By Rorisang Modiba
- Small business funder Lula says the VAT registration threshold of R1-million has not changed in 16 years, limiting SME growth.
- Lula’s Chief Risk Officer Garth Rossiter says small businesses are deliberately capping their income to avoid crossing the VAT threshold.
Small business funder Lula has renewed its call for Finance Minister Enoch Godongwana to raise the VAT registration threshold from R1-million to R3-million in the 2026 National Budget.
The current threshold has stayed at R1-million for 16 years. Lula says small and medium-sized enterprises (SMEs) contribute about 40% to South Africa’s GDP, but tax compliance costs hold many back.
Lula’s Chief Risk Officer Garth Rossiter described the threshold as a “glass ceiling” that discourages businesses from growing.
“We are seeing a trend where businesses intentionally cap their productivity to stay under the R1-million mark,” Rossiter said.
He cited psychology practices reducing working days and service-based businesses turning away contracts to avoid triggering VAT registration.
Rossiter said raising the threshold to R3-million could immediately unlock productivity across thousands of SMEs. Lula argues that any short-term drop in VAT revenue would be outweighed by higher corporate tax collections, stronger profits and job creation.
Lula submitted the proposal in late 2025 and has since received feedback that it will be considered in the 2026 Budget cycle.
Rossiter said the budget must also address long-term infrastructure certainty, with businesses still struggling with energy and water supply.
President Cyril Ramaphosa announced a R50-billion investment in digital infrastructure, including 55 data centres. Rossiter warned that digital expansion needs stable energy to succeed.
“To protect that R50-billion investment and prevent more load shedding, we need a growing energy supply with clear milestones and real accountability,” Rossiter said.
He said a business-friendly budget would be the most sustainable way to build investor confidence and support long-term economic growth.
Pictured above: VAT.
Image source: File
