Progressive tax: a proposal for customer loyalty programmes
ISSN: 0114-0582
Article publication date: 4 November 2019
Issue publication date: 4 November 2019
Abstract
Purpose
The South African Government needs to increase fiscal revenues to cater to increased government spending. This paper aims to argue that the South African Revenue Service (SARS) has an opportunity to tax the receipt of customer loyalty programme awards in the hands of customers, with little amendment to current tax legislation or administration. This provides the South African Government an opportunity to increase much needed tax revenue in spite of limited resources.
Design/methodology/approach
Five instrumental case studies were used and analysed from a financial reporting perspective to quantify customer loyalty points earned by customers. These can form a basis for deriving the potential benefits from the taxation of customer loyalty programmes in the retail industry. The multiple instrumental case studies used and the application of accounting guidance in International Financial Reporting Standards allow generalisations to be made to highlight the amount of customer loyalty awards granted and possible tax revenues forgone in just one sector of the South African economy.
Findings
Should the proposals for taxation of customer loyalty programmes be implemented, the fiscus would be able to collect over R 234.35m (US$16.91m) in tax revenue from only five companies providing customers with loyalty awards. This indicates that this proposal for taxation is critical for investigation by the South African Government, as it may aid in achieving revenue goals for South Africa.
Originality/value
This paper contributes to the literature on taxation legislation within South Africa by proposing a model that may be used by the SARS to increase tax revenues to meet the Government’s needs.
Keywords
Citation
Pidduck, T.M., Odendaal, K., Kirsten, M., Pleace, L.A. and De Winnaar, K. (2019), "Progressive tax: a proposal for customer loyalty programmes", Pacific Accounting Review, Vol. 31 No. 4, pp. 626-645. https://doi.org/10.1108/PAR-10-2018-0082
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited