Theses and Dissertations (Taxation)

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A historical institutionalist analysis of tax policy change : South African case studies of VAT and sugar tax
(University of Pretoria, 2023-08-31) Marriott, Lisa; Steyn, Theunis Lodewikus; sare.pienaar@up.ac.za; Pienaar, Sarah Johanna
Governments require financial resources to advance their economic and social agendas, yet the public often resists taxation. This inherent conflict in tax revenue collection often leads to tax policy outcomes driven by political expediency rather than logical design. To gain a better understanding of tax policy changes, this study delves into two tax events implemented on 1 April 2018 in South Africa: the introduction of a tax on sugar-sweetened beverages (SSB) and the increase in the standard value-added tax (VAT) rate from 14% to 15%. The study identifies the primary influences underlying these events and highlights insights from a historical institutionalist analysis of the evolution of these two tax policies. While the study is not comparative, it employs historical institutionalism to inform the analysis of the two taxes to examine the politics of taxation to obtain a greater understanding of the complex political environment that is tax policy development in South Africa. A case study approach is followed, blending theoretically-informed document analysis from the consultation and policy development processes and data collected from 30 semi-structured interviews with a diverse range of actors who were involved in these processes. The pressing need to combat the escalating obesity crisis and the related surge in non-communicable diseases was identified as the main influence on the introduction of the sugar tax in SA. Meanwhile, regarding the VAT rate increase, the main drivers of the policy change were identified as corruption, wasteful government spending, and the demand for more government revenue. The study underscores the significance of contextually-relevant evidence and extensive engagement with multiple stakeholders, as vividly demonstrated in the development of the SSB tax. In terms of a theoretical contribution, the study accentuates the relevance of informal institutions and the prevalence of corruption, which resonate particularly in the South African and broader developing country context. It also highlights distinct forms of power and their utilisation to achieve institutional objectives. This research enriches the literature on and comprehension of tax policy development in three distinct ways. Firstly, it furnishes insights into the antecedents leading to tax policy change in two distinct tax events in South Africa. Secondly, at a practical level, the research bears implications for policymakers contemplating tax policy changes in developing countries. And lastly, the study shows how historical institutionalism can be harnessed to attain a deeper grasp of tax policy change in the context of research in African and other developing countries.
An analysis of the VAT consequences of customer loyalty programmes
(University of Pretoria, 2021-08-31) Pidduck, Teresa; andreklopper7@gmail.com; Klopper, Andre
South Africa adopted a general anti-avoidance rule (GAAR) as one of its methods to combat innovative tax avoidance schemes into which taxpayers may enter. Since the South African GAAR was introduced for the first time in 1941 it has undergone numerous amendments due to weaknesses highlighted by its failures in court. However, since its most recent amendment in 2006, the efficacy of the South African GAAR is in doubt, as not all of its requirements have been subjected to judicial interpretation and application. This study aims to determine the effectiveness of the South African GAAR when compared to that of its New Zealand counterpart by employing a ‘Structured Pre-emptive Analysis’ (SPA) to identify the weaknesses in the South African GAAR. A SPA is a multimethod qualitative approach that combines doctrinal and reform-oriented approaches. The study was carried out in three phases. Doctrinal research was used in Phase 1 to obtain an understanding of the South African and New Zealand GAARs, in order to understand how they should be interpreted and applied, as well as to identify weaknesses and make suggestions for improvement in both. Reform-oriented research was conducted in Phase 2 where the South African GAAR was applied to a case from New Zealand, in order to propose amendments to the South African GAAR. In Phase 3, triangulation was used in order to compare the findings gained in Phases 1 and 2 and thus validate the findings of the research. The comparison performed between South Africa and New Zealand revealed that guidance should be provided in order to address the uncertainties in the interpretation and application of the South African GAAR, so as to prevent inconsistencies that may limit its efficacy. In addition to this, the South African GAAR should be consolidated into a three- part enquiry instead of the current four-part enquiry, which may be achieved by considering the tainted elements as part of the tax benefit requirement, instead of a separate fourth requirement that would make the South African GAAR more onerous to apply. Lastly, the sole or main purpose requirement should be amended so that it need not be the sole or main purpose to avoid tax, but rather one of the purposes, provided that it was not merely incidental.
