In a recent case handed down in the Cape Town Tax Court (VAT 969), the court held that services supplied by a South African procurement agent acting on behalf of a non-resident tour operator, are subject to VAT at the standard rate of 14% VAT, if the ultimate tour will take place in South Africa. The court attempted to apply the consumption basis of taxation based on the assumption that the actual tourists will be in South Africa at the time that the services are actually rendered. The section of the VAT Act dealing with the zero-rating of such services (section 11(2)(l) of the VAT Act) however specifically requires that to apply the standard rate of VAT, the vendor must supply the services directly to the final end users. In this case the services were either directly supplied to the end users by the various service providers (suppliers of accommodation, transport, etc.) or by the non-resident tour operator. The SA agent merely acted as an agent/middle man in the process. To bring the vendor within the above requirement, the Tax Court held that all evidence points towards to agent making the supplies directly to the tourists when they are in South Africa. On this basis the charges by the agent to its non-resident principal were held to be subject to VAT at the standard rate. This is a very alarming approach taken by the Tax Court. To amend the facts to achieve a desired tax outcome is completely void of any of the established principles of interpretation of statutes. It furthermore effectively labels the transaction as a sham to achieve an undue tax benefit. Hopefully this case will go on appeal and the higher courts will come to a different conclusion.