The role of Supply Chain Management in South African public entities’ influence on taxation expenditure and revenue
Abstract
The study aims to understand the role of supply chain management (SCM) in public entities to determine whether these public entities have an influence on South Africa‘s tax expenditure and revenue through a qualitative research methodology. Gauging the influence of SCM is done by first understanding SCM, particularly in the public sector, and the legislation (PFMA 1999, PPPFA 2000, B-BBEE 2003) which provides a framework for South African SCM. In addition, a contemporary understanding is important to South African
SCM developments in order to inform its current standing. The Auditor-General South Africa (AGSA) reports on the Public Finance Management Act (PFMA) 2014/15 to 2018/19 and the 2015 Public Sector SCM Review provide a credible depiction of SCM in South Africa. In applying purposive sampling, a sample of 40 public entities were purposefully extracted from the AGSA PFMA reports 2014/15 to 2018/19 based on the incurrence of irregular, unauthorised, fruitless and wasteful expenditure. A limitation however hinders the compilation of the sample of 40 public entities from the population of public entities, as some public entities have been unable to publish their annual financial statement to be audited by the AGSA. The irregular, unauthorised, fruitless and wasteful expenditure is aggregated and through the use of emergent sampling, which is a subset of purposeful sampling, the top 10 public entities that contribute the most to the aggregated expenditure from the period 2014/15 to 2018/19 is composed to extract rich data which is a trait of purposive sampling. These top 10 public entities are identified to extract rich data in relation to the amount of tax revenue allocated to these public entities through tax expenditure that has been misused through the incurrence of irregular, unauthorised, fruitless and wasteful expenditure. The rich data provided by the top 10 also allows the researcher to identify the findings relating to SCM that has resulted in a waste of governments tax expenditure. These findings are supported by numerous news articles published in 2019 to 2021 even on mismanagement of the COVID-19 pandemic funds such as R430 million spent for sanitising schools in Gauteng. The findings from the study revealed that there is significant non-compliance relating to SCM regulation during the period of 2014/15 to 2018/19. Tax expenditure which is misused creates a reliance on the budget deficit to allow government to continue with its mandate. The findings also reveal that the non-compliance to SCM legislation results in a
deteriorating tax morality, thus affecting governments tax revenue collection. In order to understand the implications of the findings, relevant literature is examined and synthesised so as to highlight the importance of tax morality and its effect on tax revenue collections. The significance of this study is that it aims to add to literature which highlights the consequences of non-compliance to SCM in public entities, specifically the consequence on tax revenue and expenditure.