Due to the nature of the digital economy, multi-national entities are able to trade in countries over the internet without a physical presence, they are setting up group structures across the world, housing intellectual property in tax havens and shifting profits between jurisdictions, lowering their group tax rates. This treatise considered the OECD/G20 BEPS Project 2015 Final Report on Action Plan 1 which discusses the nature, risks and proposed options to combat base erosion and profit sharing (BEPS). Although the OECD have made no recommendations in their report many countries have taken action to protect their tax bases. The scope of this treatise is limited to multi-national entities who avoid tax presence in a country or shift profits to off-shore entities in low/no tax jurisdictions. The aim of this treatise is to identify the risks posed by the nature of the digital economy to direct taxation and analyse proposed solutions to respond to these risks. A comparative study of the proposal and changes implemented in the UK, Australia and India was undertaken to gain an understanding of international thinking regarding the best way to combat BEPS. These proposals were then compared to the South African perspective in order to determine which of the proposals would be feasible to combat BEPS in South Africa.

M.Com. / Please refer to full text to view abstract

Foreign direct investment (FDI) was unknown to Chinese people before the opening policy in 1979, but since then China's economy has been surging ahead in the past twenty eight years. As one aspect of the FDI policy, I focused on the corporate taxation field to be my research interest, and the topic of my thesis. In the thesis, the reader will learn how FDI developed in China and degree of FDI development. Also, I provide the reader with China's tax system and policy-oriented in as much detail as possible, most of which is the tax incentive policy towards the FDI in China. However, the policies and incentives raise some issues. As the result of offering FDI tax preference, Chinese government tax revenue as a percentage of GDP has been declining steadily. Problems such as tax avoidance and evasion, and local "fake" FDI entities are getting serious. The new Corporate Income Tax Law of the People's Republic of China (CIT Law) was passed by the PRC National People's Congress on March 16 2007 and will take effect on January 2008. When China entered into the World Trade Organization (WTO) in 2001, compliance with the general rules required China improve its tax system as soon as possible. The CIT law section in the thesis includes the policy-changing behind the legislation and expected influence on the FDI in China in the future. As a result of the changes to be brought about by the CIT Law, foreign and domestic business in China must adapt to the new tax regime, and I offer some recommendations in that regard. / Law, Peter A. Allard School of / Graduate

This thesis considers the impact of taxation on two problems in the theory of financial markets. The first paper deals with the optimal choice of debt made by value-maximising firms. We consider a one-period world with personal and corporate taxation and distinguish between the repayment of principal and the payment of interest on corporate debt. It is shown that at optimum, a value-maximising firm may choose to issue multiple debt contracts with differing seniorities. In addition, the impact of a change in the tax rates (corporate or personal) on the optimum level of debt is seen to be ambiguous. Unambiguous statements can, however, be made about the impact of a change in the corporate tax rate on firm value, the value of the equity and on the required rate of return on risky corporate debt. The analysis borrows heavily on a framework that we develop early in the paper which permits us to visualise the value-maximising firm's choice of an optimal capital structure, graphically. The second essay examines the impact that taxes have on the pricing of call options on corporate stock. It is demonstrated that the process of replication can be influenced by the basis of the stocks used for the replication process as a result of the capital gains taxes involved. Consequently, the equilibrium price for an option is some average of the various costs of replication that different investors face. We find that the equilibrium price for the option can be influenced by investor preferences and by the history of the stock price. The empirical findings of an apparently unpredictable strike-price bias that have been observed in the past literature is examined and duplicated numerically. In addition, one explanation is given for the rationale behind covered option positions that consist of an option position and the corresponding hedge. / Business, Sauder School of / Graduate

M.Com. (Accounting) / This study examines the disclosure of taxation in company financial statements. The following aspects were discussed: (a) The taxation expense in the income statement comprises of a current tax charge and deferred tax provision. (b) The extent of the recognition of the tax effects of timing differences in company financial statements. (c) The alternative measurement methods which can be applied to either partial or full allocation. (d) The effect of tax allocation on company financial statements 1n the United Kingdom, Canada and the United States of America. (e) Discounting of the deferred tax credit. (f) The development of generally accepted accounting practice ln South Africa relating to tax allocation. The discussion indicates that the South African statement with regard to the disclosure of taxation, promotes the usefulness of published financial information even though it is not free of criticism. A number of recommendations are made by which the problems currently being encountered with the South African statement on the disclosure of taxation in company financial statements, can be addressed.

