Research Articles (Taxation)

Permanent URI for this collectionhttp://hdl.handle.net/2263/14463

For inquiries regarding this collection or items in the collection, please contact: Danie Malan
Tel.: +27 12 420 2302

Browse

Now showing 1 - 20 of 158

Criminal prosecutions and tax fraud in Australia, New Zealand and the United Kingdom
(Sweet and Maxwell-Thomson Reuters, 2024) Marriott, Lisa
This article examines the approach to criminal prosecutions for tax fraud in three countries: Australia, New Zealand and the UK. The study builds on existing work to further develop an understanding of the extent to which these jurisdictions use civil, instead of criminal, proceedings when serious tax fraud is detected. A comparison is made with benefit fraud for illustrative purposes. The research shows that all jurisdictions use insufficient resourcing to justify the small number of criminal prosecutions for tax fraud. However, proportionately greater resources are invested in criminal prosecutions for benefit fraud in all jurisdictions, despite benefit fraud having significantly less financial impact. The author discusses how existing practices appear to challenge the directives provided in the prosecution guidelines of each country. The absence of transparency and fairness in these practices is highlighted, and a proposal is made that an external agency be tasked with investigating and decision-making in relation to prosecutions for all crimes where the state is the victim.
The use of good character discounts in sentencing financial fraudsters
(Routledge, 2024) Marriott, Lisa
This article assesses how good character is used to discount sentences in tax and benefit fraud cases in Aotearoa New Zealand. Four factors are highlighted. The first is a focus on neoliberal priorities that privilege “good citizens” who are primarily tax fraudsters, with the provision of sentence discounts to ensure the offender can remain in employment. The second is sentence reduction, which is primarily visible in tax cases when repayment of the outstanding funds is made. While the average value of benefit fraud is less than a quarter of the average tax fraud, typically, money obtained from benefit fraud is used for living expenses and not available for repayment. Third, only tax fraudsters benefited from anticipated reparation, on the expectation from the court that this would occur after sentencing. Finally, the ways in which prior tax offending is classified leave tax offenders in a stronger position to claim no prior offending and receive a sentence reduction for good character. These factors combine to result in unfair outcomes that benefit tax offenders.
The impact of the 2021 civil unrest on the recurrent property tax in South Africa’s KwaZulu-Natal Province
(International Association of Assessing Officers, 2023) Channing, Janet; Franzsen, R.C.D. (Riel)
The devastating civil unrest experienced in July 2021 in especially KwaZulu-Natal, South Africa, not only affected more than 40,000 businesses, but also had a direct impact on the collection and administration of the recurrent property tax (called “property rates”). This paper considers policy recommendations for supplementary valuations and rates relief for affected property owners and debates the implementation options available to municipalities.
Political donations and tax deductions in Aotearoa New Zealand and Australia
(Journal of Australian Taxation Pty Ltd, 2023) Marriott, Lisa; Rashbrooke, Max
This study examines the different approaches to tax concessions for political donations in Australia and Aotearoa New Zealand (NZ). In Australia, a tax deduction may be claimed for a moderate donation to a political party. Conversely, in NZ no tax concessions are available for donations to political parties. The study concludes that while there are several benefits of using the tax system to facilitate political donations, the two different policies align with the two countries general approaches to using the tax system to influence behaviour. An analysis of tax expenditures is used to support this argument. Reference to tax expenditures in Australia shows a longer timeline of acceptance of tax expenditures, alongside a more comprehensive regime of included activities. In NZ, the absence of tax concessions for political parties is aligned with NZ’s general approach to using the tax system to change behaviours, which is minimal state intervention.
Pre-colonial centralization and tax compliance norms in contemporary Uganda
(Cambridge University Press, 2023-06) Ali, Merima; Fjeldstad, Odd-Helge
The paper examines the legacy of pre-colonial centralization on tax compliance norms of citizens in contemporary Uganda. Using a regression discontinuity analysis on neighboring ethnic homelands with different levels of pre-colonial centralization, we find that pre-colonial centralization is correlated with stronger norm for tax compliance. The result is explained by the legacy of location-specific capacity of centralized states in upholding authority and a strong social cohesion exhibited through higher interpersonal trust but not through trust in public institutions.
