The South African general anti-tax avoidance rule and lessons from the first world: a case law approach (original) (raw)
Related papers
A Critical Analysis of Tax Avoidance in the South African Income Tax Act 58 of 1962, as Amended
Mediterranean Journal of Social Sciences, 2013
Everybody can organise his or her business in order to reduce, postpone or avoid tax, as long as he or she operates within the boundaries of the legislation. Tax avoidance is evil, as it deprives the state of the resources that it can use to meet its expenditure and responsibilities. Previously, the Commissioner had to prove that a transaction, operation or scheme had been entered into with the sole or main purpose of avoiding, postponing or reducing the liability to pay tax. The arm's length test and abnormality test needed to be satisfied for the Commissioner to succeed in preventing tax avoidance. Tax avoidance had to be the whole or main purpose of a transaction, operation or scheme. These provisions were very weak and the Commissioner did not succeed in his or her activities. The new Amendment has introduced new remedies for the Commissioner to use to prevent impermissible tax avoidance arrangements. The Amendment protects the Commissioner to the detriment of the taxpayers. There is a provision for impermissible tax avoidance arrangement but the legislature did not provide for permissible tax avoidance arrangements. The new provisions for tax avoidance seem to structure how taxpayers should arrange their businesses. It is recommended that the law has to be amended to include the provision of permissible tax avoidance arrangements. This would help honest taxpayers to arrange their activities in such a way that they would save money and pay less tax to the state.
2016
Tax planning, where taxpayers arrange their affairs so as to minimize the resulting tax liability, has evolved over the last couple of decades as a result of the change in the way business is conducted by virtue of globalisation and the development in technology. It appears to have become more and more aggressive as taxpayers have the opportunity to access tax benefits not only through utilising loopholes in domestic legislation, but also through international tax loopholes. Revenue Authorities have to respond to this by employing mitigating anti-avoidance mechanisms. One such mechanism employed in South Africa ("SA") is the use of General anti-avoidance Rules ("GAAR") found in s80A-L of the Income Tax Act No. 58 of 1962 ("ITA"). To combat certain shortcomings in this GAAR's predecessor and to stay abreast of international trends, for the first time ever, a Statutory Purpose Element has been included in GAAR. This Statutory Purpose Element, as included in s80A(c)(ii) of the ITA, evaluates the misuse or abuse of the provisions of the ITA as a means to identify impermissible tax avoidance arrangements. Essentially, this calls for the application of the modern approach to statutory interpretation, where the purpose and context of the provisions of the ITA are first identified, before the misuse or abuse of these provisions can be proven. This study evaluates whether the inclusion of this Statutory Purpose Element in GAAR, adds any value or provides any additional powers to SARS when applying GAAR, especially in light of s39(2) included in the Bill of Rights of the Constitution, of 1996, ("Constitution"). The Constitution, the supreme law in SA, already calls for the modern approach to be applied to any statutory interpretation and the findings of this study indicate that s80A(c)(ii) appears to be completely superfluous as it does not award any additional powers to SARS, which were not already granted by the Constitution. If anything, s80A(c)(ii) broadens the scope of GAAR to such an extent, that it most likely will only cause further confusion for taxpayers wanting to engage in tax planning.
