Against the background of increasing tension between the need for additional disclosure and an information overload in financial statements, this study investigates the relevance of specific tax accounting information in an experimental setting. Participants make judgments on the financial performance, investment attractiveness and tax position of the firm, in absence or in presence of detailed tax information in the other comprehensive income statement. Our results do not support the notion that such deferred tax information has an effect on the judgment of experts, as long as the amounts of deferred tax are normal. However, when the detailed amounts of deferred tax are abnormally high, judgment differs significantly. Our result is important for standard setters, as they may consider further developing guidance in standards (such as IAS 1 and IAS 12) and in the Practice Statement for how to judge materiality of information, in accordance with the materiality principle set forth in IAS 1.31. By doing so, the risk of information overload can be reduced. Our study thus contributes to the current debate on the extent of disclosure. Our results are novel and the method used allows for the isolation of effects and the identification of causal relationships. / Series: WU International Taxation Research Paper Series

This dissertation investigates whether consumers’ cross-border shopping due to interstate commodity tax differentials influence counties’ economic activity and states’ strategic competition in multiple tax policies. First, I examine how own and the nearest neighboring states’ commodity tax rates affect counties’ retail activity. Particularly, in contrast to many previous studies, I examine whether the distance to the state border influences the responsiveness of counties’ retail activity to sales and excise taxes of own and the nearest neighboring states. Since the costs of avoiding state commodity taxes are presumably lower along borders, the impacts of state commodity taxes on retail activity may be different for counties closer and further away from the state border. Considering retail establishments and employment of industries that are most likely to be affected by consumers’ cross-border shopping activity, I find that that the impacts of domestic and the nearest neighboring states’ sales and excise tax rates on counties’ retail establishments and employment depend on the distance to the state border. However, contrary to what would be expected, the impacts tend not to be very robust. Second, I investigate whether consumers’ cross-border shopping to low commodity taxed states influence state governments to engage in strategic competition in multiple tax policies. Previous works on fiscal competition document that state governments engage in commodity tax competition to gain cross-border shoppers. Specifically, the empirical research find that changes in neighboring states’ one commodity tax rate influence changes in a home state’s same commodity tax rates. However, these studies do not address whether changes in neighboring states’ one commodity tax rate also induce the home state to adjust other taxes, either other commodity taxes or possible income taxes. Using a panel of the United States’ state-level data for the period 1977−2002, I estimate the reaction functions not for a single tax rate but multiple rates. In this framework, I find that states react to neighbors’ lower tax rates on one tax base by changing rates on either the same tax base or/and other tax bases, thereby suggesting that states engage in strategic competition in multiple tax rates to meet their revenue goals.

The purpose of the study is to analyse tax reform measures to secure the tax revenue base, in particular the personal income tax structure of South Africa. The main objectives are: firstly, to identify personal income tax reform interventions so as to align the personal income tax structure in South Africa with international best practices. Secondly, the impact of tax reforms on revenue collection, given optimal economic growth levels, is determined. Thirdly, to determine the best tax reform scenario which could minimise the individual tax burden and maximise its efficiency. Lastly, the impact of the suggested tax reforms on fairness as a principle of a good tax system is evaluated. A static micro-simulation model is developed from survey data and used to simulate the proposed tax reforms. Different tax reforms were selected from a study of international tax reform trends and an analysis of the South African personal income tax structure. The literature provides clear margins for the structuring of tax bands and threshold margins. Tax elasticities are estimated in order to explain the methodology for determining the impact of tax reforms. These elasticities include the elasticities for determining the progressiveness of the PIT structure, determining the deadweight loss (tax efficiency) and also to determine the optimal levels of taxes and economic growth and revenue maximisation. The different tax reform scenarios take the economy closer to or further away from optimum growth and optimum revenue. The results show that as far as marginal rates are concerned, a lowering in rates to levels on par with South Africa’s peers offers potential for improved levels of efficiency with the tax burden equal to or even below the optimal tax ratio from an economic growth point of view. Although such a ratio is below the optimal revenue ratio the results suggest that the loss in revenue could be minimised over time through a resultant increase in productivity and economic growth. By adjusting the non-taxable thresholds and taxable income bands according to the algorithm defined in the best practice scenario, more taxpayers will be included into the tax net but with a net decrease in tax liability. As a result the tax/GDP level also declines to a level below the optimal growth level but tax efficiency increases. The resultant loss in revenue will have to be recouped through increases in other than individual income taxes but improved levels of tax morality because of the lower margins for each tax band and increased productivity might also contribute to increased revenue performance. The tax structure is also more progressive which contributes towards the “fairness” of the tax regime. Regarding tax expenditure reforms, the analysis shows that medical tax credits offer a more equitable form of relief than medical deductions which substantiate this kind of reform as already implemented by government and which is to be fully phased in over the next couple of years. Tax liability is slightly lower in the case of medical credits compared to medical deductions but the difference is only marginal as far as net revenue and optimal growth and efficiency is concerned. However, a medical credit which increases disposable income at the lower end of the scale and discriminates against higher income groups also improves progressiveness of the tax regime and therefore the fairness thereof accordingly. Finally, the demographic impact of the suggested reforms also shows some important trends. Better education improves skills levels which seems to be positively correlated to taxable income levels. As far as age is concerned, the analysis shows that a substantial number of taxpayers in the categories below the age of 24 and above 65 fall within the lower taxable income groups. Those are also the most vulnerable groups from a subsistence point of view. Thus, tax reform that specifically improves their levels of disposable income should be prioritised in order to address equity and fairness as objectives for a “good” tax structure. / Thesis (PhD)--University of Pretoria, 2014. / gm2014 / Economics / Unrestricted

