Do Value Added Tax Class Rulings Matter in Universities?

Abstract

This study empirically analysed the class ruling at two South African universities. The principles underpinning the Canons of Taxation, Consumption Theory, and the Principle of Neutrality were reviewed as analytical benchmarks. The literature review synthesised prior studies that examined the ruling or explored apportionment practices within universities. A sequential mixed-methods approach was adopted, beginning with a quantitative phase followed by a qualitative phase. Quantitative data were collected from thirty (37) university staff members through an online questionnaire, and descriptive statistical analysis was conducted using SPSS (version 29). The qualitative phase involved online interviews with ten (10) tax and finance professionals engaged in apportionment practices at universities, capturing their experiences, perspectives, and insights. The data were analysed using thematic and transcript analysis with the aid of NVivo (version 20). The findings indicate that respondents believe the South African Revenue Service should revisit and improve the existing ruling. Concerns were raised regarding the lack of continuous training at universities, cost implications, and the complexity of Value-Added Tax apportionment. In the context of a rapidly evolving higher education sector, the VAT Act and the definition of educational services appear to require reform. Based on these findings, the study recommends that SARS consider revising the ruling by removing a prescribed apportionment rate and allowing universities to adopt methods that are practical and aligned with their operational contexts. Consistent with prior research, the study also finds that the input-based method remains complex, and that the definition of Value-Added Tax within the educational sector is overly broad.