South Africa's response to the digital economy's direct tax challenges - Part 1
(Nelson Mandela Metropolitan University, Faculty of Law, 2023-06) Tshidzumba-Sengwane, Khodani
International tax rules were developed more than a century ago. At their core is the principle that profits should be taxed where economic activities physically take place and where value is created. Advances in technology and the progression of the fourth industrial revolution have changed how businesses around the world operate and have given rise to the “digital economy”. Businesses no longer need to be “physically” present in a jurisdiction but can operate digitally or virtually anywhere in the world. New business models such as e-commerce, payment services, app stores, online advertising, cloud computing and participative network platforms have emerged. The digital economy and these new business models pose various challenges to the effectiveness of rules on the current jurisdiction to tax; businesses are able to derive significant economic benefits from a country without a “taxable nexus” to such country – for example, without the creation of a fixed place of business, permanent establishment or establishing a place of effective management. The digital economy is global in nature and, therefore, policy actions dealing with the global economy need a global approach. The Organisation for Economic Co-operation and Development (OECD) has taken a leading role in developing new direct-tax rules that will address the tax challenges posed by the digital economy and has agreed to develop a two-pillar solution that can be consented to internationally and implemented by countries. Pillar one proposes new rules on tax nexus and profit allocation for large multinational enterprises (MNEs) that meet certain revenue and profitability thresholds. The rules do not require MNEs to be physically present in a jurisdiction. Pillar two proposes mechanisms to ensure large MNEs pay a minimum level of tax (currently set at 15 per cent) regardless of where their headquarters are or the jurisdictions in which they operate. Some countries (such as the United Kingdom (UK), United States of America (USA), India, and Nigeria) have opted to take unilateral measures as they wait for a global solution. These unilateral measures are often uncoordinated and give rise to some undesirable consequences, such as double taxation. South Africa has decided to wait for global consensus and is currently not taxing the digital economy through its direct-tax rules. Although the OECD solutions are helpful proposals on taxing the digital economy and are a step in the right direction, it is submitted that they are not completely suited for South Africa as a developing African country; they do not consider some of South Africa’s unique circumstances, such as the prevalence of corruption, semi-skilled tax administration and limited resources. South Africa should not merely adopt the rules blindly but should adapt them to suit its needs as a developing country. South Africa needs to protect its tax base while embracing the digital economy; perhaps, while it waits for a global solution, it could strengthen its source rules as recommended by the Davis Tax Committee. This article is divided into two parts. Part 1 evaluates the suitability of South Africa adopting the OECD global solutions to the direct-tax challenges posed by the digital economy in a developing African country; Part 2 evaluates whether South Africa’s response to these challenges is the best option by considering the approach and consequences of select developed and developing jurisdictions (that is, USA, UK, Nigeria and India) adopting unilateral measures while waiting for an OECD global solution.
Exposing students to a simulation of the online platform used by the South African Revenue Service
(Emerald, 2023-09) Du Preez, Hanneke; Hill, Tanya; Coetzee, Liza; Motsamai, Lungelo; Stark, Karen; hanneke.dupreez@up.ac.za
PURPOSE – Students completing their tertiary education at a university may be equipped with theoretical knowledge with little to no practical experience. In order to bridge this gap in practical skills, a computer simulation was developed based on the e-filing platform of the South African Revenue Services (SARS). Students were exposed to this self-developed computer simulation to answer the question: to what extent will the e-filing simulation improve students’ confidence to practically apply their theoretical knowledge? DESGIN/METHODOLOGY/APPROACH – The research applied a pre–post questionnaire research method to gauge the students’ ability to apply their theoretical knowledge to a practical scenario before and after the simulation. FINDINGS – From the results, it is apparent that the students were inspired with confidence in getting to terms with the application of their theoretical knowledge in a real-life scenario. The computer simulation provided the platform for learning to take place in a practical environment without the risk of errors that would translate into real financial consequences. ORIGINALITY/VALUE – The contribution of this research can be found in a teaching intervention that may support the training of future tax professionals in practical application skills. The contribution can be extended to the enhancement of education in the field of taxation, particularly with the results’ showing that the students experienced high levels of increased confidence in their application of theoretical knowledge to real-life scenarios.