The efficacy of the South African general anti-avoidance rule : using lessons from New Zealand
(University of Pretoria, 2021-08-31) Pidduck, Teresa; michellekirsten0@gmail.com; Kirsten, Michelle
The general anti-avoidance rule (GAAR) has been adopted by South Africa as one of its methods to combat tax avoidance schemes into which taxpayers enter. Since 1941 when the South African GAAR was first introduced into the tax legislation, it has been amended various times as a result of the weaknesses that were highlighted by its failures to stand up to the rigours of the courts. However, since the most recent amendment to the South African GAAR in 2006, its efficacy remains unknown due to the fact that it has not been tested by the courts in its entirety. This study aims to address this concern by determining the effectiveness of the South African GAAR when compared to its New Zealand counterpart. This study employed a ‘structured pre-emptive analysis’ research methodology, which is a combination of doctrinal and reform-oriented approaches. The doctrinal approach was used in Phase 1 of the research whereby a doctrinal analysis of the South African and New Zealand GAARs were performed. This approach allowed an understanding of the interpretation and application of the two GAARs to be obtained, as well as to allow for the identification of weaknesses in the South African GAAR, while simultaneously making suggestions for improvement. The reform-oriented approach was used in Phase 2 of the study in which the South African GAAR was applied to the facts of a case from New Zealand. Phase 3 of the study contained the triangulation of the findings from both Phases 1 and 2 of the study, thereby validating the findings of the study. The findings from Phases 1 and 2 highlighted various weaknesses that exist in the South African GAAR which indicate that additional guidance should be provided to address the existing uncertainties currently contained within the interpretation and application, in order to prevent inconsistencies that may limit its efficacy. The findings of this study indicate that for a taxpayer to be considered party to an arrangement, they do not need to be aware of the entire arrangement nor all of its details. Furthermore, it was noted that the sole or main purpose requirement should be amended to rather require that obtaining the tax benefit was one of the purposes, provided it is not merely incidental, as opposed to requiring the tax benefit to be the sole or main purpose of the arrangement. In addition, it is suggested that the sole or main purpose test be amended to being a purely objective test and not considering subjective intent of the taxpayer.
Virtual reality as a tax educational tool in developing countries
(University of Pretoria, 2021-08-31) Du Preez, Hanneke; gejansen@nust.na; Jansen, Geraldo
Background: The application of virtual reality (VR) in education is an alternative teaching method that bridges the gap between theory-based and practical learning as it provides an opportunity to learn through computer-generated simulation. The adaptation of technology such as VR to facilitate education has the potential to enhance the understanding of relevant content. The attractiveness of VR as a teaching tool is its ability to deliver alternative teaching and learning experiences in the 21st century. Main purpose of study: The introduction of VR as part of the classroom experience in developing countries as an educational tool is one of the ways to further transform education. Furthermore, the integration of VR into education systems is one way of encouraging the use of technology to facilitate education. However, the use of VR in education is underexplored in developing countries, and there is little available research on VR in tax education in developing countries, which provides the opportunity for further research. Method: This study adopted the systematic review research method, where data is collected systematically from documents indexed in scientific digital libraries to ensure the evidence obtained to answer the research question is of the highest quality. Results:
An evolution on how countries tax virtual currencies : is there a consensus evolving
(University of Pretoria, 2021-08-30) Venter, Juanita; jacquesvictor4@gmail.com; Victor, Ockert Jacobus
Background: Tax implications of virtual currencies are a widespread debate that perplexes many governments, policymakers and revenue collection authorities. Virtual currencies are not physical but rather digital, and only exist electronically. Their unique decentralized online exchange platform means that they do not belong to a specific country, jurisdiction or regulatory body and therefore no bank can govern the use or exchange of these currencies. The combination of the above poses unfamiliar challenges to tax jurisdictions regarding how to effectively accommodate and tax these currencies within existing traditional tax systems that were not designed to absorb unconventional technologies. Main purpose of the study: Using a systematic review, this study aimed to provide a holistic view of the tax implications of virtual currencies globally and whether a consensus on an approach has developed. Method: Applying a systematic review, relevant secondary data was obtained from quality sources and analysed against predetermined criteria for relevancy. This collective data was scrutinized, and findings were presented and discussed. A conclusion regarding whether a consensus is evolving on how virtual currencies are taxed was reached and summarized accordingly. Results: The approach taken in academic literature regarding how to tax virtual currencies varies. Commonly, virtual currencies are simply incorporated into existing tax law; either by incorporating them into current tax law definitions by way of defining what virtual currencies are or by amending existing tax definitions to include virtual currencies. Unavoidably, tax jurisdiction existing laws differ; for example what constitute revenue in nature, capital gains taxes and wealth taxes. Consequently, there will be different tax implications for virtual currencies as well. Therefore, various factors exist that will impact how jurisdictions tax virtual currencies. Conclusions: The different stages in the lifecycle of virtual currencies are of utmost importance. Once the lifecycle stages are understood, current tax law can be amended to accommodate these stages and bring them into the tax net as either revenue, capital in nature or non-taxable. In conclusion, no consensus has been reached regarding the tax implication on Normal Tax, however promising results exist for Value Added Tax.
