Abstract
The past decade has seen an unprecedented growth in technology and globalization. This has created a newer technology driven economy, which has disrupted traditional economies internationally. Moreover, it has challenged the traditional tax legislations globally. In doing so, it has enabled many companies to trade with customers from all the four corners of the globe, as well as earn income in different tax jurisdictions.
In addition, the rate at which the digital economy has grown in South Africa and the world, has exceeded any expectation, since the last 5 years. The Covid-19 epidemic has been a catalyst towards this rapid growth. This entails that more people are getting their services and goods via the internet or online shopping in South Africa. Furthermore, online shopping has led to goods being conveniently delivered on the customer’s front door. This has not gone without any challenges to the tax authorities.
As a result, the South African Revenue Services (SARS) has had to also change the way it has collected tax, especially Value Added Tax (VAT) from all the internet transactions taking place. SARS has had to amend its tax laws to meet the new globalized technology driven economy where people obtain their services from Multinational Enterprises (MNE’s). They have to guard against the non-payment of VAT from local consumption.
In this study, the VAT Act was examined to see if it meets the recommendation by the Organization for Economic Co-Operation Development (OECD), and whether or not SARS was correctly taxing e-commerce(VAT). The taxing provision was studied and compared with the UK VAT Act. The South African VAT Act, was found that it has to be amended, and to meet the international standards set by the OECD. The study also proposes possible amendments to section 7 of the VAT Act.