Faculty of Commerce, Law and Management (ETDs)

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An analysis of the deductibility of interest expenditure rules in South Africa
(2019) Pillay, Kerusha
Taxpayers are broadly financed in two ways, namely through the use of debt and equity. The returns on capital and debt are treated differently from an income tax perspective (SARS 2013). The interest expense incurred by taxpayers in the production of income by a person carrying on a trade, are deductible in determining taxable income, subject to certain conditions and limitations. The number of provisions contained in the Income Tax Act of 1962 (the Act) which deal with the tax treatment of interest income and interest expenditure have gradually increased over time. There are numerous aspects to be borne in mind by resident and foreign companies when considering the income tax and withholding tax implications which may arise in respect of transactions giving rise to interest income and interest expenditure (SAICA 2015). This is affirmed by the number of provisions in the income tax act dealing with the deductibility of interest primarily dealt with in section 24J of the Act as well as indicated by the 2014 amendments to section 8F, the introduction of section 8FA, sections 23M and 23N into the legislation. The purpose of this report is to assess whether the Department of National Treasury (National Treasury) have taken the number of provisions of the deductibility of interest too far.
An analysis: the possible consequences of a potential wealth tax on immovable property in South Africa
(2019) Ignatova, Alberta
The Davis Tax Committee issued a media statement on 25 April 2017, calling for written submissions on the introduction of a possible wealth tax in South Africa (Davis Tax Committee, 2017, p 1). The discussion of a potential wealth tax came two months after an increase applying to the top income tax bracket for individuals by 4% to 45%, resulting in an effective capital gains tax rate for individuals of 18% (ENS Africa, n.d. par 2). This should be seen on the back of the capital gains tax increase of nearly five percentage points from 13.32% in the 2014 year of assessment to 18% in 2017 (ENS Africa, n.d. par 2). The Davis Tax Committee had been tasked to review South Africa’s tax system and had consequently launched a public debate on one of the most controversial possible moves on its agenda, wealth tax (Reuters, 2017, par 1). There is an ongoing debate among South Africans on whether the government should implement such a tax to lessen the glaring inequality in Africa’s most industrialised economy (Reuters, 2017, par 2). South Africa is grappling with weak economic growth and unemployment of more than 25% and the minority still controls a disproportionately big share of the economy (Reuters, 2017, par 9). The public debate on wealth taxes often focuses on redistribution of land, and consequently one of the potential forms of wealth tax could be a wealth tax on property (Davis Tax Committee, 2017, p 1). As taxes on land and property have both fiscal and non-fiscal effects, it is therefore useful to analyse the possible positive and possible negative impact of the potential wealth tax on immovable property on the revenue authority, and taxpayers. The aim of this research report is to analyse the possible consequences of the potential wealth tax specifically with a focus on immovable property. Firstly, consideration will be given to what the possible definition of immovable property could be. Secondly, the potential types of wealth tax on immovable property will be analysed together with existing wealth taxes imposed by the Income Tax Act 58 of 1962 (the Act), municipal legislation (Municipal Property Rates Act, 2004), Estate Duty Act (Estate Duty Act 45 of 1955) and Transfer Duty Act (Transfer Duty Act 40 of 1949). Thereafter the research will consist of an objective analysis of the possible positive and possible negative consequences of the potential wealth tax on immovable property.
Assessing cybersecurity vulnerabilities in the disposal of ewaste in South African public & private institutions
(University of the Witwatersrand, Johannesburg, 2022) Khumalo, Dimitri
Over the years there have been numerous studies conducted, focusing on the various facets of waste electronic and electrical equipment, also termed electronic waste or e-waste, and the impact it has on the environment. However, little attention has been placed on the management of personal data during the disposal phases of e-waste and the inherent ramifications it poses if this data were retrieved. This study sought to assess the vulnerabilities to which organisations are exposed, specifically financial and government institutions, by interrogating the management policies, processes, and procedures for stored data when disposing of e-waste at the end of the asset life cycle. A qualitative research method, through semi-structured interviews was conducted. The population selected were very senior individuals, selected based on the specific roles and experiences they fulfilled within the financial services sector, various government institutions, and e-waste recycling companies. From the findings, it emerged that there were growing concerns around the effective policy regulations put in place to manage the disposal practices of ewaste and that of personal identifiable and sensitive data of individuals. This has driven a need for policies and robust mechanisms to be instituted to try and minimise the overall impact these vulnerabilities could pose to the environment and the entire value chain, at that juncture where electronic devices have reached their EOL and are now being disposed of. iii The results demonstrate that more focus has to be placed on the managing of ewaste in industry, providing policy directives in relation to how organisations need to prescribe and conform to effective disposal practices of electronic devices that have reached their EOL. Further to this, government, in consultation with various industry role players, needs to look at ways to formalise and regulate the e-waste sector and institute measures to ensure conformance for every part of the value chain.
