Value added tax - place of supply and the taxation of the electronic cross border supplies of services and intangibles

Includes bibliographical referencesThe primary concern of this dissertation is the reduction of cross-border tax obstacles by improving the VAT rules governing cross border supplies of services and intangibles. These cross-border transactions are on the increase for many countries around the world. Cross-border transactions come with many challenges which impact current VAT rules and systems negatively and expose serious shortcomings in the application thereof. The dissertation examines the nature of the current cross-border VAT rules in South Africa (SA) and the United Kingdom (UK) and analyses the effectiveness and adequacy thereof. As a result of globalization rapid growth in international trade, specifically by electronic means, is inevitable. Today businesses are certainly becoming more focused internationally and are able to conduct their business activities across borders without constraints. Many VAT rules were designed only taking into account national economic activities and not international activities. The supply of services and intangibles across borders may be made without being reported, recorded and taxed. Many cross-border trading activities may potentially fall outside of the tax net and result in the non-collection of VAT revenues. Many countries have introduced a place of supply rule to mitigate the challenges and uncertainties arising from cross-border transactions. South Africa's value-added tax system does not include a place of supply rule. South Africa's Revenue authorities are currently faced with many challenges and uncertainties regarding the tax consequences of cross border transactions. The effectiveness of SA's existing VAT rules governing exports and imports are increasingly challenged by the growth in online web-based commerce. The difficulty in establishing the most effective rules to ensure compliance with VAT obligations on web-based transactions is growing. There is no standard set of VAT rules for cross-border transactions that can readily be applied internationally to every circumstance to determine the place of supply. The aim of this research is to determine whether the introduction of a place of supply rule is an effective solution to resolve the challenges and uncertainties resulting from cross border electronic transactions and ultimately increase VAT revenue. The dissertation specifically includes information on the practical application of the place of supply rule and the challenges facing the UK. A comparison between the VAT rules applied in South Africa for imports versus the UK place of supply rules is made and the significant differences are highlighted. In conclusion it is proposed that the introduction of a place of supply rule in South Africa would be beneficial and would contribute to the development an d improvement of South Africa's VAT system