Defeating Section 10(1)(o)(ii) of the income tax act within the parameters of South Africa's general anti-avoidance rules
(University of Pretoria, 2021-10-14) Coetzee, E.S.M. (Liza); chlomole@gmail.com; Molyneux, Chloe Frances
Background: The foreign remuneration exemption contained in Section 10(1)(o)(ii) of the Act was capped at R1.25 million with effect from 1 March 2020. This amendment gave rise to so-called expat tax, namely South African expats being subject to tax in South Africa on foreign remuneration income exceeding R1.25 million. The amendment to the legislation came in response to the situations of double non-taxation created by its predecessor which allowed for a full exemption of foreign remuneration earned by South African expats working abroad. In particular, expats rendering employment services in host countries imposed little or no taxation on the respective employment income, such as the UAE, meaning that tax leakage was rife. The response to the amended Section 10(1)(o)(ii) of the Act has resulted in a mass exodus of expats who are choosing to cease tax residency in South Africa through the application of a DTA tie-breaker clause, deeming them exclusively tax resident in the other country for purposes of the DTA. South African expat tax is avoided as sole taxing rights of remuneration income is usually awarded to the source country. The act of ceasing tax residency through the operation of the permanent home criterion of a DTA tie-breaker clause against the backdrop of the South African GAAR provides the basis of analysis in this study. Main purpose of study: The study undertook to analyse whether the Section 80A–80L of the GAAR could be triggered by South African expats seeking to cease tax residency in South Africa through application of Article 4(2) of the SA/UAE DTA. The studied focused on the first criterion of the DTA tie-breaker clause, namely, the ‘permanent home’. This criterion was analysed and applied to practical scenarios common to South African expats in a quest to determine whether the GAAR’s application is warranted. Method: A doctrinal approach was followed in the study which entailed sourcing information on Section 10(1)(o)(ii) of the Act from international instruments such as the OECD MTC 2017 and its Commentary, the South African GAAR, domestic and international case law, text books, journal articles, webinars, video recordings of lectures, and consultations with tax experts. Once sourced and analysed, the information contained in these sources was transposed and applied to the set of facts under consideration for the study to have practical effect. Results: The study found that a variety of factors contribute to the mass exodus of taxpayers leaving South African shores for greener pastures. These factors may be indicative of a legal tax revolt since the study found that breaking of tax residency by invoking the permanent home criterion of the tie-breaker test did not fall foul of the South African GAAR. The capping of the Section 10(1)(o)(ii) exemption incentivises expats to break their tax residency and so escape application of the exemption to the expat’s foreign remuneration income. However, when residency is broken an exit charge is triggered on the expat’s worldwide asset base (except those remaining in the capital gains tax net such as immovable property in South Africa), since SARS claims that it would have received this capital gains tax if the expat had sold the assets whilst being ordinarily tax resident in South Africa. Dual resident expats who seek to cease tax residency in South Africa bear the burden of proving that their permanent home for purposes of the DTA tie breaker is in the other Contracting State and not in South Africa. The study illustrates that since South African domestic law provides for the breaking of residency by invoking the DTA tie-breaker clause and therefore the disapplication of Section 10(1)(o)(ii) of the Act, and since numerous expats are choosing to invoke the DTA tie-breaker clause to cease tax residency, that the actions taken in this regard are normal, they do not meet any of the tainted elements contained in the South African GAAR and cannot be classified as impermissible avoidance arrangements. Conclusions: South African expats who notify the Commissioner of the intention to apply the DTA tie-breaker clause contained in Article 4(2)(a) of the SA/UAE DTA and therefore cease tax residency in South Africa will not trigger application of the South African GAAR, since none of the tainted elements housed in Section 80A(b)–(c) of the Act are met.
A systematised review of the literature pertaining to tax revolts
(University of Pretoria, 2021-08-31) Stark, Karen; aefestratious95@gmail.com; Efstratiou, Alexis
Repeated tax revolts have occurred throughout history (Du Preez & Stoman, 2019:456; Burg, 2004:viii). Lowery and Sigelman (1981:964) describe a tax revolt as a “systematic national phenomenon”. In addition, they provide eight possible explanations for the occurrence of a tax revolt, namely:  Self-interest – the individual is influenced by his or her situation regarding the amount of taxes paid and services received from the government (Du Preez & Stoman, 2020:462);  Tax level – an attempt to trim what is viewed as a bloated government;  Tax efficiency – a reaction to perceptions of widespread waste and inefficiency in the public sector;  Tax distribution – perception of inequities in the tax system;  Economic pinch – the general condition of the economy as well as personal finances in particular;  Political ideology – focus on ideology rather than demography or economics;  Political disaffection – a reflection of the declining levels of confidence in the government; and  Information – lack of information about government (Lowery & Sigelman,1981:964-966). Recently, the possibility of a tax revolt occurring in South Africa has been explored by researchers (Du Preez & Stoman, 2019; Du Preez & Molebalwa, 2021) and is reported on by the media (Anon., 2021a; Anon., 2021b); Visser, 2021). Burg (2004) describes hundreds of tax revolts (including rebellions and riots) throughout history from 2350 BC until 2002. He also discusses specific individuals (rebels) that were leaders of these tax revolts. By employing a systematised review, the present study aims to contribute to the existing academic literature by exploring and analysing the literature pertaining to tax revolts and their rebel leaders, published from 2003 (the first year not covered by Burg (2004)) to mid- 2021.
