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Value-added tax : a critical analysis of input tax in respect of share issue costs
Thesis (MAcc)--Stellenbosch University, 2020.
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| Format: | Thesis |
| Language: | en_ZA |
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Stellenbosch : Stellenbosch University
2020
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| _version_ | 1867613935871459328 |
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| access_status_str | Open Access |
| author | Beukes, Wilna |
| author2 | Herron, Andrea |
| author_browse | Beukes, Wilna Herron, Andrea |
| author_facet | Herron, Andrea Beukes, Wilna |
| author_sort | Beukes, Wilna |
| collection | Thesis |
| dc_rights_str_mv | Stellenbosch University |
| description | Thesis (MAcc)--Stellenbosch University, 2020. |
| format | Thesis |
| id | oai:scholar.sun.ac.za:10019.1/108332 |
| institution | Stellenbosch University (South Africa) |
| language | en_ZA |
| last_indexed | 2026-06-10T12:44:03.396Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from SUNScholar — Stellenbosch University Repository |
| publishDate | 2020 |
| publishDateRange | 2020 |
| publishDateSort | 2020 |
| publisher | Stellenbosch : Stellenbosch University |
| publisherStr | Stellenbosch : Stellenbosch University |
| record_format | dspace |
| source_str | SUNScholar — Stellenbosch University Repository |
| spelling | oai:scholar.sun.ac.za:10019.1/108332 Value-added tax : a critical analysis of input tax in respect of share issue costs Beukes, Wilna Herron, Andrea Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy. Value-added tax Taxation -- Law and legislation Income tax -- Law and legislation UCTD Thesis (MAcc)--Stellenbosch University, 2020. ENGLISH SUMMARY: The issue of shares is one of the main sources of finance used to start up or expand a business. Costs are incurred to facilitate the issue of shares in both the listed and private market. Value-added tax (VAT) is levied on the supply of these services when provided by VAT vendors, in terms of the Value-Added Tax Act (No. 89 of 1991) (hereafter referred to as the VAT Act). The South African Revenue Service’s (SARS) current policy is that input tax on share issue costs incurred is not deductible based on the judgment in Income Tax Case No. 1744 (2002) 65 SATC 154 (hereafter referred to as ITC 1744). Through reliance on earlier judgments in the Court of Justice of the European Union (CJEU), it was held in ITC 1744 that the absence of a direct and immediate link between share issue costs incurred and the making of taxable supplies precluded the taxpayer from claiming an input tax deduction. South African authors disagree on whether the direct and immediate link test relied on in ITC 1744 should be used to apply the provisions of the VAT Act. Furthermore, South African authors have suggested that there are grounds to argue that the issue of shares does not constitute a “supply” as defined in section 1(1) of the VAT Act. In terms of the New Zealand Goods and Services Tax Act, on which the VAT Act was modelled, the New Zealand Inland Revenue Department argued that input tax on share issue costs should be deductible to satisfy the broad taxation principles of neutrality, effectiveness and fairness. Despite international developments, SARS has not clarified its policy on the treatment of input tax on share issue costs incurred since ITC 1744 was heard in 2002. This research assignment therefore set out to determine whether input tax on share issue costs incurred should be deductible. A qualitative research approach was followed. Primary and secondary data were collected and analysed in the form of a desktop literature review to determine whether input tax on share issue costs incurred should be deductible. This research assignment found that the use of the direct and immediate link test relied on in ITC 1744 may not be appropriate in South Africa, and that only a direct functional link may be required by the phrase “in the course of making taxable supplies” in the input tax definition in section 1(1) of the VAT Act. It was further found that there are grounds to argue that the issue of shares does not constitute a “supply” in terms of section 1(1) of the VAT Act and that share issue costs incurred may accordingly form part of a business’ general overhead costs. Lastly, it was found that the current denial of input tax on share issue costs incurred detracts from the broad taxation principles of neutrality, effectiveness and fairness, which are fundamental to a good VAT system. The