Presumptive income taxes and tax compliance costs : policy implications for small and medium-sized enterprises in emerging economies
(University of Exeter Business School, 2023) Ferry; Evans, Christopher Charles; Tran-Nam, Binh
It has been suggested that the introduction of presumptive income tax regimes for small and medium-sized enterprises (SMEs) can help to reduce the tax compliance costs that these businesses face. Little evidence, however, is available to help us to evaluate whether this is indeed the case. This article discusses how a presumptive tax regime may impact upon the tax compliance costs of SMEs operated by individuals (individual SMEs) in Indonesia in 2019 and suggests that the use of such regimes can have a beneficial effect on such businesses. It considers all components of tax compliance costs, including explicit, implicit, and psychological costs. By applying a mixed-modes research method, two main findings are highlighted. First, the presumptive tax significantly reduces explicit costs, although it does not appear to influence the implicit and psychological costs incurred by individual SMEs in Indonesia. Secondly, the combination of explicit and implicit costs indirectly affects the psychological costs through the existence of tax disputes and tax stressors. Not only do the results provide us with a new understanding of aspects of tax compliance costs, they show how the components of the costs interact with each other. While the empirical application is countryspecific, the conceptual framework developed in the study does not exclusively relate to taxpayers in Indonesia and can be applied to other countries or in other public regulation studies.
Unveiling the hidden unpaid care economy : envisioning a better tax landscape for women
(TaxTalk, 2023-07) Swanepoel, Sumarie
It is the eve of South African Women’s Day 2023. My phone chimes, signalling the commencement of the customary Women’s Day platitudes. “Treat the special women in your life to a service for a sparkling home. Shower her with love and more ‘her’ time.”
Blunt tool or sharp scalpel? Taxation as a means to achieve justice on gender equality
(TaxTalk, 2023-07) Swanepoel, Sumarie; Marriott, Lisa
On 2 and 3 August 2023, the University of Pretoria organised and hosted an international taxation conference with the theme: ‘Distributive Tax Justice in the Global Economy’. On the first day, there was a panel session titled: ‘Taxation as a Means to Achieving Justice on Gender Equality’. This brief article provides a synopsis of some of the information shared in that panel.
Innovation, regulation, and excise taxation
(International Network of Customs Universities, 2023-09-30) Van Oordt, Marius Louis
Innovation and regulation may reduce the harm arising from the production and consumption of excisable goods, which may warrant lower excise rates. However, countries often rely on excise revenues and may face conflicting interests in supporting innovation through differential excise rates and regulation on reduced harm goods and collecting sufficient tax revenues. This paper summarises recent innovations and regulations of excisable goods, discusses their potential implications for the design of excise regimes, and calls for further debate on excise taxes in the face of recent innovations and regulations.
Using mixed methods to understand tax compliance behaviour
(Academic Conferences International, 2023-09) Monageng, Nompumelelo Lorraine; mpumi.monageng@up.ac.za
Mixed methods research is not commonly adopted by researchers studying tax compliance behaviour despite the benefits that it can bring to research in this area. This is a method that is generally associated with social sciences however, this emergent methodology is being increasingly applied in disciplines that are traditionally associated with quantitative research, including in tax compliance research. Despite the growing trend in applying mixed methods to tax compliance research, there are no known studies that have summarised this methodological approach for researchers and provide guidance on how mixing research methods can allow for an in-depth view of tax compliance behaviour. The purpose of this article is first, to briefly explain mixed methods research for novice and established researchers unfamiliar with this methodological approach; second, provide an overview of the use of mixed methods in tax compliance research; third, provide an example of using mixed methods in order to illustrate a practical application of mixed methods; fourth, to discuss the value gained in applying mixed methods to examine and understand the effect of reciprocity nudges on tax compliance behaviour as well how challenges in applying mixed methods research can be faced. This article contributes to the business and management methodological literature by summarising the implementation of this approach and how studies aimed at understanding tax compliance behaviour could be enriched by embracing a mixed methods approach.
