Johannesburg – First there was panic. Then it was a document. And now? peace of mind. After the short-lived announcement of a 0.5% VAT increase kick-in on May 1, South African businesses can finally achieve “deletion” with dozens of emergency emails entitled “VAT impact on travel budgets.”
But while the VAT hike may not have gone further, it achieved something unexpected. It forced businesses to suspend business travel programs and acquire inventory. And that's what Herman Heuns, general manager of corporate travelers, says it's worth the conversation.
“The announcement of the VAT may have been short-lived, but when it comes to travel programs, it provided valuable insight into how businesses were prepared or exposed. A few cents in tax should not derail travel plans.
For many organizations, the first rumble of VAT increases led to a surge in internal activity. Emailing the procurement team, CFOs question the budget and business travelers suddenly realize potential new costs on future trips.
“Even if the verdict had not experienced it, the efforts we made to assess the impact were not in vain,” Heunes said. “It reminds me that there is always room for smart travel.”
Here's what the fear of VAT highlighted: And, looking back at these lessons, it's why companies can bring long-term success.
1. It's time to revisit our travel policy
Travel behavior has changed dramatically over the past few years. However, many companies have not updated their internal travel policies to reflect this. Do you encourage advance bookings? Are there clearances for each DIEMS? Is approval streamlined and implemented? “VAT conversations helped to remind travel managers how important a robust policy is,” explains Heunes. “A good policy doesn't just make travelers safe and compliant, it also keeps costs down.”
2. The power of negotiated fees
In the event of uncertainty, like unexpected taxes, businesses with negotiated supplier tax rates are best suited to adapt. Companies working with travel management companies (TMCs), such as corporate travelers, have access to pre-negotiated rates, often including VAT and protected from short-term market volatility. “We had customers asking how this would affect the hotel band and rate caps. But those responsible for fixed rate contracts through us were in better financial position. That's the value of TMC,” Heunes said.
3. Read the detailed printing
If your business is using long-term supplier agreements, the proposed increase in VAT was a reminder to read fine prints. Does your agreement include tax provisions? Is it flexible enough to absorb minor changes in government policies? And if you're in the RFP season, are you asking the right questions? Heunes advises: “Contingency plans. The next change may not be half. It could be a fuel spike or a lodging tax. Build a contract to protect your business.”
Don't cut, don't optimize
This is the biggest point from stirring the VAT. Business trips are still essential. Connect teams, win deals, and keep the company moving. But like all other cost centers, there is always a smarter way to manage it.
“Stoping travel in response to cost pressure is a knee response,” says Heunes. “The true resilience lies in reviewing travel programs overall, partnering with trusted experts and building systems that are agile enough to withstand change. So, companies may have clicked 'delete' in these VAT warning emails, but they will do well to keep the prompts up.
