Thesis (MAcc (Accountancy))--University of Stellenbosch, 2006. / The advent of the internet made it possible to conduct business in a different manner
- electronically. Electronic commerce enables residents and vendors to transact with
residents and vendors of any other country (jurisdiction) at any time, making the
world indeed a smaller place.
Electronic commerce has, however, raised many questions internationally.
Determining the effect of such transactions on the tax take of a country is of great
importance to a government. The South African Revenue Service adjusted the
Income Tax Act in order to take globalisation into account in accordance with
international direction. In contrast, no changes have been suggested for the indirect
taxation, namely value added tax.
Electronic commerce were not contemplated when the Value-Added Tax Act was
introduced in 1991. The charging section (section 7 of the mentioned act) provides
that a transaction will be taxed in South Africa on the supply of goods or services, on
the import of goods and on the supply of an imported service. In traditional business
the place of supply was easy to define because a pure consumption test could be
applied: namely that the place of supply is where the goods or services have been
consumed. Today this rule will put an enormous compliance burden on vendors since
the physical place of consumption in electronic commerce is not that obvious (Masters, 2001). Not only must the precise place of supply be determined but the
vendor also has to value the supply in multiple jurisdictions.
This study highlights the applicable sections of the Value-Added Tax Act and applies
it to electronic commerce in order to determine if the existing legislation should be
modernised or if parts of it needs to be re-written.
The following concepts will be considered:
• Place of supply in order to determine the jurisdiction where tax must be
charged.
• Value of supply to determine the value on which tax must be charged.
• Vendor to determine which entities, South African or otherwise, have to
register for VAT in South Africa.
• Goods.
• Services to consider goods and services of digital content.
The international initiatives regarding the application of consumption tax, under the
leadership of the Fiscal Committee of the Organisation for Economic Co-operation
and Development, were taken into account in the study of any required amendments
to sections of the Value-Added Tax Act. A group, “The Consumption Tax Technical
Advisory Group”, was established in January 1999 by the OECD to consult with
business and non-members on the implementation of consumption tax on electronic
commerce transactions. The composition of the group is representative of the main
trading nations in the world, but also includes smaller countries, non-members and
private sector participants. It includes Australia, Japan, the United Kingdom, the United States of America and the European Commission. Considering the global
composition of the group this study will focus on the initiatives of the OECD and it is
not deemed necessary to investigate the initiatives of individual countries. The study
will however consider the research and initiatives of South Africa’s biggest
commercial partner, the European Union (OECD, 2004a: 285).
The South African initiatives regarding electronic commerce include the Green Paper
on Electronic Commerce released by the Department of Communication in
November 2000 and the Electronic Communications and Transactions Act
promulgated on 26 June 2002. The legislation does not address the tax implication
of electronic commerce but in chapter 4 of the mentioned green paper it was
discussed by the legislators.
There is growing international pressure to lower corporate income tax rates. As the
tax base erodes in this area other sources, possibly consumer taxation, must be
found to meet the shortfalls (Masters, 2001).
It is the aim of this study to show that the present Value-Added Tax Act is in need of
modernisation in order to take into account the wide range of electronic commerce
transactions.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/3404 |
| Date | 12 1900 |
| Creators | Oosthuizen, Sonia |
| Contributors | Van Schalkwyk, C. J., University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Accountancy. |
| Publisher | Stellenbosch : University of Stellenbosch |
| Source Sets | South African National ETD Portal |
| Language | Afrikaans |
| Detected Language | English |
| Type | Thesis |
| Rights | University of Stellenbosch |
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