A comparative study of the tax considerations of traditional funding available to small, medium and micro enterprises versus alternative sources of funding
(2019) Zungu, Sibongile Nomzamo Goodness
During the February 2018 National Budget speech, the 2018 GDP growth projection was anticipated at 1.5% (National Treasury 2018), 0.6% higher than the percentage projected by the International Monetary fund (IMF) just a month before (Khumalo 2018). In a country with a low GDP and an unemployment rate sitting at a straggering 26.7% (Statistics South Africa 2018), small, medium and Micro Enterprises (SMME's) sometimes referred to as small businesses. play a pivotal role in the success of the economy.
A critical analysis of the international direct tax solutions for businesses in the digital economy
(2019) Peres, Monique Helena Alfonso
Taxes are not paid where value is created when it comes to the digital economy. Current international tax laws were written before the digital economy started. The digital economy has changed our lives and how business is done. Value is created in different ways by digital businesses compared to traditional businesses. Digital businesses can do business in any jurisdiction in the world without a physical presence. The permanent establishment concept is still based on physical presence which is irrelevant to digital businesses. The permanent establishment concept and its irrelevance to the digital economy will be discussed in the report. Foreign digital businesses use the physical presence required by the permanent establishment concept in their tax planning to reduce their tax liability. The questions that will be answered in the report are how and where value is created and where should digital businesses pay direct taxes such as income tax, amongst other taxes. The purpose of this report is to critically analyse how digital businesses should be directly taxed when they have a significant digital presence with little or no physical presence in a jurisdiction. The report will critically analyse the direct tax solutions that have been proposed to tax businesses in the digital economy.
A critical analysis of the rationale for the introduction and implementation of sugar tax
(2019) Parker, Shuaib Ahmed
In the 2016 Budget Speech, the then Minister of Finance, Pravin Gordhan, announced a decision to introduce a Health Promotion Levy (‘sugar tax’) on sugar-sweetened beverages (‘SSBs’). Sugar tax came into effect on 1 April 2018 in South Africa. In its Policy Paper released by the National Treasury in July 2016, titled “Taxation of Sugar Sweetened Beverages” (‘Policy Paper’), the National Treasury outlined the proposed sugar tax. It argued that the primary objective of the introduction of sugar tax was to reduce excessive sugar intake and curb the growing problem of obesity. Obesity and other non-communicable diseases (‘NCDs’) have significantly escalated over the past 30 years and has become a growing concern in South Africa. This has resulted in South Africa being ranked the most obese country in sub-Saharan Africa. The impact of SSBs on obesity and other NCDs has received widespread attention on the international stage and by the World Health Organisation (‘WHO’). This is evident from the fact that South Africa is not the first country in recent years to introduce a form of sugar tax which has been gaining traction as popular intervention to combat the growing concern of NCDs. The argument arises as to whether the tax is actually intended to meet its desired health benefits or simply increase revenue for the fiscus. This research will examine whether the implementation of sugar tax will contribute to its intended health objectives envisaged. In order to achieve this, a study will need to be undertaken with countries which have successfully introduced sugar tax including, Mexico, Norway, Denmark, the United Arab Emirates, Chile and United Kingdom. Lastly, this study will also explore the success of the implementation of sugar tax and the impact it has had on the fiscus of these countries.
