School of Accountancy (ETDs)

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    Does the headquarter company regime still have a role to play in Aouth African tax law and if so, which aspects of the regime require revision?
    (University of the Witwatersrand, Johannesburg, 2024) Gumula, Thuso; Mansoor, Hafsa; Rudd, Reinhard
    The South African Headquarter Company Regime (HQC) was implemented on 1 January 2011, and it was designed to attract multinational companies to establish their headquarters in South Africa for the purpose of investing in other African nations through the country. Since the recommendations of the Katz Commission in 1997, the South African National Treasury (National Treasury) has done substantial work in terms of refining the provisions of the HQC regime to ensure that South Africa becomes an ideal Headquarter Company location. Since its inception in 2011 the HQC regime has failed to take off, with very few companies adopting the HQC regime. The South African HQC regime has been criticized for not being attractive to potential investors due to issues such as complicated qualifying requirements and the availability of alternative regimes such as Mauritius and Kenya, which are perceived as more appealing and user-friendly. The aim of this research is to assess whether the South African HQC regime remains relevant within South African tax legislation and, if it does, to identify which aspects of the HQC regime necessitate revision. This study will also include recommendations of proposed changes that can be made to address the current criticism of the HQC regime. The above objective will be achieved through literature review of applicable government publications, journal articles, tax articles from reputable websites, statutes etc.
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    An exploratory analysis of the environmental and social incentives of key management personnel for JSE-listed companies
    (University of the Witwatersrand, Johannesburg, 2024) Haripersadh, Shriya; Burnham, Kayleigh; Van Zijl, Wayne
    Societal pressure on companies to be environmentally and socially responsible as well as stock exchange requirements have led to the wide adoption of integrated reporting by public companies in South Africa (Baboukardos & Rimmel, 2016; De Villiers et al., 2014; IoDSA, 2016; Lokuwaduge & Heenetigala, 2017; Moloi & Iredele, 2020). The prior literature discusses the importance of remuneration linked to Key Performance Indicators (KPIs). Consequently, analysing whether Key Management Personnel (KMP) have non-financial KPI-linked remuneration provides strong evidence of a company’s commitment to being socially and environmentally responsible. Currently, no research investigates this globally and in the South African context. This study presents a comprehensive comparative analysis of the integration of environmental and social (ES) KPIs in KMP remuneration for South African Johannesburg Stock Exchange listed companies. Data was collected from twenty companies from the JSE’s top, middle and small capitalization companies at different points in time (2011, 2018 and 2022) using content analysis to provide a total sample of 60 companies with 180 firm-years. Data was analyzed using descriptive and inferential statistics. The prevalence, distribution and settlement methods of E, S, and combined ES KPIs in KMP remuneration structures were examined. Utilising both agency theory and stakeholder theory, the research explores how linking the remuneration of KMP to ES KPIs may serve the interests of both shareholders and stakeholders. The findings reveal a progressive adoption of ES KPIs in KMP remuneration structures over the investigated years, with notable variations observed across industries and company size. Larger companies and companies with higher social and environmental impacts utilize more ES KPIs in their remuneration policies. Industry-specific trends influencing the integration of ES KPIs were identified, shedding light on the evolving landscape of corporate governance and sustainability practices. By elucidating the dynamics between KMP remuneration and environmental and social performance metrics, this study contributes to a deeper understanding of how companies incentivise responsible leadership and foster sustainable business practices.
