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1 – 10 of 583This article reports on a study on the value‐added tax (VAT) levied on new residential properties sold to individuals by developers registered for VAT purposes. The objective of…
Abstract
This article reports on a study on the value‐added tax (VAT) levied on new residential properties sold to individuals by developers registered for VAT purposes. The objective of the research was to evaluate the current VAT provisions applicable to new residential properties in South Africa by measuring them against the principles of taxation, and by comparing the results with those obtained for the United Kingdom, Canada and Australia. Similarities and differences are established and evaluated. It is recommended that the supply of new residential properties in South Africa be zero rated.
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R.D. de Swardt and R. Oberholzer
E‐commerce has changed the way in which business is conducted. One instance of this is that it has made the digitisation of products possible. This shift has severe implications…
Abstract
E‐commerce has changed the way in which business is conducted. One instance of this is that it has made the digitisation of products possible. This shift has severe implications for traditional consumption taxes, which were developed under the premise of a physical presence in a tax jurisdiction. A large number of countries in the world that impose Value‐Added Tax (VAT) on the supply of goods and services, including South Africa, are affected by this shift. The Organisation for Economic Cooperation and Development (OECD) has suggested a number of principles that should apply to consumption taxes in e‐commerce. These principles are intended to provide fiscal climates in which e‐commerce can flourish and ensure taxation systems that secure individual countries’ tax bases. A comparison between the OECD principles and the rules pertaining to the imposition of VAT in South Africa on the supply of digitised products reveals several discrepancies and uncertainties. A baseline survey among VAT specialists in South Africa, conducted in order to substantiate these findings, confirmed these discrepancies and uncertainties in practice.
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This paper reports on a research study of value‐added tax (VAT) that applies to new residential properties developed by developers who are registered for VAT purposes. The…
Abstract
This paper reports on a research study of value‐added tax (VAT) that applies to new residential properties developed by developers who are registered for VAT purposes. The objective of the research was to compare the current VAT provisions relating to new housing in South Africa with those of the United Kingdom, Canada and Australia. Similarities and differences were determined and discussed. It was ascertained that the selected countries all have special rebates or concessions regarding new housing, whereas South Africa has none.
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Anculien Schoeman, Chris Evans and Hanneke du Preez
Enhanced revenue mobilization is essential in developing countries such as South Africa. However, it is inevitably a complex process, both from economic and political…
Abstract
Enhanced revenue mobilization is essential in developing countries such as South Africa. However, it is inevitably a complex process, both from economic and political perspectives. Increasing the rate of value-added tax (VAT) has been identified as one option to increase tax revenue, although the likely effect of VAT rate changes on tax compliance behaviour is undetermined. This study considers the impact of such a change on the tax compliance behaviour of small business entities. In order to address the impact of VAT rate changes on tax compliance behaviour, a between-subjects pre-test/post-test online field experiment was conducted and designed to identify the implications of rate changes of various directions and magnitude.
Statistical analysis of the data obtained from the experiment indicated that small business entities are inclined to reduce the VAT liability when there is an increase in the VAT rate, and to do so by overstating purchases rather than under-declaring sales. This leads to an increase in non-compliance. The greater the magnitude of the VAT rate increase, the greater the level of non-compliance. In contrast, no significant relationships were identified between a decrease in the VAT rate and tax compliance.
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Value added tax (VAT) is an indirect tax that is payable upon the consumption of goods and services. Recently, the Government of Mauritius has introduced a new set of rules to…
Abstract
Purpose
Value added tax (VAT) is an indirect tax that is payable upon the consumption of goods and services. Recently, the Government of Mauritius has introduced a new set of rules to extend the VAT system to non-resident providers of electronic services to consumers based in Mauritius. The purpose of this research paper is therefore to assess the adequacy and efficiency of the recent VAT amendments in terms of compliance requirements and collection measures and to identify loopholes in the present legal provisions.
Design/methodology/approach
The methodologies for the research are in essence comprised of the black letter approach which will analyse the legal provisions relating to VAT in Mauritius. A comparative analysis will also be conducted to find out the corresponding legal provisions relating to VAT on digital services in South Africa.