Exploring the deep determinants of tax revenues
(Australian School of Business, University of New South Wales, 2023-08) Van Oordt, Marius Louis; marius.vanoordt@up.ac.za
The tax effort literature explains cross-country variation in tax to GDP ratios using various determinants of tax revenues. To date, this literature has viewed this tax ratio primarily as a function of current economic and political circumstances, proximate determinants of tax performance. Borrowing from the development economics literature, this article explores ‘deep determinants’ or long-term variables of tax ratios. I consider how geography, formal institutions, and informal institutions influence tax ratios in a large cross-section of countries. A theory based on ‘institutional efficiency’ is proposed that may partly explain the lower tax ratios in many developing countries.
The impact of demographic variables on value-added tax compliance in South Africa
(Australian School of Business, University of New South Wales, 2023-04) Schoeman, Anculien; anculien.schoeman@up.ac.za
Research into the impact of demographic variables – including gender, age, formal education and tax knowledge – on tax compliance has produced mixed results. This article reports on an online between-subjects experiment conducted with individuals owning/managing small businesses to determine the impact of such variables on tax compliance behaviour in South Africa, specifically when there are changes in the VAT rate. The study finds that before there are changes in the VAT rate, gender, education and tax knowledge have an effect on tax compliance decisions. By way of contrast, when there is a change in the VAT rate (specifically an increase), the only demographic variable that is found to have a significant effect on tax compliance is education. The results of the study are both confirmatory and innovative and provide useful further evidence for tax policy-makers, administrators and researchers on the impact and implications of demographic variables on tax compliance in a developing country setting.
Filling the fiscal basket : quantifying tax revenues from customer loyalty programmes
(NISC Pty (Ltd) and Informa Limited (trading as Taylor & Francis Group), 2024) Croucamp, Ilanri Francie; Craigen, Jade Shirley; Pidduck, Teresa Michelle; Swanepoel, Sumarie; Coetzee, Elizabeth Susanna Maria; teresa.pidduck@up.ac.za
The South African government is experiencing a significant shortfall in tax revenue, and recent research has identified customer loyalty programmes (CLPs) as a potential revenue stream. Despite the popularity of these programmes, which are used by 73% of economically active South Africans, no tax is currently imposed on the rewards received by customers, resulting in the loss of much-needed tax revenue. This paper quantifies the tax revenue that could have been generated by South Africa’s three most-used CLPs over a five-year period (2018–2022) to determine if a tax on CLP rewards is a viable revenue stream for the fiscus. The longitudinal instrumental case study employed demonstrates that the fiscus could have conservatively collected R1 140 753 042 in total tax revenue from the three CLPs if a tax had been imposed on CLP rewards, as proposed in this paper. This paper highlights the significant revenue potential of taxing CLP rewards, and it provides valuable insights for policymakers who seek to address the country’s revenue challenges. The findings reveal the magnitude of potential contributions to tax revenue in the form of CLPs. Given the impetus behind CLPs, their exponential growth rate and their increasing importance as a marketing strategy, this paper proposes a re-evaluation by policymakers of the taxation of CLP rewards.
Financing child rights in Malawi
(BMC, 2023-11-16) Etter‑Phoya, Rachel; Manthalu, Chisomo; Kalizinje, Frank; Chigaru, Farai; Mazimbe, Bernadetta; Phiri, Ajib; Chimowa, Takondwa; Ligomeka, Waziona; Hall, Stephen; O’Hare, Bernadette
BACKGROUND : Nearly all countries have ratified the United Nations Convention on the Rights of the Child and, therefore, support children having access to their rights. However, only a small minority of children worldwide have access to their environmental, economic, and social rights. The most recent global effort to address these deficits came in 2015, when the United Nations General Assembly agreed to a plan for a fairer and more sustainable future by 2030 and outlined the Sustainable Development Goals (SDGs). One remediable cause is the lack of revenue in many countries, which affects all SDGs. However, illicit financial flows from low-income to high-income countries, including international tax abuse, continue unabated. METHODS : Using the most recent estimates of tax abuse perpetuated by multinational companies and tax evasion through offshore wealth, and precise econometric modelling, we illustrate the potential regarding child rights (or progress towards the SDGs) if there was an increase in revenue equivalent to tax abuse in Malawi, a low-income country particularly vulnerable to climate change. The Government Revenue and Development Estimations model provides realistic estimates of government revenue changes in developmental outcomes. Using panel data on government revenue per capita, it models the impact of increased revenue on governance and SDG progress. RESULTS : If cross-border tax abuse and tax evasion were curtailed, the equivalent increase in government revenue in one country, Malawi, would be associated with 12,000 and 20,000 people having access to basic water and sanitation respectively each year. Each year, an additional 5000 children would attend school, 150 additional children would survive, and 10 mothers would survive childbirth. CONCLUSIONS : More children would access their economic and social rights if actions were taken to close the gap in global governance regarding taxation. We discuss the responsibility of duty bearers, the need for a global body to arbitrate and monitor international tax matters, and how the Government of Malawi could take further domestic action to mitigate the gaps in global governance and protect itself against illicit financial flows, including tax abuse.
