Abstract
D.Com. (Accounting)
The income potential and operational advantages of a broad-based
sales tax justify the reliance there upon to produce a material part
of the tax revenue of a country with a large third-world element in
its economy. Since the introduction of sales tax in 1978 it has
developed from a relatively inferior tax into an important element of
the South African tax structure presently yielding in excess of 25%
of total tax revenue. The relevant statute, namely the Sales Tax Act
103 of 1978, has subsequently been amended to ensure certain
structural and operational changes to the sales tax system and the
rate has been increased from 4% to 12%. The question may therefore
well be asked whether the present sales tax system upholds the
criteria for an acceptable tax system, namely equity and efficiency,
and still meets with the demands of the advancement that has taken
place in the south African economy. This issue is fuelled by the
common concern expressed about the apparent unacceptable levels of
sales tax avoidance and evasion. In order to answer this question a
framework for a sales tax system that would ideally suit the economic
structure and social conditions of South Africa was devised. This
framework shortly requires the sales tax system to be fair, simple,
certain and neutral. The existing sales tax system was tested
against this framework and apart from certain breaches, such as the
taxation of capital and certain intermediate goods and the
insufficient official divulgence of information, it was found to be
generally efficient. Furthermore, due to the fact that the
consumption of exempt foodstuffs decline much faster, as a proportion
of income, than the consumption of taxed goods and services as income
increases, the sales tax burden was found to be distributed
proportionally over the income range. The recent widespread adoption
of value added taxes has lead the study to examine and evaluate the
additive-, subtractive- and invoice methods of value added taxation...