School of Accountancy (ETDs)

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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
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    The Impact of the Metaverse on the South African Insurance Industry
    (University of the Witwatersrand, Johannesburg, 2023) Mia, Rashad; Quaye, Emmanuel
    The internet is evolving, where virtual reality and artificial intelligence converge to create a more immersive online experience. This revolutionised digital space will allow users to interact and transact virtually with more users more efficiently. This will impact the way we live, work, and socialise. Despite multiple articles discussing the metaverse and its relational impact on the insurance industry, this research paper aims to understand the metaverse from different South African perspectives, and through virtual one on one interviews; participants were interviewed to unpack further potential risks and benefits of the metaverse on the South African consumer. This also led to perspectives on the potential insurance landscape within virtual worlds and the type of products and services that could stem from. The thematic analysis of the insurance landscape in the metaverse provided insights into emerging trends and opportunities in the space that covered themes such as virtual property insurance, cyber insurance, digital identity, reputational insurance, and personalised insurance products that could be developed to tailor individual needs. In terms of risks and benefits, the data and information highlighted themes that touched on addiction, privacy and security, social isolation as well as financial risks. On the other hand, the benefits mentioned were enhanced social experiences, access to new experiences as well as professional opportunities. The research of this paper intends to provide a localised viewpoint of insurance in South Africa and how such a highly regulated industry will pivot, if at all, towards the inevitability of the metaverse.
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    Barriers to digital transformation in a South African water utility
    (University of the Witwatersrand, Johannesburg, 2023) Paima, Veshal
    This study offers a qualitative examination of the barriers hindering a leading South African water utility, referred to here as Organisation X, from fully embracing digital transformation. The qualitative case study scrutinises the utility's attempts at digitalising its processes for better efficiency and the significant barriers that disrupt the realisation of its digital initiatives. Through interviews, this study captures the perspective of these challenges from individuals deeply engaged in the digital transformation journey. The findings shed light on the intricate barriers that Organisation X faces, encompassing organisational culture, the integration of new digital tools with existing systems, governance, leadership, impacts on the value chain, and the overarching capacity for innovation. The conceptual framework of this study delves into the relationship between the organisation's strategy and its business model, focusing on how digital transformation can drive value creation by refining business operations. By investigating these factors, the study seeks to deeply understand the barriers that Organisation X faces in its quest to effectively implement digital strategies and advance its digital maturity. Furthermore, by evaluating the operational strategies of Organisation X, the research pinpoints congruencies, and disparities with its digital ambitions
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    A comparative study and analysis of the amended foreign employment income exemption in South Africa
    (University of the Witwatersrand, Johannesburg, 2023-01) Essop, Ahmed; Blumenthal, Roy
    Tax exemptions are granted by the government for a multitude of reasons. These include providing some form of tax relief, alleviating specifically identified tax burdens, encouraging investment, promoting donations to approved public benefit organizations and avoiding the possibility of double taxation (Kransdorff, 2010, p. 79). One specific provision in section 10(1)(o)(ii) of the South African Income Tax Act of 1962, pertained to South African residents working abroad, namely the foreign employment income exemption. The intention of this exemption was to prevent residents from being double taxed (SARS, 2021a). Over the last few years, there has been a noted increase in the number of South Africans working abroad and this has been alluded to as being one of the reasons that government decided to review and amend the section 10(1)(o)(ii) foreign employment income exemption (Ryan, 2020). The impact of this amendment on South African residents working abroad will be analysed and investigated. A comparative analysis will be done on the tax payable of South African residents working in the following countries: the UK, the UAE and India
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    Substance over Form – Fraus Legis - Simulated Transactions Is there a gap in South African tax law in circumstances where parties conceal or disguise a transaction but still give effect to the agreements in accordance with the tenor of their terms?