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    Relative Sustainable Development Goals (SDG) Information Quality: An exploratory analysis of South African state-owned enterprises disclosures
    (University of the Witwatersrand, Johannesburg, 2023) Hosiosky, Kayla; Myeza, Lindani; Marques, Gary
    Orientation/context: Following the introduction of the United Nations Sustainable Development Goals (SDGs), there arose significant public anticipation for businesses to conform, in their operations, to these objectives and report on their progress toward alignment. State-owned enterprises (SOEs) in South Africa are created to be sustainable in the short, medium, and long term to advance the social, environmental, and economic needs of the public. It is therefore important to recognise that these entities can be valuable resources to be used in the achievement of the SDGs for South Africa. Against this backdrop, this study underscores the importance for SOEs to adopt sustainable practices and seamlessly incorporate SDG information into their corporate reporting cycle. Purpose – The purpose of this study is to evaluate the quality of SDG information disclosed in the integrated or annual reports of South African SOEs listed under Schedule 2 and 3B of the Public Finance Management Act (PFMA). This research also focuses on identifying those SDGs to which SOEs contribute the most with respect to corporate reporting quality. Design/methodology/approach – This study examined the integrated/annual reports of SOEs listed in Schedule 2 and 3B of the PFMA for the 2022 year-end. A detailed content analysis was employed, utilising a constructed quality measure that amalgamates various indicators from sustainability reporting literature, to gauge the quality of SDG disclosures. The emphasis placed on SDG information, the inclusion of qualitative, quantitative, and monetary disclosures, and the substance (boilerplate or committed) of disclosures are considered. The balance and comparability of disclosures as well as the ease with which SDG information can be interpreted based on the use of infographics are also included as quality indicators. These indicators are evaluated at the overall report level as well as within the scope of each of the 17 SDGs. Findings – The results show that the SDG information disclosed by the SOEs is mainly symbolic, including boilerplate, unbalanced, inaccessible and mainly qualitative information without really showing any information regarding the progress of corporate sustainability performance. Consequently, there is doubt about the degree to which the integrated or annual reports can be readily understood and effectively utilised to assess the SOEs’ overall performance concerning their contribution to the SDGs. Originality/value – Limited research has been conducted on public sector sustainability or SDG reporting in South Africa. The study contributes to the growing body of SDG reporting research in the public sector, by revealing new insights that could provide guidance to policymakers and those charged with governance on how to improve sustainability and SDG reporting. Furthermore, the results reveal the quality of SOEs’ SDG disclosures, which can be incorporated in stakeholders’ decision-making processes, facilitating more ii useful decisions to be taken. The proposed quality measure offers a valuable resource for scholars and professionals who wish to assess and analyse specific elements of report quality
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    After the 2021 amendments to section 23M, what further amendments are required in section 23M to align with BEPS Action 4 recommendations?
    (University of the Witwatersrand, Johannesburg, 2023) Busakwe, Ndawoyakhe; Kolitz, Maeve
    Debt financing is an essential source of investment in South Africa as a country importing capital. As much as an economy in a good state depends on investments, taxpayers can use debt financing to create opportunities for base erosion and profit shifting (National Treasury, 2020a:5). The use of interest deductions to fund tax-exempt income and tax relief obtained on the deduction of interest expense which is higher than the net interest expense of a group can also create opportunities and ways in which taxpayers erode the tax base (OECD, 2015:16). Kruger (2015:12) noted that revenue authorities worldwide have been concerned for many years about the tax effect of debt financing, particularly what they perceive as debt funding that taxpayers utilise for tax avoidance and erosion of the tax base. In order to combat base erosion, several foreign jurisdictions have enacted interest deduction limitations and anti-hybrid instrument provisions, and the Organisation for Economic Co-operation and Development (OECD) raised this issue as one of its focus areas on Base Erosion and Profit Shifting (BEPS) (Kruger, 2015:12). Section 23N and s 23M became effective in the Income Tax Act 58 of 1962 (the Act) in South Africa between 2014 and 2015 respectively. Both of these provisions applied an interest limitation based on the ratio between the particular interest and a tax proxy for adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) (Van der Zwan, Schutte and Krugell, 2018:1). Kruger (2015:11) stated that: ‘fiscal authorities around the world have been concerned for some time that excessive debt funding could lead to tax avoidance which is caused by a mismatch between the tax treatment of interest incurred and interest received, which could result in excessive deduction of interest expense.’ In the South African context, National Treasury also acknowledged in the 2013 Budget Review that, although debt financing might have a positive impact on a iii healthier economy, taxpayers often use it to erode the South African tax base (National Treasury, 2013a:55). In order to protect the South African tax base as far as excessive interest deductions are concerned, National Treasury introduced s 23M through the 2013 Taxation Laws Amendment Act No 13 of 2013, with effect of 1 January 2015. In a joint project by the OECD and Group of Twenty (G20) on BEPS, it was identified that the deductibility of interest for purposes of calculating taxable profits should be one of the focus areas in order to counter BEPS, which was followed by the analysis and release of the final report titled OECD/G20 Base Erosion and Profit Shifting Project: Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4: 2015 Final Report (BEPS Action 4 Final Report) (Van der Zwan et al., 2018:1). BEPS Action 4 contains recommendations for jurisdictions to implement the measures proposed to address the risks by interest payments and the related tax deductions to the corporate tax base (Van der Zwan et al., 2018:1). The purpose of this report is to examine how closely the South African interest limitations rules contained in s 23M align with BEPS Action 4 recommendations and to the extent that s 23M and BEPS Action 4 are not aligned, the report will determine further amendments that are required in s 23M of the Act to align with the BEPS Action 4 recommendations. The research includes a comparison of s 23M and BEPS Action 4 recommendations before the 2021 amendments to s 23M; discussion of the 2021 amendments to s 23M; analysis of the current differences and similarities between s 23M and BEPS Action 4 recommendations; and discussion of what further amendments are required in s 23M to align with BEPS Action 4 recommendations.
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    Trust Taxation Reform in South Africa: Striking a Balance Between Tax Neutrality and Effective Compliance (Lessons from the United Kingdom and the United States of America)
    (University of the Witwatersrand, Johannesburg, 2024) Dhanpat, Sanjiv; Blumenthal, Roy; Koker, Alwyn de
    South Africa's trust legislation revisions under the General Laws Amendment Act, 22 of 2022, intend to address international concerns highlighted by the Financial Action Task Force (FATF), most notably concerns affecting tax evasion and a lack of transparency around beneficial ownership. This research report examines trust legislative amendments, particularly the Trust Property Control Act (TPCA) 57 of 1988, as well as various other legislative acts in the trust sector. This research report further provides a comparative assessment of South Africa's trust legislative amendments against legislative measures utilized in the United Kingdom and the United States of America. This comparison is relevant given the diverse but well-established frameworks for dealing with trusts within these jurisdictions. The objective of this comparison is to find similarities and significant variances in how each nation taxes and regulates trusts. Aligned with the FATF's focus on addressing deficiencies in beneficial ownership transparency, this research report also examines the growing emphasis on beneficial ownership transparency from a worldwide context. In the broader context of this research, the comparison between the United Kingdom and the United States of America is relevant to highlight their regulatory procedures for ensuring tax neutrality and effective compliance in the trust landscape. South Africa's amendments to the Trust Property Control Act (TPCA) aim to enhance transparency around beneficial ownership. However, administrative and enforcement challenges may affect the overall effectiveness of these reforms. This research, through comparative analysis of the United Kingdom's Trust Registration Service (TRS) and the United States' Corporate Transparency Act (CTA), provides valuable insights for improving trust oversight in South Africa. The findings suggest that while adopting similar measures could strengthen South Africa's regulatory framework, adequate resource allocation for enforcement and ensuring trustee compliance are essential for achieving effective regulation. This research report contributes to the critical discussion on trust regulation mechanisms by analysing the delicate balance between overregulation and the need to implement appropriate safeguards against trust abuse
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    The challenges arising from the digital economy to the South African tax system and possible measures to address them (with a focus on corporate income tax for MNEs)
    (University of the Witwatersrand, Johannesburg, 2024) Datadin, Taruna; Rudd, Reinhard
    The advances in technology and innovation in recent years have resulted in the growth of the digital economy. The digitalisation has changed the way businesses operate. This has resulted in challenges to the international tax system which was set up over a century ago and has compromised the South African corporate income tax base. This research report aims to understand the impact of the digital economy on South Africa’s corporate income tax system and to assess the proposed measures put forward to address the associated challenges. The proposed measures examined in this report are global solutions proposed as well as unilateral measures proposed or implemented by other countries to address the corporate income tax challenges arising from the digital economy. The proposed measures analysed in the report were limited to the OECD’s Two-Pillar Solution, Digital Service Tax and the Digital Permanent Establishment concept. A qualitative research method was used for this research paper. The analysis has been performed through a detailed literature review. Based on the analysis performed, a recommendation was reached in that South Africa should wait to implement the global solution (the OECD’s Two-Pillar solution) to address the challenges arising from the digital economy. It was also found that at this stage, the unilateral measures of the Digital Service Tax and the Digital Permanent Establishment concept are not recommended to be implemented in South Africa.