Findings
This research paper has highlighted some recommendations inspired by the laws of South Africa and the Organisation for Economic Cooperation and Development Based Erosion Profiting Shifting action plan which may be of use to Mauritius stakeholders when devising regulations on the imposition of VAT on foreign suppliers of digital services under Section 14B of the VAT Act.
Originality/value
To the author's best knowledge, this research paper is the first study conducted in the field of indirect taxation of foreign suppliers of digital services to residents of Mauritius.
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Anna Herculina Anculien Schoeman, Christopher C. Evans and Hanneke Du Preez
Correct registration for the value-added tax (VAT) is a key aspect of tax compliance; it is vital in ensuring adequate tax revenue collection in all countries but particularly in…
Abstract
Purpose
Correct registration for the value-added tax (VAT) is a key aspect of tax compliance; it is vital in ensuring adequate tax revenue collection in all countries but particularly in developing countries such as South Africa. Non-registration hinders sufficient tax revenue collection, stifles economic growth and causes unfair competition with formal businesses. The purpose of this study is to determine whether changes in the VAT rate affect the registration decisions of businesses, ultimately impacting upon tax compliance behaviour and tax revenue collection.
Design/methodology/approach
An online 2 × 2 between-subjects field experiment was conducted, as part of a broader study, to consider compliance with registration requirements by small business entities in South Africa, specifically when there are changes in the VAT rate.
Findings
Although the study establishes that changes in the VAT rate tend not to have a significant impact on the registration decisions of such taxpayers, it nonetheless indicates that the magnitude of the change in the VAT rate may be influential on registration decisions, whether relating to compulsory or voluntary registration. More particularly, the greater the magnitude of the VAT rate decrease (increase), the more likely it is that taxpayers will register (deregister) for VAT purposes, indicating that the magnitude of changes in the VAT rate do have an impact on VAT registration decisions and therefore on tax compliance more generally.
Research limitations/implications
Not only does the study add to the limited knowledge available on registration decisions of small businesses, but also gives valuable guidance to policymakers in terms of determining the VAT rate for the country.
Originality/value
Not only does the study add to the limited knowledge available on registration decisions of small businesses, but it also gives valuable guidance to policymakers in terms of determining the VAT rate for the country.
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Rudie Nel and Gerhard Nienaber
Since its introduction in South Africa during 2009, the ability of vehicle emissions tax to reduce CO2 emissions has been questioned, but not yet assessed. The purpose of this…
Abstract
Purpose
Since its introduction in South Africa during 2009, the ability of vehicle emissions tax to reduce CO2 emissions has been questioned, but not yet assessed. The purpose of this paper is to attempt such an assessment by considering tax designs to reduce passenger vehicle CO2 emissions.
Design/methodology/approach
In this exploratory study, the authors reviewed literature on tax designs to reduce CO2 emissions, and compared the design of current taxes on passenger vehicles in South Africa to the tax designs most advocated in the literature to evaluate the effectiveness of the current South African design for this purpose.
Findings
Tax designs refer to the stage when taxes are levied (purchase/ownership/usage taxes) – levying taxes at one stage may more effectively reduce emissions than levying them at another. The current tax focus on consumers may indeed affect taxes' ability to reduce emissions, and in the current tax mix, taxes on passenger vehicles may not be the most effective way of reducing emissions. The investigation of a “feebate” policy as an alternative initiative to address increased passenger vehicle CO2 emissions is recommended.
Originality/value
Only anecdotal evidence questions the ability of the vehicle emissions tax to reduce CO2 emissions. This study is intended to elicit further discussions on other fiscal reform initiatives aimed at reducing CO2 emissions by passenger vehicles in South Africa.
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J.M.P. Venter and B. de Clercq
In his 2006 State of the Nation Address, President Thabo Mbeki indicated that the regulatory environment for small businesses would be improved, as this sector plays an important…
Abstract
In his 2006 State of the Nation Address, President Thabo Mbeki indicated that the regulatory environment for small businesses would be improved, as this sector plays an important role in the national strategy for accelerated and shared growth. The aim of this study is to determine whether the size of an enterprise and the sector in which the enterprise operates has an impact on how the enterprise’s tax responsibilities are administered and managed. A survey was conducted amongst small and medium enterprises in the manufacturing, retail and business services sectors in Gauteng. The study focused on Gauteng because the majority of small, medium and microenterprises (SMMEs) are located in this province. The study found that most small and medium enterprises (SMEs) in the business services sector outsource their tax responsibilities because they lack the time needed to manage these functions. It was also found that the size and type of organisation affects the role taxation inputs play in business decisions. The SMEs included in the survey preferred a reduction in interest and penalties charged as a taxation relief measure.