M.Com. (SA and International Tax) / The term “beneficial owner” is found in 64 of the 71 double tax agreements signed by South Africa. However, there is no definition of the term in the Income Tax Act or within the orbit of international taxation. There are international court cases in relation to the interpretation of the term. The fact that there are inconsistencies in the treaties signed by South Africa may result in treaty shopping opportunities. The study aims to define the term “beneficial owner”; to view other necessary acts and other forms of supporting legislature when interpreting a treaty; and subsequently, to explore the term as used in South African double tax agreements.

M.Com. (Taxation) / South African sportsmen and women (from now on collectively referred to as sportsmen) are currently facing new and exciting opportunities that were previously not available during the years of international sanctions. Opportunities such as international competition, meetings and extensive overseas tours have become the order of the day. However, to be able to compete at international level, means that sportsmen have to employ an ever increasing amount of resources to their sport, which results in the sport being transformed from a hobby or leisure time activity to a semi-profession. Due to this transformation, sportsmen are demanding compensation for the effort put into their sport. Despite strict amateur rules ample compensation is received by the sportsmen, which brings us to the question of what would the taxation implications be of such compensation received by amateur sportsman as a result of their participation in their respective sports. This study is aimed at answering this question, with specific reference to the two major so-called amateur sports, namely athletics and rugby. The Income Tax Act of 1962 makes no mention of income received by a sportsman specifically from the participation in any sport. To be able to answer the question reference has to be made to law reports and the general interpretation of the Act, and with the application of the same principles to the compensation received by a sportsman. The first important factor to determine is at what stage the sportsman crosses the proverbial Rubicon, in other words at what stage does the sport change from a leisure time activity to a profession. Various criteria relating to the income received have to be considered, amongst which are the following: - An amount in cash or otherwise - Received by, or accrued to a person - During the year or period of assessment - Excluding receipts and accruals of a capital nature - From a source within or deemed to be within the Republic of South Africa. Should the sportsman receive any compensation which complies to all the above mentioned criteria, then this compensation would be considered to be 'gross income' as specified in the Income Tax Act (Act 58 of 1962)(hereafter refered to as 'the Act'), and is the sportsman obliged to declare this compensation as gross income. As a result of the strict amateur rules, sportsmen are continuously looking for ways to obtain a commensurate compensation which is related to the amount of time, money and effort put in by them in the participation of their sport. One such an instrument is the use of trusts. This can be an effective way of earning a commensurate income from sport but it is important for the sportsman to keep track of the taxation implications of these instruments, especially as it is expected from the sportsman to declare all income received or accrued to him during the year of assessment.

M.Comm. (International Accounting) / Recently, there has been a spate of reported cases of large corporate entities paying very little, or no income tax, despite the appearance of being profitable. Enron conducted a lot of business through special purpose vehicle (SPV) companies that were structured specifically for the purpose of paying very little, if any, corporate tax, without having to reduce reported book net profits to achieve this. A study in October 2012 of Starbucks by Reuters found that the company had reported no profits and had paid no income tax for the previous 3 financial years in the United Kingdom despite sales of 1.2 billion pounds. By comparison, McDonalds had to pay tax of 80 million pounds based on a turnover of 3.6 billion pounds, and KFC paid 36 million pounds in taxes on 1.1 billion pounds turnover in the United Kingdom. Another company highlighted for paying no tax is the giant Internet company, Ebay. In its latest financial period the company paid 1 million pounds in tax, on a turnover of 800 million pounds. Again complicated tax structures are at the centre of the tax computation. Consideration has to be given to the role played by the accounting standards, if any, in this scenario, and the extent of the role played by accounting treatments. One has to question if accounting treatments are enabling companies to consistently pay lower rates of tax than is statutorily required, through mechanisms like the raising of deferred tax, or whether it is simply a question of the relevant tax legislation being formulated in a way that allows taxable income to be lower than accounting income. The extent of this book-tax gap and the amount of tax actually paid by companies have been researched to a limited degree. Several studies have been conducted on the financial results from the 1990s, where a consistent decline in the collection of tax by authorities, despite the economic boom that was in existence at that time, has been shown. Research in the 2000s tends to confirm the continuance of this trend of an ever-increasing book-tax gap. The general consensus from the literature review conducted is that the divergence between book income and taxable income is a growing trend, and taxes actually paid by corporates are declining and are on average lower than statutory tax rates.

