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.

1. Introduction

The paucity of further research persists, as tertiary education staff and tax professionals remain uncertain about the status and applicability of the Value Added Tax Class Ruling (VCR) (Carpenter & Smith, 2019). This limited body of research may lead university staff, tax professionals, and representative tax bodies to become complacent and accept the ruling in its current form in South Africa. Accordingly, this study aimed to determine how university tax professionals perceive the application of the VAT Class Ruling. The findings reveal divergent perceptions of the VCR between professional accountants and representatives of SARS.

A common misconception is that educational institutions are exempt from registering for VAT (Thornton, 2020). While the primary service of universities education is funded by government grants and classified as an exempt supply under Section 12(h), institutions have increasingly expanded their taxable activities to supplement funding (Thornton, 2020). Furthermore, the growth in research outputs has introduced additional taxable supplies, as research has become a significant revenue stream for universities (Herron, 2017). Examples of taxable supplies include venue hire to third parties, gym fees, contractual research, and parking fines (Nelson, 2016). In terms of Section 17(1) of the VAT Act, universities are therefore required to apportion mixed-use supplies for input tax deduction purposes. To standardise this process, SARS issued a Binding Class Ruling to Higher Education South Africa (HESA) in May 2012, establishing a uniform VAT apportionment approach for universities. Higher Education South Africa (HESA), a representative body supporting 26 public universities, is now known as Universities South Africa (USAF). The VAT Class Ruling (VCR), initially implemented in 2012, was updated in 2022 and remains valid until December 2026 (SARS-LAPD, 2022). Currently, 24 universities in South Africa are registered VAT vendors and are bound by this ruling (SARS-LAPD, 2022).

The binding ruling acknowledges complexities within the research environment, particularly regarding the classification and correct application of research-related definitions, which pose significant risks. A Tax Task Team (TTT) has engaged with research bodies at institutions affiliated with USAF to assess the classification of research projects. Findings from the TTT indicate inconsistencies in both the understanding and application of the VCR’s research guidelines across the sector, largely due to the subjective nature of the ruling (SARS-LAPD, 2022). This subjectivity contributes to challenges in applying VAT apportionment, with universities continuing to seek guidance from SARS and USAF. The study aimed to explore professional accountants’ perspectives on the application of the VCR and found that, while the ruling reflects certain tax principles associated with Adam Smith, it falls short in terms of equity, transparency, and fairness. Although professionals generally understand the VCR, it remains difficult to administer, highlighting the urgent need for review in light of the evolving scope of taxable activities within universities.

From a policy perspective, a benchmark VAT system is designed to operate on the principle of neutrality, whereby all consumption is taxed uniformly, implying that education should, in principle, be treated no differently from other forms of consumption (Ebrill et al., 2001; Keen, 2013). However, many jurisdictions, including South Africa, provide preferential VAT treatment to education services to achieve broader social objectives, resulting in such provisions being classified as tax expenditures. These tax expenditures are often criticised as inefficient subsidy mechanisms, as they are difficult to target and may disproportionately benefit higher-income groups rather than the intended beneficiaries. Despite these limitations, such concessions persist due to political and social considerations, shifting the focus toward their administrative feasibility. In this context, universities engaged in both exempt and taxable activities face inherent complexities in allocating input tax, necessitating apportionment methods such as those prescribed in the VAT Class Ruling.

Although several notable studies have examined taxation and VAT within the higher education sector such as Carpenter and Smith (2019) on “The Role of VAT in the Changing Landscape of Educational Services,” Thornton (2020) on employees’ tax in higher education, Nelson (2016) on VAT apportionment in higher education, and Holm (2017) on funding and tax incentives of higher education institutions there remains limited empirical evidence on tax professionals’ perceptions of the application of the VCR. This gap is particularly significant given the evolving nature of the VCR and its practical implications within South African higher education institutions.

This study contributes to the literature in several ways. First, it is the first study to examine tax professionals’ perceptions of the application of the VCR in South Africa. Second, it employs a mixed-methods approach to investigate this issue. Finally, the findings provide insights that may assist policymakers in improving both the understanding and application of the VCR within the South African higher education sector.

The study is guided by the following research question: How do tax professionals perceive the application of the VAT Class Ruling (VCR) in South African universities?

To address this question, a sequential mixed-methods approach was adopted, beginning with a quantitative phase followed by a qualitative phase. The remainder of the article is structured as follows: the next section presents the literature review; the third section outlines the research methodology; the fourth section presents the empirical results, analysis, discussion, and implications; and the final section provides conclusions and recommendations based on the study’s findings.

2. Literature Review

2.1. VAT Theory

In 1776, Scottish economist Adam Smith proposed the criteria for an effective tax system, known as the “canons of taxation.” These principles—equity, simplicity and certainty, convenience, and efficiency—have long been widely accepted as foundational guidelines for taxation policy (Legwaila et al., 2019). According to A. Smith (1776), the principle of equity requires that taxpayers contribute in proportion to the revenue they earn, thereby emphasising fairness in taxation. The second maxim asserts that taxes should be certain rather than arbitrary, with the time, method, and amount of payment clearly defined (A. Smith, 1776; Soyode & Oyedokun, 2019). The third maxim holds that taxes should be imposed in a manner most convenient to the taxpayer. As noted by Soyode and Oyedokun (2019), taxpayers sacrifice purchasing power when paying taxes, and governments should therefore minimise inconvenience. Taxation reduces disposable income and business returns, which may in turn lower consumer demand and contribute to unemployment. This maxim further implies that the cost of taxation should not be disproportionately distributed relative to the revenue generated (Legwaila et al., 2019). In addition, Soyode and Oyedokun (2019) emphasise that the administrative costs of tax collection should be kept low. Ideally, the VAT Class Ruling (VCR) should have been developed in alignment with these foundational taxation principles.

Value-Added Tax (VAT) was first developed in France in the 1950s, with neutrality as its core objective, aimed at promoting economic efficiency (Herbain, 2015). The European Union VAT system similarly incorporates the principle of neutrality (Ritchie, 2014). Famulska and Rogowska-Rajda (2018) describe neutrality as a fundamental principle underpinning the VAT system, while Ritchie (2014) explains that it is operationalised through the deduction of input VAT from output VAT.

2.2. VAT Principles

2.2.1. Government Tax Policies

On 30 September 1991, the Value-Added Tax (VAT) system was introduced in South Africa (Koekemoer et al., 2023). According to Koekemoer et al. (2023), taxes are levied under the relevant legislative framework, with VAT administered in terms of the Value-Added Tax Act of 1991. The South African taxation system comprises three primary tax bases—income, consumption, and wealth—with VAT classified as a consumption tax (Legwaila et al., 2019).

Section 7(1) of the Act initially set the VAT rate at 10%; this was subsequently increased to 14% on 7 April 1993, where it remained stable for many years (Botes, 2016). The Minister of Finance, Mr Malusi Gigaba, later announced a further increase to 15%, effective from 1 April 2018, in the 2018 Budget Speech (National Treasury, 2018).