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J.M.P. Venter and B. de Clercq
In his 2006 State of the Nation Address, President Thabo Mbeki indicated that the regulatory environment for small businesses would be improved, as this sector plays an important…
Abstract
In his 2006 State of the Nation Address, President Thabo Mbeki indicated that the regulatory environment for small businesses would be improved, as this sector plays an important role in the national strategy for accelerated and shared growth. The aim of this study is to determine whether the size of an enterprise and the sector in which the enterprise operates has an impact on how the enterprise’s tax responsibilities are administered and managed. A survey was conducted amongst small and medium enterprises in the manufacturing, retail and business services sectors in Gauteng. The study focused on Gauteng because the majority of small, medium and microenterprises (SMMEs) are located in this province. The study found that most small and medium enterprises (SMEs) in the business services sector outsource their tax responsibilities because they lack the time needed to manage these functions. It was also found that the size and type of organisation affects the role taxation inputs play in business decisions. The SMEs included in the survey preferred a reduction in interest and penalties charged as a taxation relief measure.
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Josephine Borghi, John Ataguba, Gemini Mtei, James Akazili, Filip Meheus, Clas Rehnberg and Di McIntyre
Objective – Measurement of the incidence of health financing contributions across socio-economic groups has proven valuable in informing health care financing reforms. However…
Abstract
Objective – Measurement of the incidence of health financing contributions across socio-economic groups has proven valuable in informing health care financing reforms. However, there is little evidence as to how to carry out financing incidence analysis (FIA) in lower income settings. We outline some of the challenges faced when carrying out a FIA in Ghana, Tanzania and South Africa and illustrate how innovative techniques were used to overcome data weaknesses in these settings.
Methodology – FIA was carried out for tax, insurance and out-of-pocket (OOP) payments. The primary data sources were Living Standards Measurement Surveys (LSMS) and household surveys conducted in each of the countries; tax authorities and insurance funds also provided information. Consumption expenditure and a composite index of socio-economic status (SES) were used to assess financing equity. Where possible conventional methods of FIA were applied. Numerous challenges were documented and solution strategies devised.
Results – LSMS are likely to underestimate financial contributions to health care by individuals. For tax incidence analysis, reported income tax payments from secondary sources were severely under-reported. Income tax payers and shareholders could not be reliably identified. The use of income or consumption expenditure to estimate income tax contributions was found to be a more reliable method of estimating income tax incidence. Assumptions regarding corporate tax incidence had a huge effect on the progressivity of corporate tax and on overall tax progressivity. LSMS consumption categories did not always coincide with tax categories for goods subject to excise tax (e.g. wine and spirits were combined, despite differing tax rates). Tobacco companies, alcohol distributors and advertising agencies were used to provide more detailed information on consumption patterns for goods subject to excise tax by income category. There was little guidance on how to allocate fuel levies associated with ‘public transport’ use. Hence, calculations of fuel tax on public transport were based on individual expenditure on public transport, the average cost per kilometre and average rates of fuel consumption for each form of transport. For insurance contributions, employees will not report on employer contributions unless specifically requested to and are frequently unsure of their contributions. Therefore, we collected information on total health insurance contributions from individual schemes and regulatory authorities. OOP payments are likely to be under-reported due to long recall periods; linking OOP expenditure and illness incidence questions – omitting preventive care; and focusing on the last service used when people may have used multiple services during an illness episode. To derive more robust estimates of financing incidence, we collected additional primary data on OOP expenditures together with insurance enrolment rates and associated payments. To link primary data to the LSMS, a composite index of SES was used in Ghana and Tanzania and non-durable expenditure was used in South Africa.
Policy implications – We show how data constraints can be overcome for FIA in lower income countries and provide recommendations for future studies.