Taxpayers' perceptions towards SARS : 2009-2017 ERA
(University of Pretoria, 2022-08-31) Molebalwa, Keamogetswe; katz.suliman@gmail.com; Suliman, Khatija Fatima
Background: The 27th of April 1994 was a momentous occasion for South Africa, as the country ushered in the age of democracy. This meant that many of South Africa’s laws and administrative functions needed to change, in order to reflect a new and inclusive democratic South Africa. One of the administrative functions, which saw significant change, was how tax administration is to be conducted in the country. This came about in the restructuring of the Inland Revenue Service and Custom and Excise Directorates into the semi-autonomous revenue-collection agency called The South African Revenue Services (SARS). Taxpayers’ perceptions towards SARS are crucial for ensuring that the administration is both efficient and effective. Taxpayers’ perceptions are shaped by how much confidence taxpayers have in tax administrators and on how much authority the tax administrators are given within the confines of the law and the constitution. Main purpose of the study: The study aims to gain some insight into taxpayers’ perceptions towards SARS during the 2009-2017 period. This study aims to provide an addition to the existing, limited research on taxpayers’ perceptions in South Africa; and also to provide a stepping-stone for future studies, which might assist policymakers to understand the factors influencing taxpayers’ perceptions. The Method: Data was collected through an online questionnaire The questionnaire included a combination of closed-ended, Likert and open-ended questions. Open-ended questions and Likert questions were analysed by using a descriptive statistical method. The closed-ended questions were analysed individually , by using a content-analytical approach. The results of the data gathered were analysed electronically, by using the computer program of Microsoft Excel. Results and Conclusions: Based on the results obtained from the questionnaire distributed, it was found that the factors affecting taxpayers’ perceptions in South Africa were: corruption, taxpayer-government exchange, fairness, efficiency and effectiveness, as well as the tax administration of SARS. Furthermore, taxpayers’ perceptions towards SARS are inconclusive; as there appeared to be both positive and negative perceptions of SARS during 2009-2017. The main driver for the change in perceptions is the increased levels of corruption, which resulted in state capture during this period.
The perception of the effectiveness of carrots in comparison to sticks on tax compliance of individuals
(University of Pretoria, 2022-08-29) Monageng, Nompumelelo; u21523437@tuks.co.za; Robbertse, Nicolaas Johannes
Background: The majority of tax revenue is collected by the revenue authorities by virtue of personal income tax. Therefore, it is imperative to consider the perceived effectiveness of carrots in comparison to sticks on the tax compliance of individuals. In a South African context, enforcement strategies and measures that seek to encourage voluntary tax compliance are applied in order to improve tax compliance amongst individual taxpayers. Therefore, examining the impact of carrots (measures that seek to encourage voluntary tax compliance) in comparison to sticks (enforcement strategies) on tax compliance is imperative, in order to determine the most effective strategies that could be applied by tax authorities in improving tax compliance. Main purpose of study: To determine individual taxpayers’ perceived effectiveness of carrots in comparison to sticks on tax compliance, and to ascertain factors that are perceived as likely to encourage tax compliance, as well as factors perceived as likely to discourage tax compliance. Method: A quantitative research design was applied. An online questionnaire was distributed to participants in order to collect primary data. Thereafter descriptive and inferential statistics were calculated in order to determine whether the research objectives had been met. Results: The results indicated that a combination of carrots and sticks leads to better tax compliance amongst individual taxpayers. The majority of the participants indicated that the impact of a carrot will be greater if the benefit obtained can be quantified. The importance of the fiscal exchange relationship between taxpayers and the government was emphasised, as the results show that unhappiness with public goods or services provided by government is perceived as likely to discourage tax compliance amongst individual taxpayers. Conclusions: SARS mainly applies enforcement strategies to encourage tax compliance. However, although SARS already applies some carrot-based strategies, they should consider additional carrot-based strategies to encourage tax compliance amongst taxpayers.