2.2.2. VAT Accounting Procedures

Section 15(1) of the Act provides that VAT is generally accounted for on the invoice (accrual) basis, although the payment basis is permitted in certain circumstances. Section 9 stipulates that a supply is deemed to occur at the earlier of the time an invoice is issued or any payment is received. Accordingly, vendors may be required to declare the full amount of output tax on supplies made, even where payment has not yet been received in full. Similarly, for input tax purposes, vendors may deduct input tax in full on supplies received, notwithstanding that payment has not yet been made (SARS-LAPD, 2022).

2.2.3. Tax Compliance

According to Evans (2008), modern tax systems can impose significant inconvenience on taxpayers. The overall tax burden comprises three components: first, the tax liability itself; second, efficiency costs; and third, administrative costs incurred by the tax authority alongside compliance costs borne by taxpayers (Barbone et al., 2012). Barbone et al. (2012) further emphasise that compliance with tax laws does not occur effortlessly; rather, tax systems must be developed, maintained, supervised, and enforced across all jurisdictions.

The Tax Administration (TA) Act 28 of 2011 came into effect on 1 October 2012. Taxpayers are required to comply with both the VAT Act and the TA Act. In conjunction with Section 41B of the VAT Act, the (Republic of South Africa, 2011) empowers the Commissioner of SARS to issue binding general rulings and binding class rulings (Legwaila et al., 2019). Section 41B defines a ‘VAT Class Ruling’ as a written document issued to taxpayers to clarify the application of the VAT Act, thereby assisting vendors in applying its provisions correctly (Legwaila et al., 2019). In terms of Section 75 of the TA Act, a ‘binding general ruling’ is a prescribed document issued by SARS.

Furthermore, Section 29 of the TA Act requires taxpayers to retain records and accounting books to ensure compliance with the Act, while Section 55 of the VAT Act requires vendors to maintain additional supporting documentation. Section 39, read together with Section 213 of the TA Act, provides for penalties in cases of non-compliance. In addition, Chapter 12 of the TA Act stipulates that interest on outstanding amounts is calculated on a daily basis and capitalised monthly (SARS-LAPD, 2022).

2.2.4. The Administrative Burden of VAT on Businesses

Section 23 of the Act provides that a person is required to register for VAT where taxable supplies exceed R1 million, making registration compulsory. Voluntary registration is permitted where taxable supplies exceed R50,000 within a 12-month period. From an administrative perspective, VAT imposes a significant compliance burden, particularly due to the number of returns that must be submitted within a 12-month tax period (Olla, 2016). Olla (2016) further notes that larger businesses are more likely than small and medium-sized enterprises (SMEs) to utilise sophisticated accounting systems and tax professionals to manage VAT calculations and submissions.

2.2.5. Economic Implications of VAT Changes

Erero’s (2021) research study on the impact of the tax rate change from 14% to 15% found that it increased net indirect tax and economic growth between 2019 and 2021. The study also revealed that policy shocks can be used to address unemployment, low economic growth, and inequalities in society (Erero, 2021).

The Figure 1 below demonstrates the conceptual framework and VAT principles that affect the apportionment method as well as the ratio.

The VAT Class Ruling (VCR) prescribes the apportionment method for mixed-use supplies to be applied by universities (SARS-LAPD, 2022). The apportionment of input VAT is grounded in Section 17(1), which serves as the cornerstone provision for mixed-use supplies. According to SARS-LAPD (2022), the VCR mandates the use of the input-based method as the prescribed approach to apportionment. The ruling further categorises research activities into basic, applied, and contract research, with specific rules governing each classification. Basic research is treated as exempt for VAT purposes, whereas applied and contract research are subject to VAT at either the standard or zero rate. In cases where students are involved, the input tax claim is limited to 50%. SARS introduced the VCR to assist universities in accurately classifying their taxable supplies and in calculating input VAT on goods and services (Jeewa, 2016). However, VAT non-compliance in the tertiary sector, along with challenges in correctly allocating funding and expenditure, remain areas of concern (Jeewa, 2016). Additionally, VAT-related decision-making has become increasingly complex (Jeewa, 2016). The VCR seeks to provide guidance in contexts where universities have multiple income streams and outlines the procedures for VAT apportionment between taxable and exempt supplies (Smit, 2009). Given that universities supply both exempt and taxable goods and services, an annual VAT apportionment calculation is required, further complicating VAT management (Holm, 2017).

Despite its intended purpose, the VCR has resulted in financial implications that affect the distribution of input VAT recovery between the fiscus and universities. Universities account for both input and output VAT in their monthly VAT returns. Historically, universities applied an apportionment rate of approximately 20%, allowing them to recover a higher proportion of input VAT incurred on mixed-use purchases. However, the 12.5% apportionment limitation introduced under the VCR has reduced the proportion of input VAT that can be claimed, compared to previous institutional practices.

From a policy perspective, VAT neutrality does not require maximisation of input VAT recovery for taxpayers, but rather that input VAT is allocated in proportion to taxable and exempt activities. In this regard, the VCR may be interpreted as an administrative simplification aimed at harmonising apportionment practices across universities, rather than a deviation from neutrality. Nevertheless, respondents perceived the reduced recovery rate as creating financial pressure, particularly for research-intensive institutions.

In line with this study, the principle of neutrality should therefore be understood in terms of accurate allocation rather than recovery maximisation, while ensuring that the apportionment framework remains practical, consistent, and responsive to the operational realities of universities.

2.3. Empirical Studies

Ritchie’s (2014) study, titled “International apportionment mechanisms for VAT inputs—is the turnover basis the best mechanism for all retail industries in South Africa?”, compared the turnover method used in South Africa with international apportionment approaches. The study found that the turnover method is not well suited to the retail industry and noted similarities between South Africa’s approach and those of Singapore and New Zealand, although these may not fully address local complexities. In contrast, jurisdictions such as Canada and Australia generally adopt a principles-based approach under self-assessment systems, where the responsibility for determining a fair and reasonable apportionment method rests with the taxpayer, supported by administrative guidance rather than detailed prescriptive legislation (Ebrill et al., 2001).

Furthermore, while New Zealand, Singapore, and Australia have introduced measures to address distortions arising from exempt financial services, these do not constitute “semi-input tax credits.” Rather, such measures include limited or partial input tax recovery mechanisms for specific financial supplies—such as reduced input tax credits in Australia and targeted input tax recovery rules in Singapore—aimed at mitigating cascading effects and neutrality concerns. These approaches seek to balance administrative feasibility with revenue protection. However, adopting a fully transaction-based approach, as observed in jurisdictions like Canada and Australia, may increase compliance costs and administrative complexity for both taxpayers and SARS.

