Abstract:
South Africa is in need of additional sources of tax revenue to alleviate the government deficit, to stabilise public debt and to restore the public finances of South Africa. This is as a result of the South African government consistently spending more than they have received in tax revenues in recent years (Godongwana, 2021:10). Recent research has been conducted which indicates that the taxation of Customer Loyalty Programme rewards in the hands of the customers is a potential source of revenue for the fiscus. This is as a result of the providers of the Customer Loyalty Programmes being able to deduct their expenditure incurred to operate the Customer Loyalty Programmes for tax purposes. However, customers are not being taxed when rewards are being earned by them. The purpose of this study is to quantify the potential tax revenue from taxing Clicks ClubCard Loyalty Programme rewards awarded to customers. This study forms part of a larger study that calculates the potential tax revenue from four different Customer Loyalty Programmes.
In order to achieve the purpose of this study, a methodological approach known as a qualitative multiple longitudinal instrumental case study analysis was followed in the larger study, however a single case study analysis was performed in this study. The multiple case study approach was used in the larger study to analyse the potential tax revenues from four Customer Loyalty Programmes that met the definition of a Customer Loyalty Programme for the purposes of the study, whereas a single case study approach was used in this study to only analyse the tax revenue from the Clicks ClubCard Customer Loyalty Programme. A longitudinal design was applied to quantify the potential tax revenues in this study and the larger study, from 2018 to 2021 at a flat rate of withholding of 25% which constitutes a prepayment of the customer’s normal tax liability.
The potential tax revenues in each of the respective years were as follows: R119 592 805 in 2018, R129 252 845 in 2019, R142 835 087 in 2020 and R159 320 801 in 2021. In total, over the four years a total of R551 001 538 could have been collected had the Clicks ClubCard Loyalty Programme rewards been taxed. Therefore, given the fact that this substantial amount is the potential tax revenue from one Customer Loyalty Programme only, it is evident that the taxation of Customer Loyalty Programmes could be a significant additional source of revenue for the fiscus that could help to stabilise public debt and to restore the public finances of South Africa.