The perception of the effectiveness of carrots in comparison to sticks on tax compliance of small and medium-sized enterprises
(University of Pretoria, 2022-09-27) Monageng, Nompumelelo; cnjomeni@gmail.com; Njomeni, Chuma
Background: Tax authorities have traditionally focused on deterrence measures such as audits, penalties, and interest to enforce tax compliance. The focus on deterrence measures has come under scrutiny as researchers found that the level of tax compliance by taxpayers indicates that there may be supplementary factors in addition to deterrence measures to encourage tax compliance. Over time researchers have found that social norms, nudges, and morality impact a taxpayer’s tax compliance decision. In this study, the perceptions of the taxpayers of small and medium-sized enterprises (SMEs) in South Africa will be examined on what they consider as likely to impact their tax compliance decision between sticks (deterrence measures) and carrots (measures aimed at encouraging voluntary tax compliance). Main purpose of study: In this study, the perceived effectiveness of carrots in comparison to sticks on tax compliance of SMEs in South Africa is examined. Method: A quantitative research method was adopted to analyse primary data and respond to the research question. Descriptive and inferential statistics were evaluated to respond to the set research objectives. Results: The results of this study have shown that SME taxpayers perceive carrots as mostly likely to impact their tax compliance decision in comparison to sticks. Conclusions: The results of this study align to existing literature which have shown that, in addition to deterrence measures, other factors impact a taxpayer’s tax compliance decision. The results also show that deterrence measures are perceived to be less effective in comparison to carrots on tax compliance of SMEs in South Africa. This challenges tax authorities to reflect on their methods of encouraging taxpayer compliance.
The taxman in post-apartheid South Africa : taxpayers’ perceptions for the period 1994 to 2007
(University of Pretoria, 2022-11-02) Molebalwa, Keamogetswe; u17282581@tuks.co.za; Monyatsi, Medupi Boitumelo
Background: On 27 April 1994, a momentous occasion for South Africa as the country ushered in the age of democracy. With this a need for the reform of tax administration to improve efficiency, effectiveness, and equity for the new and inclusive South Africa. Tax administration is vital as governments rely on tax revenues collected to fund their developmental agenda. This saw the formation of the South African Revenue Service (SARS) as a semi-autonomous organisation as per the recommendations of the Katz Commission, which was formed to investigate and report on all aspects of the South African tax administration system. Main purpose of study: A tax gap exists and taxpayers’ perceptions and attitudes towards the tax administration have been identified as possible reasons for the non-compliance contributing to the tax gap. Although external factors may also contribute to the tax gap it is important to understand how perceptions and attitudes may affect tax compliance particularly as there is limited research on taxpayers’ perceptions. The aim of this study is to determine what taxpayers’ perceptions are towards SARS for the period 1994–2008. Method: A total of 100 responses were received for the study with 82 of the responses being valid. The responses were collected using a Google Forms Survey, which consisted of a Likert-scale and open-ended questions. Descriptive statistics is used to analyse the Likert-scale questions and thematic analysis is used to analyse the open-ended questions. SPSS and Excel are the software programs used to conduct the descriptive statistical analysis and the thematic analysis in the study. Results: It was found that taxpayers generally perceive SARS as a well-managed and effective organisation. Further, taxpayers understand why SARS collect tax revenue despite them feeling as though it is being used frivolously. Conclusions: Wide ranging factors influence taxpayers’ perceptions towards SARS, many of them beyond their immediate control. SARS should exert more influence on how tax revenues are spent in fiscal policy in order to better manage the relationship with the public, who are of the opinion that SARS needs to take more accountability in how tax revenues are spent.
An analysis of the risk and limitations of placing reliance on lifestyle audits in the fight against corruption and tax evasion in South Africa
(University of Pretoria, 2022-08-31) Hill, Tanya; NasiphiTNkangane@gmail.com; Nkangane, Nasiphi Tutuka
Background: Taxation and corruption are global phenomena, and no society is immune to corruption. Lifestyle audits are used to identify corruption and tax evasion. These audits are commonly used by investigators to determine whether a person’s lifestyle is equivalent to their known income. The outcomes from the investigation aid in deterring those who find themselves under investigation. There are certain risks that need to be considered when relying on the outcomes from conducting these audits. Main purpose of study: The purpose of the study is to analyse the risks, limitations, adverse factors, and the public’s perceptions on placing reliance on lifestyle audits in the fight against corruption and tax evasion in South Africa. Method: In this study qualitative and quantitative methods in collecting and analysing data were applied, therefore a mixed-method approach was followed. A survey was distributed to respondents, which aimed at identifying the risks, limitations, adverse factors and the public’s perception of placing reliance on lifestyle audits in the fight against corruption and tax evasion in South Africa. Results: It was found that corruption and fraud are the leading factors that negatively impact the reliance on lifestyle audits. It was also found that the main risks and limitations of placing reliance on lifestyle audits are a lack of information, violence against lifestyle auditors and whistle-blowers, violation of an individual’s rights, the lifestyle audit selection process, and the lack of skills and expertise of lifestyle auditors. Conclusions: Lifestyle audits are a good start in detecting corruption and tax evasion. However, there are many risks and limitations that hinder the effectiveness of lifestyle audits in South Africa. Corruption needs to be addressed before lifestyle audits can be utilised as a reliable tool in the fight against corruption and tax evasion.
