Abstract
M.Com.
Without a doubt the digital economy has revolutionised traditional ways of conducting business
around the world. The advent of mobile telephony, mobile internet access, the smart device and
other cutting edge technologies have brought about a rebirth of certain existing industries and
have ushered in the emergence of entirely new types of business bringing customers, products
and services together in a global virtual space. This has enabled billions of consumers across the
globe to connect and interface seamlessly in a rapidly expanding cyber marketplace, without
actually ever physically meeting each other.
Ageing global tax systems originally designed for application in a less sophisticated non-digitised
business world have not kept up to date with technological advances and have as a result become
ineffective in taxing the profits of business, which is transacted through the internet and in the
cloud. International organisations like the G20 and the OECD as well as many governments are
presently investigating ways to tax the profits from cloud and digital content in the most efficient
and effective manner. The challenge is to improve tax policy and appropriateness, without
impeding economic growth at a micro and macro level and without giving certain jurisdictions
disproportionate taxing rights to the detriment of others.
This minor dissertation considers the appropriateness of current South African tax legislation for
taxing inbound (transactions where profits leave South African shores) electronic services in
South Africa. Focusing on online sales and purchase transactions, this minor dissertation briefly
outlines the development of digital technology and the emergence of the developing digitised
economy. The minor dissertation highlights the challenges in taxing profits in the digital economy
and views these challenges from a South African perspective. This minor dissertation analyses
the relevant current South African legislation, exploring possible alternative solutions to the
identified challenges. The research confirms that current South African tax legislation is not
adequate, highlights the deficiencies and proposes a feasible solution for South Africa.