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Progressive tax: a proposal for customer loyalty programmes

Progressive tax: a proposal for customer loyalty programmes The South African Government needs to increase fiscal revenues to cater to increased government spending. This paper aims to argue that the South African Revenue Service (SARS) has an opportunity to tax the receipt of customer loyalty programme awards in the hands of customers, with little amendment to current tax legislation or administration. This provides the South African Government an opportunity to increase much needed tax revenue in spite of limited resources.Design/methodology/approachFive instrumental case studies were used and analysed from a financial reporting perspective to quantify customer loyalty points earned by customers. These can form a basis for deriving the potential benefits from the taxation of customer loyalty programmes in the retail industry. The multiple instrumental case studies used and the application of accounting guidance in International Financial Reporting Standards allow generalisations to be made to highlight the amount of customer loyalty awards granted and possible tax revenues forgone in just one sector of the South African economy.FindingsShould the proposals for taxation of customer loyalty programmes be implemented, the fiscus would be able to collect over R 234.35m (US$16.91m) in tax revenue from only five companies providing customers with loyalty awards. This indicates that this proposal for taxation is critical for investigation by the South African Government, as it may aid in achieving revenue goals for South Africa.Originality/valueThis paper contributes to the literature on taxation legislation within South Africa by proposing a model that may be used by the SARS to increase tax revenues to meet the Government’s needs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Progressive tax: a proposal for customer loyalty programmes

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0114-0582
eISSN
0114-0582
DOI
10.1108/par-10-2018-0082
Publisher site
See Article on Publisher Site

Abstract

The South African Government needs to increase fiscal revenues to cater to increased government spending. This paper aims to argue that the South African Revenue Service (SARS) has an opportunity to tax the receipt of customer loyalty programme awards in the hands of customers, with little amendment to current tax legislation or administration. This provides the South African Government an opportunity to increase much needed tax revenue in spite of limited resources.Design/methodology/approachFive instrumental case studies were used and analysed from a financial reporting perspective to quantify customer loyalty points earned by customers. These can form a basis for deriving the potential benefits from the taxation of customer loyalty programmes in the retail industry. The multiple instrumental case studies used and the application of accounting guidance in International Financial Reporting Standards allow generalisations to be made to highlight the amount of customer loyalty awards granted and possible tax revenues forgone in just one sector of the South African economy.FindingsShould the proposals for taxation of customer loyalty programmes be implemented, the fiscus would be able to collect over R 234.35m (US$16.91m) in tax revenue from only five companies providing customers with loyalty awards. This indicates that this proposal for taxation is critical for investigation by the South African Government, as it may aid in achieving revenue goals for South Africa.Originality/valueThis paper contributes to the literature on taxation legislation within South Africa by proposing a model that may be used by the SARS to increase tax revenues to meet the Government’s needs.

Journal

Pacific Accounting Review – Emerald Publishing

Published: Nov 4, 2019

Keywords: IFRS; Progressive tax; Customer loyalty programmes; Income tax; Tax leakage; Revenue administration

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