The South African general anti-tax avoidance rule and lessons from the first world: a case law approach
- Pidduck, Teresa Michelle Calvert
- Authors: Pidduck, Teresa Michelle Calvert
- Date: 2018
- Subjects: Tax evasion -- South Africa , Taxpayer compliance -- South Africa , Taxation -- Law and legislation -- South Africa , South Africa. Income Tax Act, 1962 , Taxation -- Law and legislation -- Australia , Taxation -- Law and legislation -- Canada , Tax evasion -- Law and legislation -- South Africa , General anti-avoidance rule (GAAR)
- Language: English
- Type: text , Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10962/60328 , vital:27768
- Description: Tax avoidance has been a concern to revenue authorities since the time that the concept of tax was first introduced. Revenue authorities worldwide constantly strive to ensure taxpayer compliance, while combating impermissible tax avoidance. South Africa uses a general anti-avoidance rule (GAAR) as part of its arsenal to combat the increasingly innovative ways in which taxpayers seek to minimise their tax. However, the GAAR has been the source of much criticism and its effectiveness in combatting impermissible tax avoidance is untested in the courts. Therefore, the use of hindsight to criticise the GAAR is not possible. This study applied a qualitative approach to compare the South African, Australian and Canadian GAARs in order to propose changes which are intended to improve the efficacy of the South African GAAR. This research was performed by first comparing the three GAARs using a doctrinal research methodology and then applying the South African GAAR to the facts of selected cases from Australia and Canada in the form of reform-oriented research. In order to apply the South African GAAR to the facts of the cases a framework was developed in phase 1 of the research in order to ensure consistency in the application. This allowed for a more reliable analysis to be made regarding the areas where the South African GAAR could be improved. The convergence of results from the two research methodologies validated many of the suggestions made for the improvement of the South African GAAR This thesis examined the GAARs in South Africa, Australia and Canada with a view to identifying if there are any lessons to be learned for their application and interpretation, in order to suggest improvements which can be made to the South African GAAR. Further, relevant Australian and Canadian case law was found to be instructive as to the approach that could be adopted for purposes of applying the South African GAAR. The findings of the research revealed that while the South African, Australian and Canadian GAARs differ in their structure, each is directed to achieve the same end. The results of the study identified two types of improvements to the South African GAAR. Firstly, the South African GAAR should be consolidated into a three-part enquiry instead of the current four-part enquiry. In doing so the tainted elements (previously the abnormality requirement) could be used to inform an objective test of purpose. Secondly, guidance on areas of uncertainty regarding the application of the South African GAAR needs to be provided in order to prevent possible inconsistent judicial interpretations that may limit the efficacy of the GAAR whilst still protecting the right for taxpayers to legitimately minimise their tax burdens. One additional cause for concern highlighted in this research is the use of provisions from other jurisdictions without guidance on the application in the South African context. The use of similar provisions to that of its much-criticised predecessor has also introduced areas of uncertainty regarding the application of the South African GAAR. These areas of weakness and uncertainty arguably prevent the South African GAAR from being an effective deterrent to tax avoidance and many could be addressed by the legislature.
- Full Text:
- Authors: Pidduck, Teresa Michelle Calvert
- Date: 2018
- Subjects: Tax evasion -- South Africa , Taxpayer compliance -- South Africa , Taxation -- Law and legislation -- South Africa , South Africa. Income Tax Act, 1962 , Taxation -- Law and legislation -- Australia , Taxation -- Law and legislation -- Canada , Tax evasion -- Law and legislation -- South Africa , General anti-avoidance rule (GAAR)
- Language: English
- Type: text , Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10962/60328 , vital:27768
- Description: Tax avoidance has been a concern to revenue authorities since the time that the concept of tax was first introduced. Revenue authorities worldwide constantly strive to ensure taxpayer compliance, while combating impermissible tax avoidance. South Africa uses a general anti-avoidance rule (GAAR) as part of its arsenal to combat the increasingly innovative ways in which taxpayers seek to minimise their tax. However, the GAAR has been the source of much criticism and its effectiveness in combatting impermissible tax avoidance is untested in the courts. Therefore, the use of hindsight to criticise the GAAR is not possible. This study applied a qualitative approach to compare the South African, Australian and Canadian GAARs in order to propose changes which are intended to improve the efficacy of the South African GAAR. This research was performed by first comparing the three GAARs using a doctrinal research methodology and then applying the South African GAAR to the facts of selected cases from Australia and Canada in the form of reform-oriented research. In order to apply the South African GAAR to the facts of the cases a framework was developed in phase 1 of the research in order to ensure consistency in the application. This allowed for a more reliable analysis to be made regarding the areas where the South African GAAR could be improved. The convergence of results from the two research methodologies validated many of the suggestions made for the improvement of the South African GAAR This thesis examined the GAARs in South Africa, Australia and Canada with a view to identifying if there are any lessons to be learned for their application and interpretation, in order to suggest improvements which can be made to the South African GAAR. Further, relevant Australian and Canadian case law was found to be instructive as to the approach that could be adopted for purposes of applying the South African GAAR. The findings of the research revealed that while the South African, Australian and Canadian GAARs differ in their structure, each is directed to achieve the same end. The results of the study identified two types of improvements to the South African GAAR. Firstly, the South African GAAR should be consolidated into a three-part enquiry instead of the current four-part enquiry. In doing so the tainted elements (previously the abnormality requirement) could be used to inform an objective test of purpose. Secondly, guidance on areas of uncertainty regarding the application of the South African GAAR needs to be provided in order to prevent possible inconsistent judicial interpretations that may limit the efficacy of the GAAR whilst still protecting the right for taxpayers to legitimately minimise their tax burdens. One additional cause for concern highlighted in this research is the use of provisions from other jurisdictions without guidance on the application in the South African context. The use of similar provisions to that of its much-criticised predecessor has also introduced areas of uncertainty regarding the application of the South African GAAR. These areas of weakness and uncertainty arguably prevent the South African GAAR from being an effective deterrent to tax avoidance and many could be addressed by the legislature.
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The illegal diamond trade in South Africa and its tax consequences
- Authors: Kumm-Schmidt, Megan
- Date: 2017
- Subjects: Diamond industry and trade -- South Africa , Diamond industry and trade -- Corrupt practices -- South Africa , Diamond industry and trade -- South Africa -- Taxation , Conflict diamonds -- South Africa , Income tax -- Law and legislation -- South Africa , Tax evasion -- South Africa , South Africa. Income Tax Act, 1962 , South Africa. Prevention and Combating of Corrupt Activities Act, 2004 , South Africa. Tax Administration Act, 2011 , South Africa. ǂt Value-Added Tax Act, 1991 , Kimberley Process Certification Scheme
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/4389 , vital:20656
- Description: The object of the research was to discuss the taxability of the illegal diamond trade in South Africa and to identify the consequences of not declaring income obtained from the illegal diamond trade to the South African Revenue Services. The research was conducted by means of a critical analysis of documentary data with specific reference to the Income Tax Act, the Value-Added Tax (VAT) Act, the Tax Administration Act and relevant case law. The Income Tax Act and the Value-Added Tax Act were referred to in relation to the tax consequences of the illegal diamond trade and the Tax Administration Act was used to determine the consequences of not declaring income to the South African Revenue Services. It was established that amounts received from the sale of illegal diamonds are to be included in the taxpayer's gross income, whilst in relation to income received from diamond theft it was not as clear. The MP Finance Group case held that the nature of the receipt and the way in which the transaction occurred in each individual situation will be the deciding factor as to whether or not the stolen diamonds will be taxable in the hands of the thief. The buying and selling of "blood" or stolen diamonds can amount to a trade. As there have been no definitive case decisions in South Africa, it remains unclear whether expenses relating to an illegal trade are deductible. Assuming that expenses relating to an illegal trade are deductible, the provisions of section 11(a) will apply to expenses incurred as a result of dealing in illegal diamonds and it was concluded that qualifying expenses will be deductible. A taxpayer buying and selling "blood" or stolen diamonds is required to register for VAT if sales exceed the threshold and would be required to account for VAT on these transactions. If the taxpayer does not declare the income for income tax purposes or register for and pay VAT to the South African Revenue Services from either the sale of illegal diamonds or the theft of diamonds, this will amount to tax evasion and the dealer will be subject to penalties and even imprisonment
- Full Text:
- Authors: Kumm-Schmidt, Megan
- Date: 2017
- Subjects: Diamond industry and trade -- South Africa , Diamond industry and trade -- Corrupt practices -- South Africa , Diamond industry and trade -- South Africa -- Taxation , Conflict diamonds -- South Africa , Income tax -- Law and legislation -- South Africa , Tax evasion -- South Africa , South Africa. Income Tax Act, 1962 , South Africa. Prevention and Combating of Corrupt Activities Act, 2004 , South Africa. Tax Administration Act, 2011 , South Africa. ǂt Value-Added Tax Act, 1991 , Kimberley Process Certification Scheme
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/4389 , vital:20656
- Description: The object of the research was to discuss the taxability of the illegal diamond trade in South Africa and to identify the consequences of not declaring income obtained from the illegal diamond trade to the South African Revenue Services. The research was conducted by means of a critical analysis of documentary data with specific reference to the Income Tax Act, the Value-Added Tax (VAT) Act, the Tax Administration Act and relevant case law. The Income Tax Act and the Value-Added Tax Act were referred to in relation to the tax consequences of the illegal diamond trade and the Tax Administration Act was used to determine the consequences of not declaring income to the South African Revenue Services. It was established that amounts received from the sale of illegal diamonds are to be included in the taxpayer's gross income, whilst in relation to income received from diamond theft it was not as clear. The MP Finance Group case held that the nature of the receipt and the way in which the transaction occurred in each individual situation will be the deciding factor as to whether or not the stolen diamonds will be taxable in the hands of the thief. The buying and selling of "blood" or stolen diamonds can amount to a trade. As there have been no definitive case decisions in South Africa, it remains unclear whether expenses relating to an illegal trade are deductible. Assuming that expenses relating to an illegal trade are deductible, the provisions of section 11(a) will apply to expenses incurred as a result of dealing in illegal diamonds and it was concluded that qualifying expenses will be deductible. A taxpayer buying and selling "blood" or stolen diamonds is required to register for VAT if sales exceed the threshold and would be required to account for VAT on these transactions. If the taxpayer does not declare the income for income tax purposes or register for and pay VAT to the South African Revenue Services from either the sale of illegal diamonds or the theft of diamonds, this will amount to tax evasion and the dealer will be subject to penalties and even imprisonment
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