Avoiding tax in South Africa’s retail industry via customer loyalty programs
DOI:
https://doi.org/10.18533/jefs.v2i05.142Keywords:
Customer loyalty program, Leakage, Revenue reform, Tax base.Abstract
The Medium Term Budget Policy Statement presented by the South African Minister of Finance in late 2013, highlighted that government expenditure substantially exceeded revenues collected. In investigating the possible broadening of the South African tax base as well as improving revenue administration, there is evidence of a gap in the taxation of customer loyalty programmes within many industries. The problem is that customer loyalty award credits are currently not being taxed by the revenue authority in South Africa. This study uses a multiple instrumental case study design to identify the tax leakages resulting from inadequate revenue administration within the South African retail industry’s use of customer loyalty programmes. The study has found that the loss to the fiscus in the non-taxing of customer loyalty award credits is substantial.References
Allaway, A., Gooner, R., Berkowitz, B., and Davis, L., 2006. Deriving and exploring behavior segments within a retail loyalty card program. European Journal of Marketing, 40(11/12): 1317-1339.
Barreix, A., and Roca, J., 2007. Tax Policy in Developing Countries: Looking Back - and Forward. National Tax Journal, 61 (2): 279-301.
Bird, R.M., 2008. The BBLR approach to tax reform in emerging countries international studies program. Retrieved from http://isp-aysps.gsu.edu
Bizcommunity, 2012. Loyalty programmes grow, as discretionary spending slows. Retrieved 10 December, 2013, from http://www.bizcommunity.com/Article/196/168/73908.html
Bloomberg Markets., 2013. Bloomberg markets. Retrieved 10 December, 2013, from http://www.bloomberg.com/markets/companies/country/south-africa/
Broadway, R.W., 2005. Income tax reform for a globalised world: The case for a dual income tax. Journal of Asian Economics, 16 (6): 910 – 927.
Calvert, T. M., 2012. The consequences of adapting tax legislation, using international standards in the developing worlds: A South African example. Paper presented in proceedings of the Australasian Tax Teachers Association Conference, Sydney Australia: 17 January 2012.
Chinomona, R., and Sandada, M., 2013. Predictors of customer loyalty to mobile service provider in South Africa. International Business and Economics Research Journal, 12(12): 1631 - 1644.
Clegg, D. , and Stretch, R., 2013. Income tax in South Africa Vol. 1. Retrieved 8 April, 2013, available on Lexis Nexis database
Clicks Group Limited, 2012a. Annual Financial Statements. Retrieved 10 December, 2013, from http://www.clicksgroup.co.za/IRDownloads/AnnualReport2012/clicks-AFS.pdf
Clicks Group Limited, 2012b. Integrated Annual Report. Retrieved 10 December, 2013, from http://www.clicksgroup.co.za/IRDownloads/AnnualReport2012/clicks-IAR-2012.pdf
Cockfield, A.J., 2006. The rise of the OECD as informal 'World Tax Organization' through national responses to e-commerce tax challenges. Yale Journals of Law and Technology, 8(1), 136-187.
Commissioner for Inland Revenue v Butcher Bros (Pty) Ltd, 13 SATC 21 South African Tax Cases Reports, 1945 AD 301 (Appellate 1944).
Commissioner for Inland Revenue v Delfos, 6 SATC 92, South African Tax Cases Reports, 1933 AD 242 (Appellate Provincial 1933).
Commissioner for Inland Revenue v People's Stores (Walvis Bay) (Pty) Ltd, 52 SATC 9, South African Tax Cases Reports, 1990 (2) SA 353(A) (Appellate 1990).
Commissioner for Inland Revenue v Visser, 8 SATC 271 South African Tax Cases Reports, 1937 TPD 77 (Transvaal Provincial 1936).
Creswell, J. W., 2007. Qualitative inquiry & research design: choosing among five approaches (2nd ed.). London: Sage Publications.
De Koker, A. P., and Williams, R. C., 2013. Silke on South African Income Tax. Retrieved 8 April, 2013, available on Lexis Nexus database
Gomm, R. , Hammersley, M., and Foster, P., 2000. Case study method: key issues, key texts. London: Sage Publications.
Haupt, P., 2013. Notes on South African Income Tax 2013 (32nd edition). Republic of South Africa: H & H Publications, Hedron Tax Consulting and Publishing CC.
Henning, E., Van Rensburg, W., and Smit, H., 2004. Finding your way in qualitative research. Pretoria: Van Schaik.
Hesse-Biber, S. N., and Leavy, P., 2011. The practice of qualitative research (2n ed.). Thousand Oaks, California: Sage Publications.