Herron’s (2017) study, titled “A critical analysis of whether research activities performed by universities fall within the meaning and scope of the term ‘educational services’ as intended by Section 12(h) of the Value-Added Tax Act No. 89 of 1991,” adopted a doctrinal approach. The study concluded that non-commercial research qualifies as an educational service, as it aligns with the concept of systematic instruction and is therefore exempt from VAT. Conversely, commercial research was found not to qualify as an educational service, as its primary objective is income generation. The author recommended that the VAT Act clearly define the various categories of research and that SARS provide specific apportionment methods for research projects, particularly those involving indirect costs and mixed-use inputs.

Barnard’s (2017) exploratory qualitative study, “The Challenges of Value-Added Tax Compliance Provisions for Non-profit Organizations,” examined the complexities associated with VAT compliance within the existing legislative framework. The study concluded that SARS VAT guides should be updated to address technical issues, and that VAT201 forms should include more detailed questions relating to project activities and income streams. However, the study did not address the detailed application of apportionment methods.

Nelson’s (2016) study, “Value-Added Tax Apportionment Methodology Applied in the Higher Education Sector of South Africa,” investigated whether existing apportionment methods are suitable for the sector. Using a doctrinal approach, the study evaluated the principles underlying apportionment methods and found that any alternative method must adhere to key criteria, namely direct attribution, consistency, and fairness and reasonableness. The findings indicated that the varied input-based method is not a sustainable long-term solution due to its administrative burden and practical challenges. A limitation of the study is that it focused only on methods prescribed by the VCR and did not consider alternative approaches.

Jeewa’s (2016) study examined whether existing VAT exemptions in the education sector remain appropriate in a changing educational environment. The study focused on the complexity of apportionment calculations, the additional costs borne by universities, and the impact of legislative changes. Using a doctrinal approach, the study demonstrated the application of the varied input-based method, although the resulting apportionment rate of 66.66% was not consistent with rates observed in practice. The study proposed several alternatives, including standard-rating educational services to reduce administrative complexity, reclassifying educational services as zero-rated supplies, or removing exemptions and treating tertiary institutions as welfare organisations. However, the study did not account for broader socioeconomic factors that may influence VAT reform in South Africa.

Jugdhaw’s (2018) study examined whether the current VAT treatment of educational services remains appropriate, whether zero-rating is a viable alternative, and whether other VAT treatments exist. The study also analysed international practices and found that in Australia, where educational supplies may include both taxable and GST-free components, institutions are required to apply a fair and reasonable method to determine the taxable portion. The study recommended that South Africa adopt a similar approach, ensuring consistency in VAT treatment across different levels of tertiary education.

The distinction between taxable and concessionally taxed education supplies in South Africa is not always clear, and this lack of clarity reflects broader international approaches to defining education for VAT purposes. Jurisdictions generally fall into two broad models. On the one hand, countries such as the United Kingdom and Canada adopt a more principles-based approach, where legislation provides only a broad definition of education supplies, leaving significant interpretive responsibility to courts and tax authorities on a case-by-case basis. On the other hand, jurisdictions such as Australia rely on a rules-based approach, where tax legislation explicitly cross-refers to education laws, thereby providing more precise criteria for determining whether a supply qualifies as concessionally taxed. These differing approaches highlight that the challenge of characterising supplies as taxable or concessionally taxed is conceptually distinct from the apportionment of input tax. While the former relates to definitional clarity and classification, the latter concerns the allocation of input tax once the nature of supplies has been established.

In this regard, Chitando (2018), in a study titled A Critical Analysis of the VAT Apportionment Method in the Banking Sector in South Africa, examined apportionment practices across jurisdictions. The study notes that in South Africa, the turnover-based method is the approved approach, with similarities observed in Australia and New Zealand, where taxpayers may select an alternative method provided it meets the fairness and reasonableness criteria. In the United Kingdom, although a standard method exists, alternative methods may also be adopted where the standard method does not yield a fair and reasonable outcome. However, these apportionment frameworks operate only after the prior classification of supplies has been resolved, reinforcing that characterisation challenges and apportionment issues should be treated as analytically distinct.

While financial institutions similarly engage in both exempt and taxable supplies, requiring input tax apportionment, this comparison should be interpreted with caution. Jurisdictions generally do not provide safe harbour or presumptive apportionment ratios for financial services, unlike the approach adopted in the higher education sector. As such, the analogy is intended to highlight the broader administrative complexity associated with mixed supplies rather than to suggest direct policy equivalence. This distinction further underscores the unique and more interventionist nature of the VAT Class Ruling in standardising apportionment within universities. This is consistent with international VAT literature, which highlights that exemptions particularly in financial services create significant administrative complexity and necessitate difficult apportionment of input tax without simplified methods (Ebrill et al., 2001).

Swanepoel’s (2024) study, “Evaluating alternative VAT apportionment approval mechanisms for implementation in South Africa,” aimed to compare South Africa’s VAT apportionment methods with those of other countries. The study adopted a qualitative approach, analysing legislation, interpretation notes, and rulings from South Africa, Australia, and New Zealand. The findings indicate that while the Australian system allows taxpayers flexibility in selecting apportionment methods, this may create uncertainty and increase administrative burdens, particularly where professional advice is required. Overall, the study found that none of the systems fully satisfy the principles of a good tax system.

The VAT Class Ruling (VCR) prescribes the apportionment method for mixed-use supplies applied by universities (SARS-LAPD, 2022), grounded in Section 17(1). It mandates an input-based method and classifies research into basic (exempt), and applied and contract research (taxable), with a 50% input limitation where students are involved. The VCR aims to assist universities in classifying supplies and calculating input VAT (Jeewa, 2016), particularly in the context of multiple income streams (Smit, 2009). However, VAT compliance challenges, including allocation difficulties and increasing decision complexity, persist (Jeewa, 2016; Holm, 2017).

From a VAT compliance cost perspective, mixed supplies increase administrative burdens due to the need for detailed allocation and justification of input tax claims (Sandford, 1994; Coolidge, 2012). While the VCR may be viewed as an administrative simplification to standardise apportionment and enhance consistency, it has financial implications. The reduction from historical apportionment rates (e.g., ~20%) to 12.5% limits input VAT recovery and places pressure on institutions, particularly research-intensive universities.

As a form of safe harbour rule, the VCR may reduce compliance costs by providing a standardised method that avoids case-by-case attribution (Coolidge, 2012). However, the literature highlights a trade-off: institutions may perform parallel calculations—applying both the prescribed method and alternative approaches—to assess optimal outcomes, thereby increasing compliance costs (Evans, 2008). This duplication, combined with potential over- or under-recovery of input VAT, reflects a tension between administrative simplicity and economic accuracy. Accordingly, while the VCR promotes certainty and consistency, its overall impact on compliance costs remains context-dependent. The next section covers the methodology used in the study.

