The evaluation of VAT implications on imported and electronic services at UKZN.

Abstract

Abstract The South African Government is trying to reduce the Value Added Tax (VAT) gap by ensuring VAT is declared on imported and electronic services which is line with international practice. Legislation has also been changed to effectively increase compliance between residents and non- residents with the South African Revenue Services and to level the playing fields for domestic suppliers. The aim of the study was to determine the main reason for using offshore suppliers’ services and to determine if there are internal and external controls to deal with the imported and electronic services in the University of KwaZulu-Natal. The area researched is specialized and the total population is small. The non- probability sampling technique was the only effective way to ensure the sample was high with respect to the population. A sample of 49 respondents was drawn from all five campuses in UKZN with a population size of 52 potential respondents, within the Durban, Pinetown and Pietermaritzburg areas. The sample is composed of 58% females and 42% males. Of the sample, 100% were non- academic staff. The majority of the sample (98%) worked with VAT on imported services. The tertiary institution of UKZN was chosen because the specialization and sensitivity of the area studied. Not many institutions would prefer to discuss their tax affairs with outsiders. Data was collected using self-administered questionnaires developed by the researcher. A salient finding of this study was that 64% of the respondents indicated that the specialization of the services was the main reason for using foreign suppliers. There was no information gathered from the research to suggest that legislation has curbed foreign purchases or increased domestic purchases. The majority of the respondents were indecisive in determining whether they understand when foreign payments that were regarded as imported services. The study also revealed that there were internal and external controls in place at UKZN. This study showed that government benefits from the increase VAT revenue received when specialization is the main reason for using offshore suppliers because residents cannot find these services in the domestic market. Due to the high employee turnover and delegation of duties, staff must be informed of the best practice. Presentations and seminars will also assist in educating staff.