Tax and social media : tax collection mechanisms for income generated via social media
(University of Pretoria, 2022-10-07) Dos Santos-Venter, Juanita; Stark, Karen; bridget.masaukane@gmail.com; Mogola, Bridget Masaukane
A descriptive study of the perceptions and motivations of consumers on how to successfully implement a tax lottery in South Africa to improve tax compliance behaviour
(University of Pretoria, 2022-08-31) Schoeman, Anculien; jacqui10viljeon@gmail.com; Viljoen, Jacqueline
Background: Tax revenue collected from taxpayers is essential as it enables the government to provide necessary public goods and services. However, the government faces a significant obstacle due to taxpayer non-compliance. Enhancing overall tax compliance should, therefore, play a key role when trying to improve the efficacy of tax collection. Literature reviewed during this study indicated that implementing a tax lottery system might increase tax compliance, as taxpayers have a chance of being rewarded for being compliant. It is expected that this incentive may lead to an increase in voluntary tax compliance and tax revenue collected. Main purpose of study: This study aimed to analyse the perceptions of consumers with regards to implementing a tax lottery in South Africa by focusing on which factors would motivate consumers to participate. The study also sought to determine which platforms would create a positive awareness about a tax lottery. Method: This descriptive study was based on a pragmatic approach. Furthermore, an inductive research approach was adopted for this study based on primary data obtained through the use of a survey as a data collection instrument. Results: There is not a substantial amount of research available on implementing tax lotteries in developing countries such as South Africa. The literature reviewed during this study has, however, concluded that tax lotteries are becoming a more popular method to increase tax compliance behaviour rather than the stringent traditional methods used. Through the literature reviewed and survey conducted, it was evident that there are quite a few factors that need to be considered when designing and implementing a tax lottery in South Africa. Its design should be effective and efficient to ensure an increase in voluntary tax compliance, with strategic promotion playing a significant role in the success of the tax lottery and thus the improvement in tax compliance behaviour. Conclusions: The implementation of a tax lottery in South Africa may improve the tax compliance behaviour of taxpayers. Taxpayers will need to be made aware of the tax lottery as well as the fact that they may be rewarded for being tax compliant, which may lead to an increase in tax compliance. This will enable the government to provide necessary public goods and services and reduce overall public debt.
A critical evaluation of the classification of cryptocurrency transactions as an asset in the South African context
(University of Pretoria, 2022-08-15) Bauer, Nadia; elanitwin@gmail.com; Meyer, Elani
Background The emergence of cryptocurrency is one of the significant innovations of the Fourth Industrial Revolution. Cryptocurrency is an interesting phenomenon as it was created to be an independent, peer-to-peer payment system operating as an alternative to the traditional fiat currency system. Currently, cryptocurrency is mainly used on a speculative basis as it does not have legal tender status in most countries around the world. Cryptocurrency’s popularity has grown at a tremendous rate over the recent years while limited guidance has been issued to date regarding the taxation of cryptocurrency transactions both locally and globally. The Organisation for Economic Co-operation and Development has acknowledged that policymakers should attend to regulating cryptocurrency as a matter of importance. In South Africa, cryptocurrency has been included in the financial instrument definition and classified as an asset. Main purpose of study The aim of the study was to understand the appropriateness of the current tax classification of cryptocurrency transactions in South Africa and to identify possible alternative classifications for cryptocurrency transactions from the view of tax specialists. Method An open-ended questionnaire together with a thematic analysis were used as primary data to evaluate the appropriateness of the current tax classification in South Africa. In addition, secondary data was used to determine whether the current tax treatment in South Africa is aligned with other jurisdictions and to make recommendations, if needed. Results The majority of participants to the open-ended questionnaire noted that the current classification of cryptocurrency as assets in South Africa is appropriate. A few participants indicated that additional guidance is required to clarify the application of the existing tax principles to the taxation of cryptocurrency transactions. Other participants acknowledged that the different types of cryptocurrency and the different stages in its life cycle drive the tax treatment. Conclusions The classification of cryptocurrency as an asset is in line with other jurisdictions and as such is deemed appropriate. Attention needs to be given to the different stages in the life cycle of cryptocurrency as the asset has different characteristics in the various stages and as such could require different tax treatment and tax principles. In addition, taxpayers’ intention with their cryptocurrency holdings are of the utmost importance to ensure the classification as an asset as opposed to trading stock is appropriate.