3. Research Methodology

A sequential mixed-methods design was adopted, in which quantitative data were collected first and subsequently supported by qualitative data (Creswell & Creswell, 2017). This study adopts a pragmatic worldview, which is widely regarded as suitable for gaining insight into a research problem through the use of multiple available approaches (Creswell & Creswell, 2017). The key advantage of this worldview is its support for both qualitative and quantitative methods, which enhances the comprehensive understanding of the phenomenon under investigation (Bell et al., 2022). Another notable strength is that a pragmatic worldview accommodates a variety of research strategies, including case studies, surveys, interviews, experiments, and action research (Petersen & Gencel, 2013). Although the pragmatic worldview has certain limitations due to its integration of both qualitative and quantitative paradigms, it offers considerable flexibility to the researcher in selecting appropriate methods and approaches (Creswell & Hirose, 2019). The quantitative phase used a questionnaire, providing an overall understanding of the research problem, whilst the subsequent qualitative phase, conducted through online interviews, enabled deeper exploration of the findings, helped to justify the statistical results, and provided additional insights from a different perspective (Ivankova & Stick, 2007). Both methods were triangulated by comparing and aligning the statistical findings to enhance validation and interpretation (Mvunabandi et al., 2023).

Inevitably, the mixed-methods approach enabled the integration of perspectives from various accounting and taxation stakeholders. The adoption of pragmatism supported the achievement of the study’s objectives by allowing methodological flexibility and methodological complementarity.

The total study population, combining both quantitative and qualitative phases, comprised 60 participants. The research population included staff from two anonymous registered universities in South Africa, as well as tax professionals contracted to universities. The qualitative sample was derived from the quantitative phase. The quantitative sample consisted of thirty-seven (37) participants, including Chief Financial Officers, Directors, Managers, Finance and Research Accountants, Academic staff, Taxation Managers, and Consultants.

Sampling techniques included snowball and purposive sampling. Snowball sampling involves existing participants referring or identifying additional participants who may be suitable for the study. Purposive sampling refers to the deliberate selection of participants based on their knowledge and relevance to the research topic (Gill, 2020).

From a total population size of 60, the quantitative sample size of 37 was derived using a formula that was designed by Yamuna in 1967 (Israel, 2022).

$$={\displaystyle \frac{N}{1+N\left(e\right)}}$$

N = population size;

e = error limit;

10% is the error level with a 95% probability level;

n = 60/1 + 60(0.10)²;

= 37.5.

Given the small and finite population (N = 60), the study adopted Yamane’s (1967) sample size determination formula, which is widely used for finite populations in survey research. In addition, Krejcie and Morgan (1970) support that for small populations, statistically adequate sample sizes remain stable under finite population correction assumptions.

The qualitative sample comprised thirteen taxation professionals providing tax services to universities. However, data saturation was used as the guiding principle for determining the adequacy of the sample size. According to Malterud et al. (2016), saturation is commonly used to determine whether a sample size is sufficient, while Daniela (2020) further notes that a sample is adequate when it sufficiently addresses the research questions and fulfils the study’s objectives. Hennink and Kaiser (2022) report that saturation has been observed to occur within a range of eight to 24 interviews across different methodological approaches, following an analysis of 16 studies. The acceptable sample size may be as low as five interviews (Hennink & Kaiser, 2022). In this study, saturation was reached after ten interviews, resulting in a final qualitative sample of ten participants. Snowball sampling was used, whereby existing participants identified and referred additional participants who were suitable for inclusion in the study.

Ethical clearance was obtained from the University of KwaZulu-Natal Humanities and Social Sciences Research Ethics Committee. Data were collected using a questionnaire survey and semi-structured online interviews. The questionnaire employed two Likert scales, the first ranging from 1 to 5 (1 = Very Good, 2 = Good, 3 = Moderate, 4 = Poor, 5 = Very Poor), and the second ranging from 1 to 5 (1 = Strongly Agree, 2 = Agree, 3 = Neutral, 4 = Disagree, 5 = Strongly Disagree) (Mcleod, 2023). The questionnaire was validated through a pilot study involving five independent individuals not involved in the main study. The pilot aimed to ensure clarity of instructions, alignment with research objectives, and appropriateness of completion time. Revisions were made to align certain questions with the study objectives.

Reliability was assessed using Cronbach’s alpha. The first set of Likert-scale items produced Cronbach’s alpha of 0.69, which is considered acceptable for exploratory research (particularly in small samples). The second set yielded Cronbach’s alpha of 0.43, indicating poor internal consistency. Consistent with methodological guidance, this set of items was excluded from further analysis to avoid introducing measurement error. While an ideal approach would involve revising and re-testing these items, this was not feasible due to practical constraints. This limitation is acknowledged and suggests an avenue for future research.

Quantitative data were analysed using SPSS software (version 29.0), where data were organised, coded, and evaluated using descriptive statistical analysis to summarise findings and examine relationships between variables (Kaur et al., 2018).

The interview schedule was also pilot tested with three independent individuals knowledgeable in VAT and accounting. Following this, the schedule was revised, and irrelevant questions were removed to better align with the research objectives. Qualitative data were analysed using NVivo, and thematic analysis was applied to identify key themes. Thematic analysis was used to explore underlying patterns and generate themes aligned with the research objectives.

The study followed a sequential process in which quantitative data were first collected from university staff via questionnaires, followed by qualitative interviews with tax professionals. Findings from both datasets were integrated, compared, and synthesised to identify similarities and differences, ultimately forming a unified interpretation of the results.

In terms of ensuring reliability and rigour, Lincoln and Guba (1985) and Merriam (1998) suggest three key strategies. First, the researcher provided a detailed description of the research design, rationale, and participants. Second, triangulation was applied by including participants from various university departments in the quantitative phase and selecting tax professionals in the qualitative phase based on their VAT knowledge, experience with the VCR, and direct involvement in its implementation. Third, an audit trail was maintained, documenting in detail how data were collected and analysed to ensure transparency and dependability.

Please see on the survey in Appendix A and Appendix B.

4. Results

4.1. Quantitative Results

Section 4.1 summarises the data examination process, including descriptive analysis and interpretation of findings in relation to the empirical literature. Data were collected using an online questionnaire and analysed using SPSS (version 29.0), where responses were coded, sorted, and evaluated. During the coding process, binary variables were assigned to facilitate analysis (Tenuche, 2018). Descriptive statistics were used to summarise the data and identify relationships (Kaur et al., 2018), while inferential techniques were applied to assess trends, associations, and the strength of relationships among variables.

Descriptive Statistics

Respondents’ Department

Table 1. Department.

Department
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	FINANCE	23	62.16	62.16	62.16
	TAXATION	4	10.81	10.81	72.97
	RESEARCH	4	10.81	10.81	83.78
	ACADEMIC	3	8.10	8.10	91.88
	EXTERNAL CONSULTANT	3	8.10	8.10	100.0
	Total	37	100.0	100.0

below displays the various university departments in which the respondents were involved in the VAT apportionment function.