Transfer pricing adjustments : the different types, practical challenges and recommended approaches-a South African perspective
(Unisa Press, 2022-07) Oguttu, Annet Wanyana; annet.oguttu@up.ac.za
This article concerns the tax policy and practical challenges that arise from applying the various transfer pricing adjustments. The lack of clear international guidelines on how to address some issues regarding transfer pricing adjustments and the diverging policy positions that some countries have taken, pose uncertainties for taxpayers and tax disputes which can impede international trade. These challenges are addressed in the article by focusing on the South African position and providing recommendations on how to resolve some of them. The explanation of the murky issues regarding transfer pricing adjustments will be found instrumental for developing countries where the legislation, administration and practice of transfer pricing are not yet well developed. The article’s focus is on South Africa, an emerging economy on the African continent, which is used as a base for many MNEs that invest in the rest of Africa. It will be useful for foreign investors to gain an understanding of South Africa’s position on transfer pricing adjustments.
Did New Zealand get it right? : Lessons for the South African GAAR
(Australasian Tax Teachers Association, 2022-03) Pidduck, Teresa Michelle; Klopper, Andre; Malema, Tshephiso; Kirsten, Michelle; teresa.pidduck@up.ac.za
Tax avoidance has various harmful effects, one of which is the loss of revenue for governments. While an effective general anti-avoidance rule (‘GAAR’) may be instrumental in mitigating this risk, there is still uncertainty as to the effectiveness of the current South African GAAR and whether the latest amendments, in 2006, adequately addressed the weaknesses identified in its predecessor. This uncertainty is compounded by the fact that the current South African GAAR has never been subject to judicial enquiry in its entirety. This article seeks to identify potential weaknesses and improvements to the interpretation and application of the South African GAAR through comparison to its New Zealand counterpart.
Should market value be retained as the only tax base for municipal property rates in South Africa?
(Academy of Science of South Africa, 2022-10) Franzsen, R.C.D. (Riel); riel.franzsen@up.ac.za
In terms of the Local Government: Municipal Property Rates Act 6 of 2004 (MPRA), metropolitan and local municipalities in South Africa may levy property rates on property. The MPRA provides for only one tax base, namely "market value". Given the paucity of skills and capacity to prepare credible valuation rolls and given the costs of doing so, especially B3 and B4 local municipalities situated in rural areas are struggling to comply with the valuation-related provisions of the MPRA. A brief review of property tax base options utilised globally indicates that some countries allow for different tax bases (or even different taxes) based on the location and/or use of property and some jurisdictions apply simplified methodologies (such as value banding, points-based assessment or even self-assessment) to assess properties for property tax purposes. In the light of there being viable alternatives to market value and of the challenges faced by many rural local municipalities, the South African government should revisit the policy decision to have only market value as the tax base across vastly different types of municipalities.
The influence of reciprocity nudges on tax compliance in South Africa
(University of New South Wales, 2022-11) Monageng, Nompumelelo Lorraine; Evans, Christopher Charles; Steyn, Theunis Lodewikus; theuns.steyn@up.ac.za
Research on the effects of nudging as a tool to influence tax compliance has provided limited and sometimes inconclusive empirical evidence. Using a mixed methods research design, this study examines the impact of reciprocity nudges (in the form of television advertisements) on taxpayer compliance in South Africa. Our results show a statistically significant association between exposure to a reciprocity nudge and tax compliance provided that the nudge message contains specified structural and content attributes. It also establishes, inter alia, that the timing of the nudge may not be influential. The study extends the current knowledge of how insights from behavioural economics can be incorporated to assist in influencing tax compliance, particularly in a developing country setting.

Browse

Recent Submissions