Taxing customer loyalty programmes : an international perspective
(University of Pretoria, 2022-09-15) Pidduck, Teresa; kholofelo.mahapa@up.ac.za; Mahapa, Kholofelo
Customer loyalty programmes (CLPs) have become prevalent in various economies, which is indicative of a change in the nature of the economic transactions occurring between businesses and customers. Interestingly, research indicates that there has been no change in how these transactions are taxed in South Africa that corresponds with the change in business. In general, the South African tax system provides for tax revenue to fund the expenditure incurred by the South African government. Therefore, the taxation of CLP rewards in the hands of customers should increase tax revenues, which South Africa urgently needs as the government has consistently spent more than it has have received in recent years. Furthermore, it is acknowledged that the South African government needs additional tax revenue because of the damages caused by the COVID-19 pandemic, which has caused severe disruptions to economies over the world. This study contributes by using a doctrinal research methodology to analyse the tax treatment of CLPs internationally for both direct and indirect tax from the perspective of the customer and the CLP provider. The findings revealed that although international jurisdictions such as Australia, Canada, New Zealand, the UK and the USA have made headway in taxing CLPs in direct response to their increased prevalence in the commercial environment, the tax provisions established and the administration thereof can be improved. While research has been done on the indirect tax (consumption tax levied on the supply of goods or services under a CLP), employee benefits tax (employees taxed on the value of CLP rewards received from employers) and income tax implications for the provider (sales revenue from the CLP transaction is fully included in the income of the provider) relating to CLPs in Australia, Canada, New Zealand, the UK, and the USA, it does not address the tax implications of CLPs in the hand of the customer (the rewards). Simply stated, the existing legislation focuses on taxing flight rewards and employee benefit rewards and is insufficient. Consequently, further research on the taxation of CLPs is necessary to contribute to this area of taxation. Therefore, using the findings of this study, South Africa has an opportunity to devise an effective, concise and administratively efficient tax reform for CLPs.
Quantifying tax revenue on customer loyalty rewards : the case of Dis-Chem in South Africa
(University of Pretoria, 2022-09-04) Pidduck, Teresa; u18073523@tuks.co.za; Vergotine, Caleb Luke
The greatest method to produce resources and to reduce the tax collection shortfall is to grow the economy and broaden the tax base, according to the South African Minister of Finance's 2022 Budget Speech. In 2021 alone, Customer Loyalty Programmes (CLPs) were used by 74 percent of economically active South Africans and have increased in popularity in recent years. The receipt of CLP points is not taxed in the hands of customers, while the expenses associated are being deducted by businesses in calculating their taxable income. This study quantifies the potential tax revenues that may be collected should a tax be introduced on CLP rewards, using existing tax systems in order to broaden the tax base and increase tax revenues in South Africa. To quantify these tax revenues, this study focused on one CLP in South Africa (the Dis-Chem Benefit CLP) in the form of a longitudinal case study from 2018 to 2022. The findings revealed that at least R237 million in potential tax revenues could be collected from just one CLP in South Africa from 2018 to 2022 (Dis-Chem Benefit CLP) should a withholding tax of 25 percent be employed as proposed. While this research forms part of a larger study and is focused on the Dis-Chem Benefit CLP, the findings indicate that an introduction of a tax on CLPs in South Africa would also yield additional much needed tax revenues.
The perceptions of small business owners and consumers on the implementation of a tax lottery system to improve tax compliance behaviour in South Africa
(University of Pretoria, 2022-09-14) Schoeman, Anculien; JeanineKotze73@gmail.com; Kotze, Jeanine
Tax lottery systems have been implemented globally as a strategy by authorities to improve tax compliance and increase tax revenues. In this study the implementation of a tax lottery system in South Africa was investigated by considering the perspectives of South African consumers and small business owners. A questionnaire was distributed to a sample of consumers and small business owners to determine their preferences, attitudes and concerns regarding the implementation methods and administration of a possible tax lottery system in South Africa. Statistical analyses were performed on both qualitative and quantitative data that were obtained from the distributed questionnaire. The results of the qualitative data obtained from the consumer group showed that participants preferred a mobile application as an implementation method. Although, this preference differed between participants within the lowest income group and the older age groups: these participants were inclined to prefer a drum-based implementation method. Participants within the lower income group also tended to disagree with statements that measured the likelihood that they would use a mobile application to participate in a tax lottery. From the results obtained from the small business owner group, only 51% of the participants surveyed indicated that they would support a tax lottery system. The majority of the unregistered participants indicated that a tax lottery system would not motivate them to voluntarily register for tax. Although the vast majority of small business owners surveyed indicated that they would be able to supply receipts to their customers on a regular basis, small business owners that have been in operation for less than a year as well as those that were currently not issuing receipts, tended to disagree with statements which measured their capability of issuing receipts. The biggest concern among the consumer and supplier groups was that corruption and fraud may be present when a tax lottery is implemented in South Africa. This study contributes to the knowledge on tax lotteries by specifically focussing on the implementation of such a lottery in a developing country, whereas existing research has mostly focussed on tax lotteries implemented within European countries. The study specifically analysed whether a mobile application would be effective to facilitate such a tax lottery and determined whether it would be supported by South Africans. Finally, the findings of this study provide insights from the perspectives of both consumers and small business owners regarding the effective design and implementation of a possible tax lottery system within the South African environment.
