Exploring grounds for allowing an input tax deduction on the acquisition of double-cab delivery vehicles

Abstract

In South Africa, enterprises that are registered for value-added tax (VAT), are generally precluded from claiming VAT on the acquisition of double cab light delivery vehicles (LDVs), despite using such vehicles for legitimate business purposes. Such enterprises are often forced to use double cab LDVs by other legislation, most notably health and safety statutes. Enterprises that have challenged this inequitable position through the court system, have been unsuccessful as the underlying legislation has limited regard for the intended use of the double cab LDVs and rather focuses on the construction of the vehicle. This study set out to determine whether grounds exist for allowing an input tax deduction on the acquisition of double cab light delivery vehicles, based on the principle of tax equity. To achieve this, this study analysed the reasoning of the legislature in disallowing an input tax deduction on motor cars, what is deemed to be a motor car, judicial decisions on motor cars and other defined terms and other legislation that enterprises should adhere to (which drives the decision as to what type of vehicle should be acquired). The study also compared the Australian position on input tax deductions to South Africa to determine what international norms are insofar it relates to an input tax deduction on motor cars. It was found that the current VAT legislation does not achieve tax equity and that a suitable legislative intervention may be required to address the inequity.