Literature on tax evasion has generally ignored the effects of tax evasion by a monopolist in a regulatory environment. When the government is asymmetrically informed about the monopolist's demand and/or costs, however, the fIrm may have the opportunity to cheat on its regulatory constraint and tax payments. Adjustments in the regulatory constraint then will directly impact on the tax revenues of the government while alterations in tax policies may alter the effectiveness and efficiency results of a particular regulatory policy. To analyze these issues two forms of regulation, a price ceiling regulation and a fixed profit per unit regulation are considered in an environment where the government is incompletely informed about the monopolist's cost function. For the price ceiling regulation (Chapter 2) it is shown that tax evasion decisions are affected by variations in the ceiling in the sense that an increase in the effective price ceiling results in misreporting by a larger proportion. Tax evasion decisions however are found not to affect output decisions of the monopolist. Thus the optimal price ceiling under evasion is set at the same level as without tax evasion, i.e., at the point where price equals expected marginal cost. Optimality in this economy can be achieved in a number of ways. Full compliance is one way but optimality can also be achieved with tax evasion. When the form of regulation considered is a fixed profit-per-unit regulation (Chapter 3), the results are quite different from above. Because profits of the monopolist are not costlessly observable by the government, fIrms can cheat on the regulatory constraint itself. Thus output and tax evasion to affect the monopolist's output. Literature on tax evasion has often neglected the fact that income from different sources is taxed at different rates and provides different opportunities for misreporting. Once an individual obtains certain skills, his flexibility in switching jobs to evade taxes on his wage income becomes limited. Also the fact that a large part of the wage income in the U.S. is reported to the government by the employer and often withheld at the source, greatly limits the opportunity for evading wage taxes. However an individual faces many options when deciding on how to invest his savings and the income from at least some of these may not be subject to withholding and reporting. This fact suggests that the savings of an individual can be affected by tax evading opportunities. Chapter 4 examines this problem by considering a dynamic model of tax evasion. The results show that an increase in the penalty rate or audit probability leads to an increase in savings of the individual, given some assumptions on preferences. This fact implies that savings are reduced by the possibility of tax evasion. It also suggests that savings could be increased by stricter enforcement of tax laws. Because the model used in chapter 4 is fairly complicated, some of the comparative static results are found to be ambiguous under general conditions. It is also not clear from the theory what the optimal policy of the government would be. To address these issues in more details, chapter 5 considers some numerical exercises. A number of results emerge from these exercises. First, savings are found to increase with an increase in either the penalty rate or the audit rate, even when the restrictive assumptions on risk aversion do not hold and labor supply is variable. Second, full compliance seems to be the optimal policy of the government for the specification selected. These results seem to hold both for compensated and uncompensated taxes. / Ph. D.

DISC and FSC are two trade policy instruments of the United States that proV'ide a tax incentive for exporting. The two measures provide a stimulus for investment in the export sector by reduci.ng the cost of capital for exporting firms. According to a model based on the neoclassical theory of optimum capital accumulation, the minimum effect either DISC or FSC can have is surprisingly small, reducing the cost of capital by less than percent in either case. The maximum effect is large, reducing the cost of capital in the export sector by around 20 percent. However, the maximum effect of DISC and FSC is accompanied by side-effects that reduce economic efficiency significantly. These results therefore call into question the effectiveness of DISC and FSC as instruments of trade policy. / Master of Arts

Thesis (MComm)--Stellenbosch University, 2000. / ENGLISH ABSTRACT: TAX CONSIDERATIONS OF MERGERS AND ACQUISITIONS During the past few years the South African business environment experienced a considerable increase in corporate mergers and acquisitions. At a corporate tax rate of thirty per cent, the tax implications of mergers and acquisitions have an important impact on the financial success thereof. By way of background information, a short exposition of the characteristics, the various forms and the reasons for the increase, of mergers and acquisitions is provided. Essentially a merger or acquisition entails the acquisition of either the business of, or the shares in, the target company. A comparison is drawn between the tax consequences of the above two options for both parties to mergers and acquisitions. The composition of the purchase price payable by an acquiring company in respect of the acquisition of the target company's business or shares may have far reaching tax consequences. Consequently, the most commonly used arrangements relating to payment of the purchase price are scrutinized from a tax point of view. The bulk of the study consists of an analysis of particular aspects of mergers and acquisitions, which may, depending on how a particular transaction is structured, result in important tax benefits. The analysis is directed towards, firstly, establishing the tax consequences arising from mergers and acquisitions and, secondly, suggesting tax efficient structuring methods or alerting against structuring options that may have detrimental tax results. Some of the proposed tax structuring techniques have tax efficient results for one party to the merger or acquisition, but result in corresponding negative tax effects for the other. There are, however, opportunities to structure a tax efficient transaction in such a way to ensure that both parties share in the tax benefit. lt is even possible to, in respect of certain aspects of mergers and acquisitions, achieve a tax efficient result for both parties to the transaction without any commensurate disadvantage, or without them having to share the benefits thereof. lt is important to evaluate tax planning strategies against the general antiavoidance measures contained in the doctrine of substance over form and in tax legislation. Consequently, in the final analysis, the applicability of the antiavoidance measures to the tax planning strategies proposed in this study, is considered. / AFRIKAANSE OPSOMMING: BELASTINGOORWEGINGS OM IN GEDAGTE TE HOU BY SAMESMEL TINGS EN OORNAMES VAN SUID-AFRIKAANSE MAATSKAPPYE Korporatiewe samesmeltings en oornames is 'n dinamiese en immer groeiende area van die Suid-Afrikaanse besigheidsomgewing. Teen 'n korporatiewe belastingkoers van dertig persent is die belastinggevolge van 'n samesmelting of oorname 'n belangrike faktor in die finansiele sukses daarvan. Ter agtergrondinligting word daar in hierdie studie 'n kort uiteensetting van wat 'n samesmelting en oorname behels, die verskillende vorme wat dit kan aanneem en die redes waarom samesmeltings en oornames plaasvind, gegee. In wese kan 'n samesmelting of oorname geskied deur die verkryging van of die besigheid of die aandele van 'n teikenmaatskappy. 'n Vergelyking tussen die belastingimplikasies van genoemde twee opsies word uit die perspektief van beide die verkrygende maatskappy en die teikenmaatskappy, getref. Die samestelling van die koopprys wat ingevolge 'n oorname of 'n samesmelting betaalbaar is, kan verreikende belastingimplikasies inhou. Die mees algemene wyses van betaling, en die belastinggevolge wat daaruit voortvloei, word dus geanaliseer. Die studie behels hoofsaaklik 'n ontleding van spesifieke aspekte inherent aan samesmeltings en oornames wat, afhangend van die strukturering van die transaksie, verskillende belastinggevolge inhou. Die doel met die ontleding is tweeledig, naamlik om, eerstens, die belastinggevolge van samesmeltings en oornames vas te stel en om, tweedens, enersyds voorstelle te maak vir effektiewe belastingstrukturering, en andersins te waarsku teen struktureringsopsies wat negatiewe belastinggevolge mag inhou. Sommige struktureringstegnieke hou voordelige belastinggevolge vir een party tot 'n samesmelting of oorname in, maar lei tot korresponderende nadelige belastinggevolge vir die ander party. In sommige gevalle is dit egter moontlik om 'n middeweg tussen die voordeel en korresponderende nadeel te vind, sodat die partye in die voordeel kan deel. Daar word ook aangetoon dat sommige aspekte van samesmeltings en oornames, indien dit noukeurig beplan word, belastingvoordele sonder enige korresponderende nadele vir beide partye kan inhou. Belastingbeplanningstegnieke moet egter aan die algemene teenvermydingsmaatreels wat in die leerstuk van wese bo vorm, asook in belastingwetgewing, vervat word, gemeet word. Die studie word dus afgesluit met 'n bespreking van die toepaslikheid van die algemene teenvermydingsmaatreels op die voorstelle wat gemaak word ten opsigte van belastingstruktureringsopsies.