Table 1 indicates that 62.16% (n = 23) of respondents were employed in the university finance department, 10.81% (n = 4) in taxation, 10.81% (n = 4) in research, 8.10% (n = 3) were academic staff, and 8.10% (n = 3) were external consultants. Finance staff, including managers and accountants, are responsible for initiating project codes and providing grant-related information for VAT treatment purposes. Taxation staff determine the VAT status of transactions, facilitate apportionment calculations, and process VAT returns. Research staff evaluate project contract terms to assess potential VAT implications. External consultants provide support in annual VAT apportionment processes as well as ad hoc VAT-related assignments.

The bar graph below displays the various departments that respondents worked in.

The graph in Figure 2 shows that most respondents worked in the finance department.

Analysis of Knowledge of the VCR and Training:

Research aim 1—“To explore the perspectives of university taxation and finance professionals on the apportionment and application of the VAT Class Ruling (VCR) within selected universities in South Africa.”

The first set of questions concerned knowledge of the VCR, training provided during its implementation, and the scheduling of ongoing training. The table below provides a statistical analysis of knowledge of the VCR and training.

Table 2. Statistical Analysis of VCR Knowledge and Training.

Statistics
		Knowledge ogVCR	Implementation Training	Ongoing Training
N	Valid	37	37	37
	Missing	0	0	0
Mean		2.2000	2.9667	3.1667
Std. Deviation		0.84690	0.99943	0.91287
Minimum		1.00	1.00	1.00
Maximum		3.00	5.00	5.00

Note: 1 = Very good, 2 = Good, 3 = Moderate, 4 = Poor, 5 = Very Poor.

presents the descriptive statistics (mean and standard deviation) for the key variables, highlighting both central tendency and variation in the data. Most variables were measured using a five-point Likert scale, except for Knowledge of the VCR, which was measured on a three-point scale. A mean score of 2.2 for Knowledge of the VCR indicates a moderate level of knowledge, while the standard deviation of 0.84 reflects dispersion around the mean (Sykes et al., 2016). Training on VCR implementation recorded a mean of 2.9, indicating a moderate response level (Bougie & Sekaran, 2020), with a standard deviation of 1.0 suggesting variability in responses (Sykes et al., 2016). Ongoing training recorded a mean of 3.2 and a standard deviation of 0.9, indicating greater variability in responses and relatively poorer perceptions of continued training availability.

The frequency distribution in

Table 3. Knowledge of the VCR.

KNOWLEDGE OF VCR
	Frequency	Percent	Valid Percent	Cumulative Percent
Very Good	10	26.7	26.7	26.7
Good	10	26.7	26.7	53.3
Moderate	17	46.7	46.7	100.0
Total	37	100.0	100.0

for Knowledge of the VCR indicates that eight respondents (26.7%) reported very good knowledge, eight (26.7%) reported good knowledge, and 14 (46.7%) reported moderate knowledge. Overall, the findings suggest that staff demonstrated a fair understanding of the ruling. However, the presence of limited knowledge implies that implementation support and ongoing training may be inadequate. Insufficient training may contribute to the misapplication of research definitions and incorrect coding of cost centres, which could result in inappropriate input tax deductions. Responsibility also lies with university finance and taxation management to ensure that staff are adequately trained on VAT apportionment requirements. A proper understanding of the VCR further requires familiarity with the relevant sections of the VAT Act (Hassan, 2024).

The frequency table below (Table 3) analyses training statistics during VCR implementation.

Implementation Training and Ongoing Training:

In terms of training during the implementation of the VCR, three respondents (10%) rated it as very good, five (16.7%) as good, 13 (43.3%) as moderate, eight (26.7%) as poor, and one (3.3%) as very poor, indicating an overall moderate level of training. These findings suggest that finance and taxation managers should have allocated more time to training staff on VAT legislation and the implications of the VCR for project VAT treatment. SARS primarily provided written guidelines, with no formal training manuals issued by SARS, USAF, or PWC. However, some universities, such as UKZN and the University of the Free State, developed decision-tree diagrams to assist staff in applying the VCR.

Ongoing training was rated as very good by one respondent (3.3%), good by six (20%), moderate by 11 (36.7%), poor by 11 (36.7%), and very poor by one (3.3%), indicating overall poor provision of continuous training. Budgetary and time constraints, together with frequent changes in VAT legislation and research contract structures, underscore the need for regular and structured training to ensure the correct and consistent application of the VCR.

Aim number 2: To identify the key challenges perceived by stakeholders in the implementation and compliance with the VCR.

Aim number 3: “To suggest alternative strategies that could be employed to enhance the application of the Input Tax VCR within the selected universities in South Africa.”

Apportionment % Suitability and Improvement of the VCR:

The analysis revealed that 53.3% of respondents agreed with the current apportionment ratio of 12.5%, while 46.7% disagreed. Respondents who supported the current rate indicated comfort with the prescribed calculation and expressed caution regarding potential SARS audits. In contrast, those who were dissatisfied noted that previous apportionment rates ranged between 20–30%, and argued that the capped 12.5% restricts deductible input VAT, particularly in cases where expenditure cannot be fully allocated to taxable, exempt, or non-supplies. A fair and equitable apportionment ratio is essential, particularly given that VAT was the second largest contributor to the tax fiscus in 2019 (Swanepoel, 2024). However, Jeewa (2016) argues that the apportionment ratio should be increased to alleviate financial pressure, especially for research-intensive universities.

With regard to improvements to the VCR, 56.7% of respondents indicated that the ruling requires revision, while 43.3% did not share this view. This means more respondents are in favour of the improvement of the current VCR. Further, respondents highlighted ambiguities in the regulations, outdated provisions, and the need for a more modern and practical apportionment method. The VCR, introduced in 2012 and extended to 2026, was initially intended as a temporary measure. B. Smith (2019) notes that although the ruling was initially renewed within nine months, its long-term sustainability remains uncertain, and VAT administration in South Africa requires reform to enhance fairness, clarity, and effectiveness.

Analysis of Varied Input Method and Annual Apportionment Calculation:

Most respondents (80%) confirmed the use of the varied input-based method, while 20% indicated that they were unaware of the method. This distribution suggests a generally high level of awareness, although a notable minority of participants may still lack familiarity with the approach. The method is considered suitable for universities where the majority of VAT relates to either taxable or exempt supplies, with only a small proportion attributable to mixed-use supplies (Marais, 2014).

Regarding compliance requirements, 56.7% of respondents confirmed that VAT apportionment is calculated annually, while 43.3% disagreed. This split indicates mixed levels of understanding or application of the requirements under the VCR, rather than conclusive evidence of widespread non-compliance. While such discrepancies could potentially expose institutions to penalties in terms of the Tax Administration Act (Jeewa, 2016), this inference should be interpreted with caution. The relatively low standard deviations for both variables indicate that responses were closely clustered around the mean, reflecting limited dispersion in the data (Sykes et al., 2016).

Analysis of VAT Treatment of Educational Services:

The exemption of educational services was supported by 83.3% of respondents, aligning with Section 12(h) of the VAT Act (Jugdhaw, 2018). This high level of support suggests that most participants are aware of, and in agreement with, the current legislative treatment of educational services as exempt supplies.

