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Avoiding tax in South Africa’s retail industry via customer loyalty programs

Author

Listed:
  • Karen Odendaal

    (Department of Accountancy Studies; School of Business and Economics; Monash University, South Africa.)

  • Teresa Calvert Pidduck

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.

Suggested Citation

  • Karen Odendaal & Teresa Calvert Pidduck, 2014. "Avoiding tax in South Africa’s retail industry via customer loyalty programs," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 2(5), pages 6-16, October.
    • Handle: RePEc:lrc:lareco:v:2:y:2014:i:5:p:6-16
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    More about this item

    Keywords

    Customer loyalty program; Leakage; Revenue reform; Tax base.;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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