IFRS Foundation., 2011. IFRIC 13 Customer loyalty programmes. Retrieved 10 December, 2013. Available on the Lexix Nexis database
Katz, M., 1996. Third interim report of the commission of inquiry into taxation. Pretoria: Government Printer.
Kearney, L., 2013. It’s raining rewards. Personal Finance Magazine. Retrieved 10 December, 2013 from http://www.iol.co.za/business/personal-finance/it-s-raining-rewards-1.1551488#.UqgFSfQW0aB
Leedy, P. D., and Ormrod, J. E., 2005. Practical research: planning and design (8th ed.). New Jersey: Prentice Hall.
Maharaj, A., 2008. Awareness, perceptions and effects of customer loyalty programmes within the retail sector of the Durban Metropolitan area. (MCom Business Leadership), University of South Africa, South Africa. Retrieved from http://uir.unisa.ac.za/xmlui/bitstream/handle/10500/3127/2008%20MBL%203%20Research%20Report%20A%20Maharaj.pdf?sequence=1
Moorad, Z., 2013. Retailers reap rewards of loyalty schemes. Business Day Live. Retrieved 10 December 2013 from http://www.bdlive.co.za/business/retail/2013/04/02/retailers-reap-rewards-of-loyalty-schemes
National Treasury. 2012. Medium term budget policy statement 2012. Pretoria: Government Printer. Retrieved 10 December 2013 from http://www.treasury.gov.za/documents/mtbps/2012/mtbps/MTBPS%202012%20Full%20Document.pdf.
National Treasury. 2013a. 2013 Budget speech. Pretoria: Government Printer. Retrieved 10 December 2013 from http://www.info.gov.za/speeches/docs/2013/budget2013.pdf.
National Treasury. 2013b. Medium term budget policy statement 2013. Pretoria: Government Printer. Retrieved 10 December 2013 from http://cdn.bdlive.co.za/images/pdf/MTBPSDocument.pdf.
Neubig, T., and Poddar, S., 2000. Blurred tax boundaries: The new economy's implications for tax policy. Tax Notes, August 2000, 1153-1161.
Oanda, 2014. Average exchange rates. Retrieved 3 September, 2014, from http://www.oanda.com/currency/average
Pick n Pay Holdings Limited, 2012. Annual Financial Statements. Retrieved 9 December, 2013, from http://www.picknpay-ir.co.za/financials/annual_reports/2013/Integrated_Annual_Report_2013.pdf
Pick n Pay Holdings Limited, 2013. Integrated Annual Report. Retrieved 9 December, 2013, from http://www.picknpayir.co.za/financials/annual_reports/2012/financials/downloads/afs/pnp_afs.pdf
Pidduck, T., and Odendaal, K., 2013. Customer loyalty programmes: The loss to the Fiscus in South Africa. International Business and Economics Research Journal, 12 (12): 1521 – 1534.
Rose, R., 1985. Maximizing tax revenue while minimizing political costs. Journal of Public Policy, 5(3): 289-320.
Rowley, J., 2000. Loyalty kiosks: making loyalty cards work. British Food Journal, 102(5/6): 390-397.
SAICA, 2013. Income Tax Act No. 58 of 1962, Government Printer. Johannesburg: Lexis Nexis
SARS. 2012. Media statement by the Minister of Finance, Mr. Pravin Gordhan, on the preliminary outcome of revenue collection for the 2011/12 Fiscal Year. Retrieved 18 April, 2013, from http://www.sars.gov.za/home.asp?PID=74731&ToolID=2&ItemID=76570
Solidarity., 2013. Actual number of taxpayers far lower than SARS professes it to be. Retrieved 18 April, 2013, from http://solidariteit.co.za/en/actual-number-of-taxpayers-far-lower-than-sars-professes-it-to-be-solidarity/
Stake, R., 2005. The Sage Handbook of qualitative research (3rd ed.). Thousand Oaks, California: Sage Publications.
Statistics South Africa., 2011. Census 2011 data supplied to National Treasury for local government equitable share formula. Retrieved 18 April, 2013, from http://www.statssa.gov.za/publications/Census%202011_data_supplied_to_National_Treasury.asp
Trading Economics, 2014. South Africa Government Budget. Retrieved 3 September, 2014, from http://www.tradingeconomics.com/south-africa/government-budget
WH Lategan v Commissioner for Inland Revenue, 2 SATC 16, South African Tax Cases Reports, 1926 CPD 203 (Cape Provincial 1926).
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) after official publication, as it can lead to productive exchanges as well as greater citation of published work (See The Effect of Open Access).
