Browsing by Author "Vally, Imtiaz A. S."

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An analysis of transfer pricing theory and an investigation into the domestic transfer pricing practices of large listed South African industrial companies.
(1997) Vally, Imtiaz A. S.; Chukwuogor-Ndu, Chiaku.; Clulow, Alistair David.
An analysis of transfer pricing theory reveals that there are three main objectives of a transfer pricing system: the attainment of goal congruence, the facilitation of fair divisional performance evaluation and the promotion of divisional autonomy. A critical evaluation of suggested theoretically correct transfer pricing methods suggests that the simultaneous attainment of all three objectives is a difficult goal to be realised by a single transfer pricing method. The most appropriate method to suit a particular set of circumstances is contingent upon those circumstances. The transfer pricing objective considered most important in practice by large listed South African industrial companies is the facilitation of fair divisional performance evaluation. Objectives relating to simplicity and ease of application are also rated more highly than goal congruence. Both these findings are somewhat surprising based on the review of current literature. The domestic transfer pricing methods used by large listed South African industrial companies are fairly evenly split between cost and non-cost-oriented methods. The most frequently used primary transfer pricing method is market price. The use of mathematical programming and economic marginal cost prices is practically non-existent. These findings are consistent with the findings of some recent overseas studies. Policies relating to the selection of the transfer pricing method, the purchase of intermediate goods and services and the settlement of transfer pricing disputes reflects some head office management involvement in the transfer price decision process in most cases. Three organisational variables appear to have a significant association with a firm's choice of transfer pricing method. Firstly, companies with a low level of interdivisional trading use non-cost oriented transfer pricing methods whereas companies with a high level of interdivisional trading use cost-oriented methods. Secondly, transfer pricing methods selected as a result of some head office management involvement tend to be cost-oriented whereas methods selected by the divisions themselves tend to be non-cost-oriented. Thirdly, cost-oriented methods tend to be used in companies in which transfer pricing disputes are normally settled by some form of head office intervention and non-cost oriented methods are used in those companies in which disputes are normally settled by the divisions themselves.
Intergovernmental fiscal relations in South Africa.
(1999) Shabalala, Dumisani Sipho Derrick.; Vally, Imtiaz A. S.
Objective of the study. This study is about the intergovernmental fiscal relations in South Africa. The primary objective is to review the international experience of fiscal decentralisation with the view to providing answers to the issue of revenue sharing, problems of expenditure and revenue assignment, and the impact of the whole decentralization on the size of the public sector in South Africa. Methodology. The methodology adopted in this study includes (1) a review and comparison of the practise of fiscal decentralisation in four countries, and (2) an econometric investigation into the impact of fiscal decentralisation on the size of the public sector, using time series quarterly data for the period 1993/94 to the second quarter of 1998/99. Regarding the econometric investigation, a single linear regression model including fiscal decentralisation, fiscal collusion, income and population are assumed to influence the size of the public sector. Study Findings. Our analysis provides certain interesting results. First, the countries reviewed tend to assign functions in a manner that is consistent with the public finance theory that functions that are distributive in nature and those that are meant to ensure the country's stability should be reserved exclusively for the federal or national government. Whereas the Australian, Canadian and Brazilian's revenue decentralization show a number of significant taxes that are devolved to the lower levels of government, Germany represents a strong collection at the center. The discrepancy is compensated for by the use of equalization grants in the German model. Second, fiscal decentralisation is found to exert a negative influence on the size of the public sector, although the impact is statistically not significant. The insignificance of the impact of fiscal decentralisation on the size of the public sector is explained in terms of the fact that there has, in fact, been very little decentralisation in South Africa. The size of the provincial and local government own source revenue relative to the consolidated general government expenditure is very little, pointing to the serious lack of revenue raising powers by the sub-national governments and thus the absence of any meaningful extent of decentralisation. Third fiscal-collusion exerts a significant negative influence on the size of the public sector. That is, the size of the public sector will reduce if provinces and local authorities are granted enough power to raise their own revenues. This result indicates that the massive transfers of revenue from the national government to the provinces and local authorities (revenue sharing) significantly reinforces the expanding influence of the decentralised expenditures financed through revenue transfers. Fourth, the overall size of the country's population is found to be inversely related to the size of the public sector supporting the argument that as population increases, economies in providing services are reaped.