Original Research

Do South Africa’s e-commerce VAT rules measure up to international trends and OECD guidelines?

Alexandra Loffstadt, Jane Ndlovu, Misha Padia
Journal of Economic and Financial Sciences | Vol 16, No 1 | a815 | DOI: https://doi.org/10.4102/jef.v16i1.815 | © 2023 Alexandra Loffstadt, Jane Ndlovu, Misha Padia | This work is licensed under CC Attribution 4.0
Submitted: 31 July 2022 | Published: 29 March 2023

About the author(s)

Alexandra Loffstadt, School of Accountancy, Faculty of Commerce, Law, and Management, University of the Witwatersrand, Johannesburg, South Africa
Jane Ndlovu, School of Accountancy, Faculty of Commerce, Law, and Management, University of the Witwatersrand, Johannesburg, South Africa
Misha Padia, School of Accountancy, Faculty of Commerce, Law, and Management, University of the Witwatersrand, Johannesburg, South Africa

Abstract

Orientation: The taxability of e-commerce transactions have been the subject of many studies to protect governments from Value-Added Tax (VAT) erosion, illegal recovery and fraud.

Research purpose: This study critically analyses the challenges posed by e-commerce transactions in South Africa’s VAT Act. Recommendations are made for amendments to the VAT Act to improve rules to effectively tax e-commerce transactions occurring in South Africa.

Motivation for the study: Globally, including in South Africa, enforcing relevant VAT legislation to target output tax collections and input tax credits from e-commerce transactions aptly remains a challenge.

Research approach/design and method: By integrating qualitative literature reviews and comparative synthesis, this study employed a comparative legal methodology. VAT levied on e-commerce transactions in South Africa is compared to the Organisation for Economic Co-operation and Development’s guidelines as well as New Zealand’s and Australia’s Goods and Services Tax legislations.

Main Findings: While the South African VAT Act aligns with international best practices on the use of intermediaries, there are some differences as detailed in the study.

Practical/managerial implications: To align with international trade counterparts, the South African VAT Act should differentiate between business-to-business and business-to-consumer sales. A provision concerning the place of consumption for bundled goods should be included in the VAT Act. The VAT Act should contain a provision that allows bad debts to be claimed on cash sales made instead of total sales made.

Contribution/value-add: This study harmonises South African VAT legislation with international best practices within the context of continual advancement of e-commerce transactions.


Keywords

business to business (B2B); business to consumer (B2C); e-commerce; goods and services tax (GST); Organisation for Economic Co-operation and Development (OECD); South African Revenue Service (SARS); value-added tax (VAT)

JEL Codes

F38: International Financial Policy: Financial Transactions Tax; Capital Controls

Sustainable Development Goal

Goal 17: Partnerships for the goals

Metrics

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Total article views: 2116


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