Impact of artificial intelligence on tax collection
(University of Pretoria, 2022-11) Motsamai, Lungelo; Eza.a.gxaba@gmail.com; Hlomendlini, Eza Andiswa
BACKGROUND : Tax authorities can rely on digital technologies such as artificial intelligence to better manage taxes. Digital technologies offer an opportunity to reduce fraud and increase revenue. Digital technologies can improve tax compliance by facilitating the collection of authentic, accurate and complete information about traded goods and services, and enhancing the ability of border agents to collect the appropriate level of trade taxes. MAIN PURPOSE OF STUDY : The main purpose of this study is to understand and determine how the implementation of artificial intelligence can impact the collection of taxes. METHOD : The study will make use of a mixed method in terms of reviewing literature and the use of a quantitative research methodology. A mixed studies review includes the combination of both a systematic review and the use of other methods, such as questionnaires and surveys. RESULTS : After analysing the various publications, it is noted that artificial intelligence and its impact on tax systems is a broad and complex issue. Authors have concluded that automation and the use of artificial intelligence may help to improve tax compliance which will have an impact on tax collection. CONCLUSIONS : Artificial intelligence may assist tax administrators by reducing the costs involved in the traditional tax process. This may be done by reducing the lengthy process and use of complicated paperwork used in tax collection. Tax authorities may rely on the aid of AI to assist in analysing the volumes of data provided by taxpayers when filing tax returns. The success of AI adoption within the tax system is reliant on how taxpayers accept and perceive its usage.
Value-added tax : a story of customer loyalty programmes
(University of Pretoria, 2022-10-04) Coetzee, E.S.M. (Liza); Pidduck, Teresa; tjhill4@gmail.com; Hill, Trevor Jason
The South African tax system provides tax revenue to fund the expenditure incurred by the South African government. However, due to the severe harm caused by the COVID- 19 pandemic, which disrupted and damaged economies worldwide, the South African government is more in need of additional sources of tax revenues than ever. Customer Loyalty Programmes (CLPs) in South Africa have increased in popularity and uptake, and consequently, it may be beneficial for the fiscus to consider increasing tax revenues by taxing rewards granted to customers who participate in CLPs. Commentators have argued that the current value-added tax (VAT) system provides room for the taxation of CLP rewards granted to customers, however, differing opinions and limited legal guidance are available in this regard. This study, therefore, followed a qualitative, doctrinal research approach to ascertain, amongst others, the current main arguments in relevant literature regarding the VAT taxability of CLP rewards. The findings of this study revealed that two main schools of thought regarding the VAT taxability of CLP rewards exist in current literature. This study aims to contribute a third school of thought to the VAT consequences arising from the granting of CLP rewards. The first school of thought supposes that a customer participating in a CLP will receive the CLP reward free of charge. In other words, the customer pays for the goods or services acquired from the CLP operator, and the CLP operator grants CLP rewards at no additional cost to the customer. The second school of thought, however, contends that the customer participating in a CLP is, in fact, paying for the CLP reward in money. This school of thought, which is drawn from the accounting treatment of CLP rewards granted, regards the amount paid by the customer to the CLP operator for the goods and/or services purchased as comprising a part-payment for the goods and/or services purchased, and a part-payment for the CLP rewards granted. The third and final school of thought as proposed by this study suggests that the customer provides a consideration for CLP rewards, in the form of customer information. This proposed school of thought is an original contribution made by the present study and is supported by the objectives of a CLP outlined by researchers, and the terms and conditions of the three most-used CLPs of 2021 in South Africa. The result of consideration being given for the granting of CLP rewards is that output tax will have to be raised by the CLP operator on the supply of these CLP rewards and the burden of this output iii tax will be carried by the CLP operators themselves. This study found that the predominant argument held by commentators aligns with the first school of thought, which is that CLP members receive CLP rewards free of charge. Consequently, if this school of thought is followed, the granting of CLP rewards will not attract VAT.

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