Zero-rating, however, was supported by 46.7% of respondents, while 53.3% were opposed. This relatively balanced distribution indicates divergent views among participants, rather than a clear consensus, and may reflect varying interpretations of the feasibility or desirability of zero-rating within the higher education context. It is therefore more appropriate to interpret these findings as evidence of mixed perceptions, as opposed to a definitive lack of acceptance.

The standard rating of educational services was rejected by 80% of respondents, with only 20% in favour. This strong opposition suggests that most respondents do not support the imposition of VAT at the standard rate on educational services, which may be influenced by concerns about affordability and access to education. Overall, while the findings point to clear support for exemption, conclusions regarding alternative VAT treatments should be drawn cautiously, as the data reflect differing perspectives rather than uniform agreement.

Despite this, standard rating has been argued to reduce administrative complexity and enable full VAT claims on research and third-stream income sources (Jeewa, 2016).

4.2. Qualitative Analysis

Interviews were transcribed and analysed thematically using NVivo. The recorded data, captured in Microsoft Word, were imported into the software and coded into nodes aligned with the key research themes. After each interview, the data were transcribed and coded with reference to preceding interviews, and the process ceased once data saturation was reached (Phesa et al., 2024). In line with Fusch and Ness (2015), saturation occurred when further coding produced no new themes or insights, as responses became repetitive. An iterative approach guided both data collection and analysis, enabling continuous comparison of emerging codes, themes, and their interrelationships. Word frequency counts assisted in identifying recurring perspectives on the VAT Class Ruling, particularly in relation to application challenges and potential improvement strategies. Parent and child nodes were used to structure the analysis, enabling systematic comparison of similar responses. Thematic analysis was applied to organise and streamline the data and to determine the recurrence of key themes. The qualitative findings were used to corroborate the quantitative results, thereby strengthening the reliability of the study and enabling the researcher to test the study’s propositions with greater confidence.

Thematic map:

The qualitative data analysis followed a structured process using NVivo 20. Data were uploaded and reviewed, and 150 significant elements were identified and aligned with the research questions. A thematic map consisting of three main themes and 25 sub-themes was developed.

Familiarisation with the data enabled deeper insight, while coding generated multiple codes derived from key phrases (Dawadi, 2020). Themes were subsequently developed by grouping related codes to identify recurring patterns (Naeem et al., 2023). A systematic structure of master, main, and sub-themes was then constructed (Dawadi, 2020). Relevant extracts were exported to Microsoft Word to facilitate cross-referencing and verification.

Themes were further refined through a process of merging, modification, and removal where necessary (Mvunabandi et al., 2023). In line with Braun and Clarke (2021), the researchers actively engaged in the construction and interpretation of themes. The final thematic map provided a visual representation of the findings and supported the interpretation and answering of the research questions.

Figure 3 shows two important dimensions, which are (1) perceived relevance of the VAT class ruling and (2) operational complexity of VAT compliance (VCR). As shown in Figure 3, most respondents demonstrated a general awareness of the VAT class ruling; however, varying levels of technical understanding were evident, particularly regarding input tax apportionment and its practical implementation. This suggests that while awareness is widespread, depth of comprehension remains uneven.

Key Themes:

Figure 4. Word Similarity.

Figure 4. Word Similarity.

Analysis of the themes derived from the interviews and Frequency of interview data:

As per Figure 4 above, interview data strengthened and validated the quantitative findings. The results indicate a strong relationship between the relevance of the ruling, the challenges experienced, and the proposed improvement strategies. Data validation was achieved through open-ended responses, which captured participants’ experiences regarding the application of the VAT Class Ruling, the associated challenges, and potential strategies for improvement.

Theme One: Relevance of the Ruling.

The South African Revenue Service issues rulings to ensure uniformity and compliance. As shown in

Table 4. Relevance of the VCR.

Theme 1: Relevance of the VCR
	Count	Coverage
Varied input-based method	8	1.20%
Role in post/pre-implementation	6	2.6%
Relevance of the VCR	5	0.98%
Fairness	5	0.62%
Industry solution	3	0.91%
Consistency and uniformity	3	0.35%

below, findings show five of ten interviewees viewed the VCR as relevant, aligning with questionnaire results. Some noted it captures university supplies and removes the need for separate rulings. However, application challenges persist, indicating partial effectiveness and areas for improvement.

The next discussion outlines the sub-themes that emanate from the main theme.

Role in the Implementation of the VCR:

Most respondents were involved in either the pre-implementation or post-implementation phases of the VAT Class Ruling. Six respondents reported direct engagement, providing valuable insight into the rationale behind its rollout. Meetings were held with the South African Revenue Service, and some participants assisted with apportionment calculations during the testing phase.

One respondent explained:

“There was an analysis of different rates and what universities did. There was a need to educate SARS on what the sector is doing.”

The findings indicate that PwC undertook extensive work to develop and standardise fixed apportionment ratios and was subsequently appointed as tax advisor to the Finance Executive Forum (FEF). The Tax Task Team (TTT) also reported to this forum. The implementation of the VCR increased administrative requirements, as cost centres required detailed VAT analysis and accurate recording within universities’ internal software systems.

Industry Solution:

Three respondents viewed the VCR as an effective industry solution for the education sector, as it helped to streamline the VAT apportionment methodology. One participant noted:

“There were different tax treatments for universities and there was a need to limit the risks. The process involved an approach to SARS for an industry solution.”

Consequently, PwC engaged with the South African Revenue Service to develop a uniform approach, which was subsequently adopted for all 26 universities in collaboration with Universities South Africa.

Consistency and Uniformity:

Three respondents reported that the VCR promoted consistency and uniformity among universities and universities of technology in South Africa. This standardisation avoided the need for 26 separate rulings across institutions. This view, noting that SARS, in consultation with HESA, implemented the ruling to simplify VAT apportionment within the higher education sector.

Varied input-based method:

Eight interviewees expressed satisfaction with the varied input-based apportionment method. One participant stated:

“I am very happy with the input-based method.”

Participants further explained that this method is more suitable for universities, as the turnover-based method previously distorted apportionment calculations due to the sector’s unique funding structure, which is heavily reliant on tuition fees, government subsidies, and research grants.

Fairness:

Opinions on fairness were mixed. Five out of ten respondents indicated that the VCR promotes fairness, with one participant noting:

“SARS and USAF sought to create a system that was fair for universities.”

Conversely, other interviewees argued that the ruling disadvantages universities. One respondent stated:

“The VCR was a temporary ruling that became permanent, and universities are prejudiced by it.”

These findings indicate differing perceptions of fairness, reflecting the varied impact of the VCR across institutions and highlighting ongoing debates regarding its equity and long-term implications.

The word cloud below displays the most frequently cited words under Figure 5.