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    The South African Headquarter Company Regime: A critical examination
    (University of the Witwatersrand, Johannesburg, 2023) Motsatsi, Boitumelo Agatha; Kolitz, Maeve
    National Treasury, through the ‘Explanatory memorandum on the taxation laws amendment bill of 2010’ stated that: South Africa’s location, its sizable economy, political stability, strength in financial services as well as the many treaties the country held with many countries across the globe, made it a natural holding company gateway into Africa (National Treasury, 2010a: p.77), (Lourens, 2019: p.30). The South African government realised that funds which were received from foreign locations could not be channelled through the country to other foreign locations without explicit exchange control approval. In an effort to enhance its attractiveness as a viable and effective location from which businesses could extend their African operations the government reviewed its tax rules and proposed measures that would provide relief from foreign exchange control and tax. (National Treasury, 2010: p.78). Section 9I of the South African Income Tax Act 58 of 1962 (the Act) was inserted in the Act with effect from years of assessment commencing on or after 1 January 2011 (Taxation Laws Amendment Act, 2010: s 6(1)(o)). The purpose of this report is to examine how problems with the South African headquarter company regime taxation rules in s 9I (Crowley, 2020) can be resolved in an effort to make South Africa’s headquarter company regime more attractive to foreign investors. The report will firstly identify the foreign investors that South Africa wants to target through the headquarter company regime in s9I. Secondly, the headquarter company regime taxation rules in s 9I will be analysed in detail. Thirdly, weaknesses in the headquarter company taxation rules will be identified and thereafter, the researcher will identify the remedies which can be applied to the aforementioned weaknesses in order to make the headquarter company regime more attractive to foreign investors (Lourens, 2019: p.25). The critical examination has led the researcher to conclude that redefining the tax policies of South Africa’s headquarter company regime in s 9I through the application of the proposed remedies to the weaknesses found in the above- mentioned regime taxation rules, may boost South Africa’s appeal as a preferred location for foreign investors to establish their headquarter companies
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    An explanatory study on benefits of implementing progressive Wealth Tax in South Africa
    (University of the Witwatersrand, Johannesburg, 2023) Dudumashe, Thobela; Nkhi, Naledi
    In the history of South Africa, there has been a growing imbalance between social behaviours and economic growth. Over the years, the government has promised to build a South Africa free of poverty, inequality, and unemployment. Low economic growth, budget deficits, rising government debts, corruption, and the global Coronavirus pandemic are contributing factors to poverty, imbalances, and economic stagnation. The history of injustices in South Africa and economic marginalisation makes it imperative to address economic challenges and inequalities using the tax policy. The wealth tax conversation has been abandoned in South Africa. Further research on the topic can make an important contribution by deepening the various aspects of wealth tax. This study explores alternative models by considering international experiences on wealth tax and adapting successful strategies to the unique context of South Africa. Wealth taxes, focusing on taxing the wealthy, are seen as a possible solution for redistributing resources to the poor. Introducing a new wealth tax carries unknown risks, particularly in terms of its potential impact on the already fragile economy that cannot afford to lose capital and investment. The lack of research on wealth tax in the South African context, as well as the limited literature on the perspective of wealthy individuals, underscores the importance of this qualitative study. The whole idea of wealth tax is that taxing those who are wealthier will provide much-needed resources for the marginalised group and be seen as a perfect tool to redistribute wealth In general theory, the wealth tax is described as a levy imposed on an individual’s net wealth, that is on the market value of all individual assets minus liabilities, this kind of tax has been ignored or not given as much attention as the other means of government revenue tax collection. Such a tax can be fraught with risks, and not all of them are known. There is fear that those affected parties may feel vulnerable and resort to tax immorality or tax evasion, which