2017
Un ni iv ve er rs si it ty y o of f P Pr re et to or ri ia a PART 1 CONTEXTUAL SETTING © © U Un ni iv ve er rs si it ty y o of f P Pr re et to or ri ia a 7 Section 179 of the TAA; s 114A of the CEA. 8 Section 164 of the TAA; s 77G of the CEA. © © U Un ni iv ve er rs si it ty y o of f P Pr re et to or ri ia a 10 Klue, Arendse & Williams Silke on tax administration (2009); Croome Taxpayers' rights (2010); Croome & Olivier Tax administration (2015). 11 Goldswain The winds of change-an analysis and appraisal of selected constitutional issues affecting the rights of taxpayers (unpublished PhD thesis, University of South Africa (2012)); Erasmus An analysis of challenging the Commissioner's discretionary powers invoked in terms of section 74A and 74B of the
Lessons learnt from history : tax evasion
2017
Tax evasion is not a new discovery. The concept of cheating the taxman has been around since the time of the Egyptian Pharaohs. Tax evasion and punishment methods in ancient times, specifically in Egypt, Greece and Rome, are discussed and compared to the history of the native poll tax and the evasion thereof in South African during the 18 th century. The tax evasion court case of Al Capone in 1931 laid the foundation for methods such as collaboration between tax authorities and law enforcement agents to investigate charges and convict tax evaders in modern day society. The curbing of tax evasion is a hurdle which governments and policy makers struggle to overcome. This study focuses on establishing whether the rules, legislation and policies implemented by the revenue authorities, for this study, South African Revenue Service, are adequate to prevent tax evasion. Evidence from resent court cases in South Africa and interviews with economic crime offenders serving prison sentences indicated that rules, legislation and policies implemented by the South African Revenue Service, detect and combat tax evasion but do not aim to prevent tax evasion. The reason for this is that rules, legislation and policies do not address the motive for economic crimes. Therefore, it is suggested that the South African Revenue Service adopts a holistic approach towards policy design in order to prevent tax evasion.
Potchefstroom Electronic Law Journal, 2018
A taxpayer has the right to arrange his tax affairs within the constraints of the law to his best advantage to pay the least amount of tax. Coupled with this right is the taxpayer's right to certainty, which entails that the time of payment of taxes, the manner of payment, and the amount of payment must be clear and plain to the taxpayer and to any other person. Accordingly, a taxpayer must have peace of mind that revenue laws will not be amended arbitrarily, retrospectively, and with the effect that the taxpayer's position is affected negatively. The South African tax legislation allows the deferral of tax liability when amalgamation transactions, asset for share transactions, and mergers and acquisitions are embarked upon by a taxpayer. This article analyses the judgment in Pienaar v Commissioner: South African Revenue Services (87760/2014) [2017] ZAGPPHC 231 (29 May 2017) critically with specific reference to amalgamation transactions, the taxpayer's right to tax cert...
Anti-Avoidance and Tax Laws: A Case of Fiji
2019
The pervasiveness of tax avoidance is undoubtedly linked to the tax policies of any country. In Fiji, residents for tax purpose have to disclose income from all sources within and outside Fiji whereas non-resident has to disclose income derived from sources in Fiji. Fiji has a comprehensive tax system put in place with tax laws continued to be amended to curb any loopholes in the system so that everyone pays their fair share of tax. Thus, this research paper applied document analysis methodology. The objective of this research was to highlight Fiji’s position on tax avoidance and how has Fiji addressed such issues identified in Base Erosion Profit Shifting (BEPS). Furthermore, the paper has discussed, Fiji’s tax laws relating to anti-avoidance and provide recommendations to further strengthen and protect Fiji’s tax base from being eroded away through various schemes or arrangements that taxpayer’s might indulge into for the purpose of paying less tax or avoiding tax. The findings in...
Analyzing and Formulating a Statutory General Anti-Avoidance Rule (GAAR) in Indonesia
Jurnal Ilmiah Akuntansi dan Bisnis (JIAB), 2020
Dealing with the practice of tax avoidance in general, many countries have compiled and implemented their own general anti-avoidance rules (GAAR). This research aims to explore the potential of statutory GAAR in handling tax avoidance practices in Indonesia and SAAR formulas that are suitable for the Indonesian context. This qualitative research employed a case study approach. Results show that the application of SAAR and the principle of substance over form in Indonesia cannot yet be applied properly; thus GAAR is needed. It is expected that the implementation of statutory GAAR can accommodate the limitations of regulators in light of unknown and future tax avoidance schemes.