Figure 5—The word cloud analysis revealed that “Apportionment,” “Ruling,” “SARS,” “Tax,” “Universities,” and “Research” were the most frequently cited terms. This aligns with participants’ sentiments, emphasizing that the VCR directly affects VAT apportionment, which is perceived as complex for universities to manage. The prominence of these terms highlights the central focus of interviewees on compliance requirements, administrative challenges, and the sector-specific application of the ruling. It further reflects the interplay between university funding structures, research activities, and tax obligations under the guidance of SARS. Overall, the findings underscore the critical role of the VCR in shaping and standardising VAT practices across the higher education sector.

Theme Two: Complexities that arise from the application of the VCR.

The second theme focused on complexities. Open-ended questions were designed to determine whether any challenges arose from the application of the VCR. The findings revealed that most of the reported challenges were related to the complexity of applying the VAT apportionment ruling.

Table 5. Complexities in the VCR.

Theme 2: Complexities Concerning the VCR
Technique	Count	Coverage
Inappropriate apportionment %	9	0.90%
Research categorisation	9	1.97%
Coding of cost centres	6	0.85%
System and data setups	4	0.77%
Skills required	4	0.58%
Apportionment methodology	3	0.46%
Proper analysis of cost centres	3	0.45%
Time-consuming	3	0.25%
Data manipulation	2	0.18%
VAT legislation	1	0.24%
Tracking the VAT	1	0.29%

below summarises respondents’ views and their frequency distribution.

Inappropriate Apportionment %:

The frequency distribution in Table 5 shows that nine out of ten interviewees considered the 12.5% apportionment rate to be inappropriate. One respondent stated:

“A higher % should be set. The ruling is more attributable to taxable supplies, more expenses, then the better the ratio.”

Another participant noted:

“Doesn’t work as a gain, especially for bigger universities claiming 20%.”

The findings indicate that the 12.5% rate is perceived as too low, particularly when compared to previous rates ranging between 20% and 30%, thereby potentially disadvantaging larger, research-intensive universities.

Research Categorisation:

Nine respondents argued that the VCR’s research definitions are ambiguous, misleading, and unclear. They noted that the definitions of basic and applied research are not sufficiently descriptive. One interviewee stated:

“There is an extremely blunt categorization of research.”

Another participant added:

“Research definition by SARS is very narrow.”

Herron (2017) similarly found inconsistencies in the VAT treatment of different types of research activities, highlighting variability in interpretation and application across institutions.

System and Data Set-ups:

Four respondents highlighted challenges related to system configuration, as VAT must be correctly set up within in-house software systems. One participant noted:

“There are system limitations, and it is a high cost to amend the systems.”

The complexity arises from multiple VAT indicators and the data-intensive nature of system configuration and maintenance.

Coding of Cost Centres:

A few respondents noted that coding research-related cost centres is difficult due to ambiguity in the VCR, supporting, who argued that universities are often not adequately equipped for VAT accounting. Proper analysis and continuous tracking of cost centres are essential, particularly for projects with changing VAT status over time.

Apportionment Methodology:

Three respondents reported difficulties in applying the methodology to between 20,000 and 30,000 cost centres. One participant stated:

“Apportionment calculation is not easy.”

Smit (2009) noted that categorising inputs and allocating VAT is complex, particularly within historically government-subsidised universities. The process is also time-consuming, as staff often lack the capacity to review and classify tax cases for research purposes accurately.

Skills Required:

Four respondents agreed that universities lack sufficient internal expertise, requiring tax professionals for effective VAT administration. One participant stated:

“VCR requires legal and tax skills plus practical implementation & knowledge. Limited skills—only tax manager, no oversight.”

Nelson (2016) supports this view, noting that universities often rely on expensive consulting firms to calculate annual apportionment ratios, highlighting the skills gap and associated cost implications.

Theme Three: Strategies to Enhance the Application of the VCR.

Theme three related to strategies to improve the VCR. The table below displays the frequency results of the respondents’ insights on strategies that will add value to it.

Improvement of the VCR:

As shown in

Table 6. Strategies to Enhance the VCR.

Theme 3: Strategies to Enhance the Application of the VCR
Technique	Count	Coverage
Continuous engagement with SARS and USAF	5	0.81%
Improvement of the VCR	6	0.69%
Increase the apportionment %	6	0.69%
New VCR Model	2	0.18%
Prescription on the apportionment %	2	0.28%
Opting out of the VCR	1	0.07%

, six respondents indicated that the VCR requires improvement to ensure a fair and more effective ruling. One participant stated:

“The ruling could be streamlined and improved by, first, ongoing, close monitoring of the situation by USAF, TTT and PWC within the registered universities.”

Respondents further suggested that SARS should issue a dedicated VAT guide on apportionment for universities. These findings align with the conclusion that additional legislative guidance is required, or alternatively, that VAT in the educational sector should be simplified.

Increase in the Apportionment %:

Six respondents argued that the apportionment percentage should be increased. One participant stated:

“12.5% is not a real basis. Some universities have little research. No scientific basis.”

This suggests that the current percentage may disadvantage universities that are primarily teaching-focused rather than those engaged in large-scale or commercial research activities. These findings are consistent with Schneider (2013), who argued that the apportionment ratio should reflect a reasonable and balanced outcome rather than an excessive or arbitrary one.

Continuous Engagement with SARS and USAF:

Five respondents emphasised the need for regular engagement between universities, SARS, and USAF. One participant noted:

“USAF and the tax task team were appointed for oversight role with appropriate knowledge.”

Concerns were raised regarding whether USAF and the Tax Task Team (TTT) sufficiently challenge SARS, with some respondents suggesting that USAF may lack adequate competence to fully perform this oversight role.

Integrated Discussion of Findings:

The preceding sections presented the empirical findings from both the quantitative and qualitative phases. This section integrates these results in line with the study’s objectives, providing a consolidated and analytically strengthened interpretation of the findings.

Aim 1: Perspectives on Apportionment and VCR Application.

The study sought to explore the perspectives of university taxation and finance professionals regarding the apportionment and application of the VAT Class Ruling (VCR) within selected South African universities.

Findings from both data sets consistently indicate a generally strong level of understanding of the VCR. Quantitative results show that 53% of respondents reported a very good understanding, while 47% indicated a moderate level. This is reinforced by the qualitative findings, where most participants demonstrated awareness of the ruling and broadly agreed on its continued relevance. As one respondent noted, “The ruling is still relevant, a temporary measure which became permanent.”

However, while awareness is widespread, qualitative evidence suggests that depth of understanding varies, particularly regarding technical aspects such as apportionment. This indicates that knowledge is uneven, which may contribute to inconsistencies in application despite general familiarity with the ruling.

Both data sets also converge on the perceived appropriateness of the apportionment method. The majority of qualitative respondents expressed satisfaction with the varied input-based method, and this is supported quantitatively, with 80% confirming its use. This strong alignment suggests that the method is both widely adopted and contextually appropriate within universities, where exempt supplies dominate and taxable activities are limited (Marais, 2014).

The findings further indicate that the VCR has achieved its intended purpose of promoting uniformity, consistency, and fairness across institutions, supporting established VAT principles (Nelson, 2016).