    (University of the Witwatersrand, Johannesburg, 2023) Hugo, Grant Anthony; De Koker, A.P
    The above is equally applicable in the context of taxation. The purpose of this research has been to understand the juxtaposition between the intention of the contracting parties and their performance in the context of the tenor of the respective agreements. The adoption into South African law of the doctrine of substance over form and its relationship with the principles of fraus legis and simulated transactions was discussed through the development of cases dealing with transactions in fraudem legis and simulated transactions. The research was undertaken in an endeavour to ascertain if there is a gap in South African tax law in circumstances where the parties disguise or conceal a transaction, but still give effect to the agreements in accordance with the tenor of their terms. In conclusion, there is no gap. More is required than that the parties give effect to their agreements in accordance with their tenor, the parties must in fact mean that the agreements shall have effect in accordance with their tenor. The concealment or disguise is sufficient in and of itself to infer simulation and giving effect to the agreements in accordance with their tenor will not deem the result to be tantamount to giving effect to the real agreement between the parties, or to shield the parties from the operation of the common law. Our courts will not be deceived by the form of a transaction, and in the event of a determination of simulation, they will strip off its ostensible form and give effect to what the transaction really is.
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    Review of the tax challenges faced by the South African real estate investment trusts on the application of the tax laws and regulations
    (University of the Witwatersrand, Johannesburg, 2023) Mabuza, Harrieth Mcondisi; Soni, Faeeza
    The introduction of the Real Estate Investment Trust (REIT) regime in South Africa in 2013 has created a substantial world-class real estate industry which has contributed significantly to the country's economic growth and prosperity over the long term. The REIT regime replaced the Property Unit Trusts and the Property Loan Stock property investments, which were in existence before the REIT regime was enacted in 2013. The REIT regime came with special tax dispensation for the South African REITs,and as a result, the investors of a REIT are taxed on the income generated by a REIT instead of the REIT itself; the REIT operates as a conduit for income derived from the immovable properties. Although most aspects of the SA REIT laws and regulations and taxation were confirmed, a few unresolved matters still require attention regarding the taxation of South African REITs. The 2019 budget review documents indicated that amendments are still required to the South African REIT tax laws and regulations to iron out current inconsistencies and challenges identified in applying the REIT tax laws and regulations. Currently, many other REIT markets, especially in underdeveloped countries, are looking to change their REIT tax regime to make it more attractive to foreign investors and to compete in global REIT markets. The study investigated the current tax challenges faced by SA REITs on the application of the SA REIT tax laws and regulations and made recommendations for necessary amendments to ensure the attractiveness of the SA REIT regime. The study made use of the qualitative and interpretive approach through the examination of existing discussion papers, both locally and internationally, legislation, reports, guiding memoranda, journals, books, case laws, website documents, and other material to understand the taxation of REITs. Interpretation ii notes and current discussions are looked at to understand the challenges faced by REITs relating to the Income Tax Act, value-added tax, Tax Administration Act, and tax treaty issues relating to REITs. The study provided a detailed understanding of the key tax design elements that underpin the SA REIT industry by comparing the SA REIT regime to the United States and United Kingdom REIT regimes. The study identified challenges that expose the REIT to double taxation, challenges that are violating the REIT conduit principle; issues that threaten the REITs to failure in meeting the 75% income test, possible exposure to fines and penalties, and threats to the loss of the REIT status. Furthermore, we have identified administration issues that cause unnecessary delays in the REIT tax administration process and tax treaty issues that affect the taxation of REITs. Further, the study made suggestions for amendments that can be made to REIT tax laws and regulations to address each of the identified tax challenges affecting SA REITs.
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    An examination of the treatment of fees received by directors for South African tax purposes
    (University of the Witwatersrand, Johannesburg, 2023) Letlabe, Obed
    The study is about the way non-executive directors are treated for tax purpose by SARS and its reasoning regarding the VAT and PAYE liability of resident and non-resident non-executive directors. This research then evaluates both statutory and common law to determine whether non-executive directors can be treated as independent contractors. The report further evaluates whether the SARS reasoning is consistent with international conventions and treaties. The research suggests that it was never the legislature’s intention to treat services rendered by office holders as ‘enterprise’ liable for VAT