The effects of individual and organizational factors on ethical behavior in the South African construction industry
(2019) Makonye, Chido
Employees often face many difficult situations that demand ethical decision making from the viewpoint of society and organizations. Various factors influence the outcome of ethical or unethical decision-making and behaviour of employees. This paper briefly examined some of the major factors that may affect ethical behaviour in construction companies. The strength of these factors may vary from individuals to individuals, organizations to organizations, and situation to situation. The factors that were investigated are personal values, corporate ethical values and the organisational climate. Age and gender were used as moderators in this study. South Africa is a developing country in which many private and public organizations are being faced with a lot of fraud and corruption. It is not only in private organization but also the government. This call for an investigation on ethical behaviour but to solve a problem one must find the source of the problem. The study was designed to answer the major question: Are there any significance relationships between personal values, corporate values and organisational climate and ethical behaviour in the South African construction industry? The researcher employed a quantitative research method. Data collection was done by use of questionnaires distributed to various construction companies. A computer programmer called SPSS version 25 and Microsoft excel were used to analyse data. Descriptive statistics was used to interpret data collected from the first section of the questionnaire that is the biographic information. Linear regression and correlations were used to test the proposed hypothesis. Multiple regression was used to test the moderation effect of age and gender. The findings largely confirm previous studies that personal values and corporate values influence ethical behaviour. However contrary to some previous studies, there was no significant relationship between ethical behaviour and organisational climate. Conclusions, findings and recommendations were drawn from the results.
Employee’s perceptions of information sharing for the delivery of services in the city of Tshwane’s customer relations department
(University of the Witwatersrand, Johannesburg, 2022) Cooke, Henry; Pooe, Kagiso ‘TK’
Information sharing is one of the fundamental tools that enables organisations to deliver services. Since information is such a broad topic, the information referred to in this study is limited to information that is needed to keep citizens informed regarding the delivery of services in the Customer Relations Management Department, regarded as the front office of the City of Tshwane (Tshwane, 2021b). Previous research has showed that lack of information sharing leads to inefficient and ineffective service delivery. It is for these reasons that this study aimed to explore employee’s perceptions of information sharing for the delivery of services in the City of Tshwane’s Customer Relations Department. The study was rooted in practice and social exchange theory, practical theory, and expectancy–value theory. The chosen research approach for this study was the qualitative approach. This study used semi-structured interviews and a non-probability purposive sampling method. Ten participants across the regions of the City of Tshwane took part in this study. Permission was received from the City of Tshwane to conduct the interviews and the Wits School of Governance provided the researcher with ethical clearance. The main research question, "what are employees’ perceptions of information sharing for the delivery services in the City of Tshwane’s customer relations department?” was answered. This study found that the perceptions of employees on information sharing for the delivery of services in the customer relations department in the City of Tshwane were not to the standard required by a local government organisation. Based on these findings, the researcher was able to provide recommendations to the City for Tshwane on information sharing for the delivery of services, and these findings opened up others areas for future research.
ESG reporting and the institutional shareholder base: a quantitative study of listed companies on the Johannesburg Stock Exchange
(2019) Moikwatlhai, Kagisho Benjamin
Previous research findings suggest that companies within developed markets which report on environmental, social and governance (ESG) issues attract a long term oriented institutional investor base. Against this background, the purpose of this study was to assess whether this relationship holds true within an emerging market context. Using cross-sectional time series data for 114 Johannesburg Stock Exchange (JSE) listed companies over the period 2012 to 2016, this study investigated whether the integration of ESG factors in investor decision making has resulted in investments being held into the long term by institutional investors and whether this relationship varies between different sectors of the JSE. The results were based on a regression analysis which was performed employing data from the Thomson Reuters ASSET4 platform as a proxy for ESG reporting scores against institutional investor shareholdings. The results did not indicate a statistically meaningful relationship between ESG reporting and the long term oriented institutional investor base even at the industry level. The results did not appear to be consistent with similar studies in developed markets, partly as a consequence of the JSE comprising greater quasi institutional investors as compared to dedicated investors. The results suggest that institutional investor’s commitment to the United Nations Principles for Responsible Investment (UN PRI) and Code for Responsible Investing in South Africa (CRISA) is yet to translate into investments in JSE companies being held long term. These findings motivate for further academic analysis of ESG-long term investor relationship, to policy setters the results call for greater consideration to be given to policy changes or industry guidance in order to ensure that the objectives as set out by the UN PRI and CRISA are achieved.