is also a great concern as it could negatively impact the economy and lead to loss of capital and investment. There is not much research on the wealth tax that focuses on the issues faced by South Africans. The aim of this study is to examine whether there will be a benefit to introducing a progressive wealth tax in the existing revenue stream, looking at possible tax relief by broadening the tax base over a period of time, evaluating the existing wealth tax, and identifying the methods that could be used to avoid the double taxation, tax evasion, and avoidance.The research is conducted using a qualitative method by analysing various literature reviews on wealth tax data, to determine the advantages and disadvantages of introducing a progressive wealth tax. The report is intended for the purpose of analysing existing wealth tax theories to see if the introduction of a progressive wealth tax would benefit South Africans. The study also contributes to ongoing political and economic debates and potentially forms part of future changes in tax policy
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    The Impact of Mobile Banking Technology Adoption on The Demand for Cash in South Africa
    (University of the Witwatersrand, Johannesburg, 2021) Nghatsane, Nghatsane; Totowa, Jacques
    Mobile Technology's exponential advances in the last century have dramatically altered how the planet works. From the invention of the aircraft, which revolutionized aviation, through the more modern invention of the internet, which has influenced how individuals and companies interact and do business. ATMs (Automated Teller Machines) are a clear example of how banking technology has progressed. This study investigated how the technology adoption theories with focus on, usefulness, ease of use, credibility, attitudes towards use and intention towards use can be utilised to understand if and how mobile banking technologies can be used to substitute for cash demand within the Gauteng, South Africa. It was found that whilst all of the factors researched do play a role in determining if consumers are likely to use mobile banking technologies over cash, credibility played the most important role. Future studies can expand the geographical reach of the study to see if any variations will be realised
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    The impact of digitalisation on the employment rate in the South African financial services industry
    (University of the Witwatersrand, Johannesburg, 2023) Mokhabuki, Makoma Tiny; Lee, Gregory
    This study aims to determine the impact of digitalisation on the employment rate in South Africa, with specific reference to the financial services industry. Many revolutions have been seen globally, from the Paleolithic and Neolithic eras to Agricultural Revolutions and the First, Second, Third, and Fourth Industrial Revolutions. Technological changes and a significant movement in employment and unemployment have occurred with these revolutions. The study seeks to determine how technological advancements through digitalisation have impacted the employment rate in the South African financial services industry. A survey questionnaire was used to invite views from people employed in the financial services industry. The purpose of the survey was to determine perceptions regarding the introduction of technologies within the working environment and their impact on employee movements. The questionnaire also invited views on whether further introductions of technologies would create efficiencies and if this would impact their team sizes. An analysis was made using Qualtrics and SPSS on the data received. The findings indicate that introductions to technology’s impact on employment are complex as it depends on various variables such as the type of skills which the employees possess and those which are required by the employer. Firstly, introductions in technology can cause structural unemployment, which is, in essence, only temporary. The introduction of technology causes unemployment in those occupational levels whereby the work is repetitive and can therefore be automated. In contrast, introducing technology causes employment in jobs requiring cognitive and abstract thinking and, therefore, cannot be automated. Within the financial services industry in South Africa, it was found that more employees in skilled positions were retrenched or transferred due to technology introductions. However, this was reduced by increased recruitment in professional positions requiring more technical skills and cognitive thinking. It was concluded that the advancement of technology should not be rolled out at a pace that would lead to a net unemployment rate; however, it should be rolled out efficiently, resulting in more employment in cognitive tasks