Aim 2: Challenges in Implementation and Compliance.

While the VCR is perceived as relevant and appropriate, the integrated findings reveal several key drivers of VAT compliance burden. Importantly, by combining quantitative patterns with qualitative frequency and emphasis, the study is able to assess the relative prominence of these challenges.

Across both data sets, input tax apportionment emerges as the most dominant and consistently cited challenge, particularly in relation to its computational complexity and application across large institutional datasets. Qualitative responses frequently highlighted the administrative intensity of apportionment calculations, especially where institutions manage between 20,000 and 30,000 cost centres.

This is supported by broader system-related challenges identified in both phases. A substantial proportion of respondents reported difficulties with system setup and cost centre coding, indicating that system limitations are a secondary but closely related driver of compliance burden. These systems often require manual adjustments to accommodate VAT requirements, increasing administrative effort and the risk of error.

Skills and institutional capacity constraints also emerged as a significant theme, although less dominant than apportionment and system challenges. Respondents emphasised the need for specialised expertise in tax, legal interpretation, and data management, suggesting that human capital limitations further exacerbate technical complexity.

These relationships can be summarised through an integrated (joint) interpretation of the findings.

As shown in

Table 7. Integrated (joint) interpretation of the findings.

1. Key Factor	2. Quantitative Indication	3. Qualitative Insight	4. Interpretation
5. Input tax apportionment	6. High reported burden	7. Most frequently emphasised	8. Primary driver of compliance cost
9. System limitations	10. Significant challenge reported	11. Repeated concerns on coding & setup	12. Secondary driver, reinforces apportionment difficulty
13. Skills constraints	14. Moderately reported	15. Noted in several interviews	16. Amplifies complexity
17. Research classification	18. Less directly measured	19. Highlighted as problematic	20. Context-specific challenge

, this integrated perspective demonstrates that while multiple factors contribute to VAT compliance costs, input tax apportionment is comparatively the most prominent driver, followed by system-related challenges and skills constraints.

In addition, the apportionment ratio of 12.5% was widely perceived as too low, particularly for research-intensive universities, where it may not accurately reflect input usage (Eager, 2024). Research categorisation further compounds these challenges, as ambiguous definitions create uncertainty in VAT treatment. These findings are consistent with Nelson (2016) and Eager (2024), reinforcing the structural nature of these compliance difficulties.

Aim 3: Strategies for Improvement.

The integration of findings also highlights several targeted strategies to address the identified challenges. Respondents across both phases consistently emphasised the need to revise the apportionment percentage, improve the design of the VCR, and enhance system capabilities.

Given that apportionment has been identified as the primary driver of compliance burden, many recommendations directly focus on improving its application. These include increasing the apportionment rate, introducing more flexible methods, and refining its alignment with institutional realities.

At the same time, system improvements and capacity-building interventions were identified as critical supporting measures. Respondents highlighted the need for training workshops, improved system integration, and clearer guidance, particularly in relation to research classification.

A recurring theme is the importance of ongoing engagement between SARS and universities. As one participant noted, “there is a need for a discussion to take place between SARS and universities who want a change.” This reflects the need for a collaborative and adaptive regulatory approach.

These findings support Eager (2024) and Hassan (2024), who advocate for VAT simplification, sector-specific guidance, and continuous stakeholder engagement.

Summary:

Taken together, the integrated findings demonstrate that while the VCR has been effective in promoting consistency and supporting compliance, its implementation is shaped by a hierarchy of challenges. Input tax apportionment stands out as the most significant contributor to compliance burden, reinforced by system limitations and, to a lesser extent, skills constraints and definitional ambiguities.

By combining quantitative trends with quantified qualitative insights, the study provides a more robust understanding of these dynamics without relying on regression analysis. The findings therefore highlight that improving VAT compliance in universities requires both technical refinements to apportionment and broader institutional and regulatory support mechanisms.

5. Conclusions and Suggestions for Further Research

This study aimed to understand the professional accounting perspective on the application of the VCR. The literature review incorporated taxation theories, VAT principles, and relevant empirical studies, while a sequential mixed-methods design was adopted to address the research question. The qualitative phase followed the quantitative phase, and the findings were triangulated to identify common themes, patterns, and viewpoints, thereby strengthening the overall interpretation of the data.

The study provides insights into the application of the VCR within the higher education sector and highlights areas where participants perceive challenges in its practical implementation. Drawing on established taxation principles such as objectivity, certainty, simplicity, clarity, fairness, and administrative efficiency, the findings suggest that while the VCR may provide a degree of certainty, its application is perceived by some participants as complex, particularly in relation to apportionment.

The results further indicate that perceptions of the VCR are not uniform. Some respondents viewed the framework as structured, while others highlighted elements of subjectivity, particularly in relation to research categorisation guidelines. Although the literature associates the VCR with principles such as neutrality and fairness, the empirical findings reflect mixed perceptions among university staff and tax professionals. In this regard, the evidence points to differing experiences and interpretations rather than definitive conclusions about the overall fairness of the system.

In addition, some participants indicated that the capped input VAT recovery and the process of applying for alternative rulings may present practical challenges. Concerns were also raised regarding administrative burden and limited transparency in relation to alternative rulings. However, these findings should be interpreted as indicative of perceived challenges rather than conclusive evidence of systemic shortcomings across all institutions.

Overall, the study offers context-specific insights into how the VCR is experienced within the sampled institutions, without claiming broad generalisability. While the findings suggest areas that may warrant further consideration by policymakers, they do not provide sufficient evidence to draw definitive conclusions about the alignment of the VCR with all principles of a fair tax system.

As with any study, limitations must be acknowledged. The research was confined to two universities, and the qualitative component was based on a small sample of 10 participants, which limits the extent to which the findings can be generalised. Additionally, the observed divergence between satisfaction with the varied input-based method and perceptions of fairness suggests that concerns may relate more to outcomes than to the method itself, and should therefore be interpreted with caution. Lastly, the second set of Likert-scale items produced Cronbach’s alpha of 0.43, indicating poor internal consistency. In line with established methodological guidance, retaining such a scale would risk introducing substantial measurement error. We therefore made the conservative decision to exclude this set of items from further analysis to preserve the validity of the findings. Future research is encouraged to refine and revalidate the excluded construct using a larger sample to enhance reliability and robustness. Likewise, future research is recommended to include a broader range of universities across all nine provinces of South Africa to provide a more comprehensive understanding of stakeholder perspectives on the VCR.

Based on the findings, several practical considerations are suggested. Universities may benefit from strengthening internal processes related to VAT compliance, including the establishment of internal review mechanisms, enhanced training, and improved accounting systems to support accurate apportionment. Engagement with tax specialists may also assist in addressing complex technical matters.

At a policy level, the study highlights areas that may merit further review, including the clarity of guidelines and the practical application of the VCR. These suggestions are offered cautiously and are intended to contribute to ongoing discussions on improving the effectiveness and consistency of VAT apportionment within the higher education sector.