Evaluating business model disclosures in the integrated report
(2019) Gutmayer, Thomas
Purpose – This paper assesses the extent to which integrated thinking has been applied in the construction of business models by exploring business model disclosures in the integrated reports of a sample of companies listed on the JSE1 for their 2016 financial years. Methodology – This paper uses a content analysis to identify disclosure themes in the integrated reports. Findings – The correlations between disclosure themes evidence the absence of integrated thinking in the construction of business models. Research limitations – Since the sample consists of only listed companies, it may not be possible to generalize the results to non-listed companies. Furthermore, the absence of a framework governing business model disclosures may negate the comparability amongst integrated reports. Originality/Value – This paper adds to the limited body of knowledge on integrated reporting and integrated thinking. It also sheds light on how one of the key principles of King IV is being interpreted and applied in a South African context, which is a relatively new area of study.
An examination of tampon tax and how it effects the social, health and economical aspects of countries including a comparative analysis of how some countries have dealt with tampon tax
(2019) Asmaljee, Sumaiyah Safi
Tampon tax is a colloquial term in common usage describing taxes levied on female menstrual hygiene products that are taxed as luxury goods in spite of the fact these items are considered necessities such as food and medicine, which are either exempted or taxed at 0% in some countries. Tampon tax in South Africa is the levying of value-added tax (VAT), to female menstrual hygiene products. Internationally, activists have initiated various campaigns and protests for the removal of tampon tax as it is not regarded as a luxury but rather a necessity, and South Africa has followed suit. There have been various campaigns and initiatives towards making female menstrual hygiene products more affordable and/ or accessible to the females from low-income households in South Africa. Reduction in sales tax rates, removal of goods and services tax on female menstrual hygiene products and the utilisation of the income earned from sales tax on female menstrual hygiene products are options available to negate the economic effects of tampon tax on females in their reproductive years. This paper discusses tampon tax and its effect on social, health and the economic well-being of South Africa. The paper will include comparative analyses to what is being done in some countries to alleviate the negative effects of the tampon tax. This paper will also examine the value-added tax in South Africa. Arguments in favour of and against tampon tax are also discussed.
Examining coordination among stakeholders in implementing the OR Tambo special economic zone
(University of the Witwatersrand, Johannesburg, 2022) Masinga, Kgothatso Anamelita; Pillay, Pundy
South Africa has adopted the Special Economic Zone (SEZ) programme as a mechanism to attract Foreign Direct Investment and increase job creation. However, despite the country’s implementation of SEZs over the past years, the country continues to experience socioeconomic challenges such as poverty, unemployment, and inequality. In this regard, this study examined coordination among stakeholders in implementing the OR Tambo SEZ, particularly given that the OR Tambo SEZ was designated as an Industrial Development Zone in 2002, and the zone received its operating permit in 2010. This delay in the issuance of the permit signals that there might be coordination challenges among key stakeholders responsible for implementing the zone. The research adopted a case study design to examine the extent of coordination among stakeholders that are responsible for the implementation of the OR Tambo SEZ. A qualitative research method was adopted to collect the data using interviews and document analysis. The study found that key stakeholders such as the Department of Trade and Industry, Gauteng Industrial Development Zone and the Municipality of Ekurhuleni are involved in the implementation process of the zone. However, there is a need to improve on the coordination mechanism by clearly indicating the role and responsibility of each stakeholder and the rules and procedures for coordination. In addition, there is a need to involve other vital stakeholders who can contribute towards the successful implementation of the OR Tambo SEZ.
Factors affecting the adoption of online share trading in South Africa
(2022) Matsena, Tshwantsho J
This research study aims to explore the adoption of online share trading in South Africa. Online share trading is a function of stock market participation, through a technology-based platform. The platform can be offered by traditional stockbrokers or by financial technology-based service providers.
