The 2013 Budget Speech presented by the South African Minister of Finance highlighted that the
best way to generate resources is to grow the economy and increase the tax base. In investigating
the possible broadening of the South African tax base, as well as improving revenue
administration, there is evidence of a gap in the taxation of customer loyalty programmes. The
complexity of identifying and administering the receipt of customer loyalty award credits for
millions of individuals has led to the receipt of customer loyalty award credits not being taxed
whilst the expenses related to these award credits are being deducted by businesses. In closing
this gap, the South African Revenue Service may be able to increase the tax base and limit fiscal
leakage. For this reason, any gaps in the taxation of receipts and accruals is of interest to any
researcher, taxpayer and government interested in understanding where current administration of
legislation may be failing. In this study, the authors consider the tax leakage from a legislative
and administrative perspective as well as investigate possible solutions. The revenue authorities in
South Africa are urged to make changes to the current tax administration in order to prevent
inconsistencies in treatment and tax leakage without negatively impacting the essence of the
customer loyalty programmes.