M.Com. (Economics) / Please refer to full text to view abstract

A research report submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the degree of Master of Commerce (specialising in Taxation) 13 April 2017 / ‘The Organisation for Economic Co-operation and Development (OECD) Action Plan on Base Erosion and Profit Shifting (BEPS), is designed to prevent multinational businesses achieving nontaxation on profits or artificially shifting profits across borders to exploit lower corporate income tax rates’ (KPMG, 2014, p 5). ‘The OECD’s BEPS Action Plan, launched in July of 2013 and endorsed by the G20, included 15 key areas for identifying and curbing aggressive tax planning and practices and modernizing the international tax system’ (KPMG, 2013). It can be argued that the aim of the ‘OECD Action Plan on BEPS’ is to make provision for G20 countries, OECD countries and all other interested stakeholders to come together on an equal footing to inter alia develop new international tax rules. One of the key focus areas of the ‘OECD Action Plan on BEPS’, is ‘Preventing the Artificial Avoidance of Permanent Establishment Status - Action 7'. ‘The aim of Action 7 is to develop changes to the definition of a permanent establishment (PE) to prevent abuses of that threshold, including through the use of commissionaire arrangements and the specific activity exemptions to avoid PE status where core activities are involved’ (KPMG, 2015, p 14). The technical arguments to be argued for the purposes of this research report will inter alia involve commenting on commissionaire arrangements and how such arrangements have been problematic for international tax rules in their current form. In addressing the problems inherent in the definition of a PE, ‘Preventing the Artificial Avoidance of Permanent Establishment Status - Action 7' specifically proposes changes to Articles 5(5) and 5(6) of the ‘OECD Model Tax Convention’ which seek to revamp the dependent agent rule. The specific activity exceptions in Article 5(4) have also been further clarified in the OECD commentary on the ‘OECD Model Tax Convention’ through the inclusion of an explanation of the activities that will be considered as being preparatory or auxiliary in nature, as well as supporting examples which help illustrate the meaning of the said terms. ii In addition, the PE rule for construction projects set out in Article 5(3) will now include a principal purposes test, as well the addition of an example illustrating the application of the principal purposes test in the OECD commentary on the ‘OECD Model Tax Convention’ dealing with Article 5(3). ‘On 5 October 2015, the OECD issued a final package of reports in connection with its Action Plan to address BEPS, as well as a plan for follow-up work and a timetable for implementation. Many countries have already adopted or are poised to adopt changes to their international tax systems based on the OECD recommendations. While implementation and timing will vary across borders, this final OECD release marks a crucial shift from the recommendation and consultation phase of BEPS to legislation and implementation’ (KPMG, 2015, p 2). Key Words: ‘Action 7’, Article 5, ‘BEPS Action Plan’, Commissionaire Arrangements, Dependent Agent, Multinational Enterprises, ‘OECD Model Tax Convention’, PE. / GR2018