The feasibility of trust as a generation skipping device based on the amendments to the Income Tax Act and the Davis tax committee's report into wealth taxation as well as the potential effect these may have on trusts
(2019) Crafford, Carel Pieter
Trusts are not as desirable as they once were, and every year they seem to become less so. The reason for their increasing undesirability is the heavy tax burden they carry.
Impact of oil price shocks on stock returns: evidence from selected Southeast Asian economies
(2017) Siddiqui, Ammar Ahmed
This paper investigates the impact of oil price shocks on stock market returns in selected Southeast Asian countries. We selected five countries, those are Indonesia, Singapore, Malaysia Thailand and Philippine. We employ autoregressive distributed lag model (ARDL) and VECM model in the analysis. We model both positive oil price shock and negative oil price shock. We find that the real Brent price is positively correlated with all the stock markets in the selected countries. The results of ARDL model indicate that positive oil price shock exhibits a negative impact on the stock market returns while lag one negative oil price shock exhibits a positive impact on the stock market returns in the short run. However, only Indonesia and Singapore exhibit a significant response to positive and negative oil shocks in the ARDL model. The cointegration analysis indicates a long run causal relationship from oil price to stock market returns for Malaysia and Singapore. This result is confirmed by the error correction model with significant and negative but low speed of adjustment.
Institutional arrangements and rehabilitation of young offenders: a case study of the Leeuwkop correctional service facility.
(2022) Macozoma, Mesuli
The 1994 democratic transition in South Africa marked a break away from its repressive past, which included the creation of new institutions to exercise the rule of law in a democratic dispensation. Transforming the prison system to correctional services through policy, changed the outlook of the state in exercising punitive measures against those charged with breaking the rule of law. A key question that has emerged is the need to understand how the established correctional services system facilitates the rehabilitation of young offenders, who make the majority of people incarcerated in correctional facilities in South Africa today. The study employed a qualitative case study approach to establish interactions between institutionalised young offenders at Leeuwkop Correctional Service Facility which serves as a medium for rehabilitation. The objective of the study was to determine whether the institutional arrangements at this facility support the institutionalisation of rehabilitation as articulated in the 2005 White Paper on Corrections. Primary data was gathered using semi-structured interviews from a sample of 16 participants, inclusive of three first-time offenders, three repeat offenders, and two former offenders from the Leeuwkop Correctional Service Facility between the ages 21 – 35 years old. In addition, eight institutional actors associated with Leeuwkop Correctional Service Facility were interviewed to understand their perspectives on the administrative processes involved in services offered by the facility. Thematic analysis was employed to analyse the data sets which generated four key themes around the issue of order and discipline, factors contributing to offending, rehabilitation of offenders in a correctional environment, and the allocation and expenditure of financial resources. Research findings indicate that a lack of transformation and misalignment of the current institutional arrangements is obscuring effective rehabilitation of young offenders at Leeuwkop Correctional Service Facility. A significant finding that emerged was that the primary objective of the Leeuwkop Correctional Service Facility is the incarceration of young offenders, and rehabilitation is a secondary function; hence the institutional and structural arrangements emphasize achieving the primary goal Conditions at Leeuwkop Correctional Service Facility, reveal that institutions established with contradicting mandates tend to systematically resist change. Arguably, the institution has struggled to transform its secondary role into an actionable goal that aligns with the policy framework, rendering this space a constitutive element in engendering a vicious cycle of violence among those who interact with the institution. The research concludes that more work is needed at both institutional and administrative level to foster a culture of rehabilitation within correctional service facilities.
Market reaction to the FTSE/JSE responsible investment index series
(2019) Usher, Hayden Philip
Responsible investment has seen considerable growth since the turn of the millennium, and this has spurred the creation and continuous development of responsible investment indexes across the globe. The purpose of this paper is to investigate whether the release of the RI index series contains price sensitive information content and therefore has value relevance for the market. Using event study methodology applied to the six releases of the FTSE/JSE Responsible Investment Index series from October 2015 to June 2018, this paper investigates the impact on the share prices of constituent, included and excluded firms from this index series. The study finds that the release of the constituents of the RI index does not contain new information content while constituents of the RI top 30 experience positive and statistically significant abnormal returns as a result of their constituency. The inclusion of firms on the RI index is not a release of new price-sensitive information, while firms included on the RI top 30 experience a sustained increase in share price throughout the event window. Firms excluded from the RI index and RI top 30 experience negative and statistically significant share returns and the market applies a greater discount toward firms excluded from the RI top 30. Finally, there are statistically significant differences between firms that were included and firms that were excluded from the RI index and the RI top 30 post-announcement date, and this is caused by the market applying a value discount toward firms with deteriorating ESG performance and disclosure. From an investors perspective, investors are able to generate significant arbitrage returns by shorting (longing) shares of firms expected to be to be excluded (included) from the RI index series. Consequently, firms should strive to be included or remain on the RI index series in order to signal the market that there has not been a deterioration in their ESG performance and disclosure, which would have a negative impact on their share price.
