Mitigating Tax Evasion by improving the organizational structure of VAT on Digital Imports into South Africa

Muneer Hassan ()
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Muneer Hassan: Department of Accountancy, Taxation, College of Business and Economics, University of Johannesburg, Auckland Park, Johannesburg 2006, South Africa

JRFM, 2025, vol. 18, issue 10, 1-21

Abstract: The South African Value-Added Tax (VAT) Act exhibits an illogical structure for digital imports. The complexity of digital import taxation creates uncertainty and has an impact on compliance, resulting in tax avoidance and diminished tax revenues. This study analysed the organisational structure of digital imports in the VAT Act as a legally complex element. This study established that the organisation of the VAT on digital imports complicates legislation and introduces ambiguity, leading to increased tax evasion and compliance, as well as administrative expenses. This study employed existing guidelines to simplify the VAT Act and improve the organisational structure regarding the VAT implications of digital imports. The methods used included a qualitative research technique utilising a doctrinal approach, as well as applied research. This study is the first to apply Hassan, Bornman and Sawyer’s VAT simplification framework to South African digital imports. The guidelines developed by these authors encompass section grouping, headings and subheadings, and explicit signposting, which were implemented in this article to effectively demonstrate and simplify the VAT consequences for digital imports. A logically structured VAT framework will improve clarity in digital import compliance, thereby reducing tax evasion. Therefore, this study contributes to tax compliance theory by proposing that a reduction in complexity and improvement in transparency mitigate tax evasion.

Keywords: imported service; electronic service; tax complexity; tax compliance; tax avoidance; administrative expenses (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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