Evaluating South Africa’s tax administrator’s Authorised Economic Operator (AEO) programme in promoting taxpayer and trader compliance.

Abstract

The Authorised Economic Operator (AEO) programme, created by the World Customs Organisation in 2007, was introduced in South Africa in 2020. Despite its potential benefits, the programme faces several challenges. Out of 357,653 eligible customs companies, only 137 registered in 2021, increasing slightly to 144 in 2022, representing less than 1% participation. (Government of South Africa, 2021). Concerns include low participation rates, minimal impact on trade facilitation and compliance, and high entry barriers, despite active promotion by the tax administrator. This study aimed to evaluate the effectiveness and efficiency of South Africa’s AEO programme in promoting compliance among taxpayers and traders. The objectives were to assess the low participation rate, identify challenges and barriers, and determine the programme’s impact on customs and trade facilitation. A mixed-method research approach was used, combining qualitative and quantitative data from a survey. The sample size was 22, selected through purposive stratified sampling, including 1 tax lecturer from the University of KwaZulu-Natal and 21 middle management employees from the South African tax administrator’s AEO department. Findings indicate that the participation rate, while low, is considered acceptable by some key informants, with 400 approved clients seen as satisfactory. The programme aligns with international standards and performs well compared to other regional countries. However, qualitative analysis revealed barriers to adoption, such as insufficient awareness and understanding of the programme, internal system challenges, and strict procedures. The study found that the AEO programme significantly enhances customs tax compliance and trade facilitation in South Africa. Businesses involved in the programme experience positive impacts, particularly in compliance and trade facilitation. The programme also provides good data security, aligning with international standards and legislative requirements, offering significant benefits to compliant clients by streamlining processes. Overall, the AEO programme’s implementation in South Africa is rated positively in terms of data security and strategy, despite the challenges in increasing participation and awareness.