findings of this research assignment therefore suggest that input tax on share issue costs should be deductible. AFRIKAANSE OPSOMMING: Die uitreik van aandele is een van die hoofbronne van kapitaal vir die stigting of uitbreiding van ’n besigheid. Kostes word aangegaan om die uitreik van aandele te fasiliteer in beide ’n genoteerde en private mark. Belasting op toegevoegde waarde (BTW) word gehef op die lewering van dienste deur geregistreerde BTW-ondernemersin terme van die Wet op Belasting op Toegevoegde Waarde (hierna verwys na as die Wet op BTW). Die Suid-Afrikaanse Inkomstediens (SAID) se huidige beleid is dat insetbelasting op aandeeluitreikkostes nie aftrekbaar is nie, gebaseer op die beslissing in Income Tax Case No. 1744 (2002) 65 SATC 154 (hierna verwys na as ITC 1744). Deur te steun op vorige beslissings in die Geregshof van die Europese Unie (GEU), is daar in ITC 1744 bepaal dat die gebrek aan ’n direkte en onmiddellike skakel tussen aandeeluitreikkostes aangegaan en die maak van belasbare lewerings ’n ondernemerverhinder om die insetbelasting aangegaan as ’n aftrekking te eis. Suid-Afrikaanse skrywers verskil oor of die direkte en onmiddellike skakel-toets, waarop in ITC 1744 gesteun is, gebruik moet word om die bepalings van die Wet op BTW toe te pas. Verder voer ander Suid-Afrikaanse skrywers aan dat daar gronde is om te argumenteer dat die uitreik van aandele nie ’n “lewering” is soos gedefinieer in artikel 1(1) van die Wet op BTW nie. In terme van die Nieu-Seelandse Belasting op Goedere en Dienste-wet, waarop die Wet op BTWgemodelleer is, voer die Nieu-Seelandse Belastingdienstedepartement aan dat insetbelasting op aandeeluitreikkoste aftrekbaar moet wees ten einde die beginsels van neutraliteit, effektiwiteit, en gelykheid te bevredig. Ten spyte van internasionale ontwikkelinge op die gebied, het die SAID nog geen leiding of duidelikheid verskaf oor die huidige beleid sedert ITC 1744 in 2002 aangehoor was nie. Hierdie navorsingstuk het dus ten doel gestel om te bepaal of insetbelasting op aandeeluitreikkostes aftrekbaar moet wees. ’n Kwalitatiewe navorsingsbenadering is gevolg. Primere en sekondere data is ingesamel en ontleed in die vorm van ’n lessenaar-literatuurstudie om te bepaal of insetbelasting op aandeeluitreikkostes aftrekbaar moet wees. Die studie het bevind dat die gebruik van die direkte en onmiddellike skakel-toets soos vasgestel in ITC 1744 dalk nie toepaslik mag wees in die Suid-Afrikaanse konteks nie, en dat slegs ’n direkte funksionele skakel vereis word deur die frase “in die loop van die maak van belasbare lewerings” in die definisie van insetbelasting in artikel 1(1) van die Wet op BTW. Dit is verder bevind dat daar gronde is om aan te voer dat die uitreik van aandele nie ’n “lewering” is in terme van artikel 1(1) van die Wet op BTW nie en dat aandeeluitreikkostes gevolglik deel mag vorm van algemene oorhoofse kostes van ’n besigheid. Laastens is bevind dat die huidige praktyk om nie insetbelasting op aandeeluitreikkostes as ’n aftrekking toe te staan nie, afbreuk doen aan die belastingbeginsels van neutraliteit, effektiwiteit, en gelykheid, wat fundamenteel is tot ’n goeie BTW-stelsel. Die bevindinge van hierdie navorsingstuk dui daarop dat insetbelasting op aandeeluitreikkostes aftrekbaar moet wees. Masters 2020-01-28T08:56:39Z 2020-04-28T15:10:07Z 2020-01-28T08:56:39Z 2020-04-28T15:10:07Z 2020-03 Thesis http://hdl.handle.net/10019.1/108332 en_ZA Stellenbosch University xiv, 113 pages, includes annexures application/pdf application/pdf Stellenbosch : Stellenbosch University |
| spellingShingle | Value-added tax Taxation -- Law and legislation Income tax -- Law and legislation UCTD Beukes, Wilna Value-added tax : a critical analysis of input tax in respect of share issue costs |
| title | Value-added tax : a critical analysis of input tax in respect of share issue costs |
| title_full | Value-added tax : a critical analysis of input tax in respect of share issue costs |
| title_fullStr | Value-added tax : a critical analysis of input tax in respect of share issue costs |
| title_full_unstemmed | Value-added tax : a critical analysis of input tax in respect of share issue costs |
| title_short | Value-added tax : a critical analysis of input tax in respect of share issue costs |
| title_sort | value added tax a critical analysis of input tax in respect of share issue costs |
| topic | Value-added tax Taxation -- Law and legislation Income tax -- Law and legislation UCTD |
| url | http://hdl.handle.net/10019.1/108332 |
| work_keys_str_mv | AT beukeswilna valueaddedtaxacriticalanalysisofinputtaxinrespectofshareissuecosts |