Market reactions to financial and resources BEE deals on the JSE
(2019) Hertz, Jenna
In South Africa, Black Economic Empowerment (BEE) has been instrumental in the transformation of the country post-Apartheid. The involvement of key sectors in transformation is dependent on specific Industry Charters and the impact of these charters on the implementation of BEE by companies has been largely ignored by prior literature. This research examines the short-run impact of BEE equity/ownership deals on the share price performance of JSE-listed stock by calculating abnormal returns (ARs) and cumulative abnormal returns (CARs) subsequent to announcements in the resource and financial sectors. The objective of the study is to determine whether announcements of BEE deals resulted in the creation of shareholder wealth in these specific sectors. The study further explores whether size of the issuing company was a factor in how the markets received BEE deal announcements. The research employed a standard event study methodology which is widely used in finance literature to examine the impact of corporate events on shareholder wealth. The sample included 111 BEE deal announcements by resource sector companies during the period January 2003 until October 2018 and 75 BEE deal announcements by financial companies during the period January 2004 until October 2018. ARs and CARs were analysed over an 11 day event window. The results of the study found that qualifying announcements had a significant positive impact on the CARs of financial sector companies and an insignificant negative impact on the CARs of resource companies over the 11 day event window. This demonstrated that BEE deals were perceived to destroy value in the resource sector and create value in the financial sector for shareholders. The difference in reaction between the two sectors was found to be significant. Furthermore, the research findings indicated that the market reacted more favourably to BEE deal announcements made by ‘small’ companies regardless of the sector. However, while these findings were significant for the financial sector, they were proven to be insignificant for the resource sector.
Mpumalanga secondary school teachers’ experiences of professional development initiatives for improved classroom practice
(University of the Witwatersrand, Johannesburg, 2022) Magagula, Nephtal Dumisan; Pillay, Pundy
In spite of the introduction of various teacher development policies and the investment of huge resources into professional and academic development of teachers in South African schools, poor learning outcomes still dominate the public schooling system. The purpose of this descriptive study was to describe the Mpumalanga secondary school teachers’ experiences of professional development initiatives in terms of usable and transferrable knowledge and skills for improved classroom practice. One of the main findings of the research was that the professional teacher development initiatives, as experienced by the sampled teachers, have positive developmental effects on the professional growth of teachers in general. It was also established that the two main challenges that discouraged teachers from attending the initiatives were their non-involvement in planning and facilitation of the initiatives. Therefore, their experiences, whether positive or negative, are dependent, inter alia, on them being involved at the initial conception and implementation of such programmes.
Neutralising the effects of branch mismatch arrangements: a South African perspective
(2019) Lindeque, Anlia
Base erosion and profit shifting (BEPS) has become an increasingly important matter for both multinational enterprises (MNEs) and the countries in which they operate. The tax avoidance strategies used to exploit gaps and mismatches in tax rules have become progressively complex and advanced over the past decade. The aim of this research report is to determine the importance and relevance of addressing BEPS via branch mismatch arrangements, as proposed by the Organisation for Economic Co-operation and Development (OECD), to an emerging economy such as South Africa. The report discusses and analyses the concept of branch mismatch arrangements, the concerns and challenges arising from the use of these arrangements, the recommendations from the OECD in addressing these mismatches and the approaches taken by selected countries. Current domestic legislation is contrasted with international approaches and the recommendations by the OECD. The outcome of adoption or non-adoption of the recommendations will be investigated.

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