The purpose of this study was to examine whether the general expenditure incurred by developers constructing residential units, whereby life rights are exchanged for interest free loans, are deductible in terms of the provisions of the Income Tax Act (58/1962). Furthermore to determine whether the judgement in CSARS v Brummeria Renaissance (Pty) Ltd and others, 2007 (4) All SA 1338 (SCA) 69 SATC 205, and its findings in law and of fact affects the deductibility of expenses incurred by developers, especially in relation to the “amount” and nature of the “amount” in the hands of the taxpayer. The research also sought to determine whether the accounting of amounts in life right exchange agreements, especially as relates to the quantification of such amount, assist in quantifying the amount for tax purposes. The research object was determined by critically analysing the relevant provisions of the ITA (58/1962) with reference to case law and commentators and a critical evaluation of Brummerria Renaissance case supra (2007:205) to determine its affect on the deductibility of the expenses relating to the quantum and nature of the benefit amount received under the life right. Furthermore, an evaluation was done of the relevant accounting standards in relation to the transactional facts to determine whether an alternative valuation model of the benefit is available. It was determined that firstly permissible and then prohibited deductions must be addressed in accordance with the ITA (58/1962). It was further evaluated whether the provision of the right of use, through the life right, can constitute an expense for the developer. It was concluded that incurring general expenses meet the requirements of section 11(a), subject to a single qualification, would be deductible. It was also submitted that the provision of the life right as expenditure should be permissible as deduction against income. However, in both these cases the deductibility in question was held to be subject to the amount received as envisaged in Brummeria Renaissance case supra (2007:205) being revenue in nature. The deductibility of the repair or preparation costs was also examined in terms of section 11(d). The distinction between repair and improvement was discussed and established. It was determined that the determination of when the “income is receivable” was critical in determining the deductibility. It was concluded that this requirement was met if the property was in a condition to receive such income irrespective of whether legal rights to such income had been established at such time that the expenses were incurred. The application of this section is also subject to the amount received, as envisaged in Brummeria Renaissance case supra (2007:205), being revenue in nature. The requirement of “income” is critical in the application of section 11(a) and section 11(d) of the ITA (58/1962), because if the amount is found to be capital in nature no deduction is permissible. The nature of the rights, timing of the accrual and the valuation method of the amount were not decided in the judgement in Brummeria Renaissance case supra (2007:205), and as a result, formed part of the research. The nature of the amount was analysed and it was concluded that the amount was income in nature. The various case law and commentators, including SARS’ IN 58, was also analysed to determine which valuation method of the benefit amount would be the most appropriate in the application of the provisions of the ITA (58/1962). To this extent it was submitted that three possible valuation methods could apply, namely the valuation of the benefit as arms length interest on the loan, the valuation of the benefit as the sale of a usufructuary interest or that the benefit amount could be represented as market related rentals in an arm’s length transaction. It was concluded that in order to determine the value and the timing of the benefit the most suitable valuation method would be to calculate interest on the face value of the loan using a market related interest rate. The benefit would be recognised over the term of the loan by calculating the interest on an annual basis on value of the loan. The various applicable accounting standards were evaluated to determine which best represents the measurement of the benefit as envisaged in Brummeria Renaissance case supra (2007:205). It was concluded that the most appropriate of the various possible accounting standards was IAS 32 which prescribed that the benefit should be determined and valued on a yearly basis in relation to the loan as a financial instrument. It was concluded that the basis for valuing and recognising the benefit for accounting purposes interrelates with the suggested accrual and timing thereof for tax purposes. AFRIKAANS : Die doel van die navorsing was om ondersoek in te stel of die algemene uitgawes aangegaan deur ontwikkelaars in die konstruksie van residensiële eenhede waar lewensregte geruil word vir rentevrye lenings, aftrekbaar sal wees in terme van die bepalings van die Inkomstebelastingwet (58/1962). Daar is verder ook ondersoek ingestel om vas te stel of die uitspraak in Kommisaris van die Suid Afrikaanse Inkomstediens v Brummeria Renaissance (Edms) Bpk en andere, 2007 (4) All SA 1338 (SCA) 69 SATC 205, die aftrekbaarheid van die uitgawes aangegaan deur die ontwikkelaars affekteer, veral in verband met die “bedrag” en aard van die “bedrag” in die hande van die belastingbetaler. Met die navorsing word daar bepaal of die rekeningkundige hantering van bedrae in lewensreg ruilooreenkomste, veral ten opsigte van die kwantifisering daarvan, kan bydrae tot die kwantifisering daarvan vir belastingdoeleindes. Die navorsingsdoelstelling is vasgestel deur die relevante bepalings van die Inkomstebelastingwet (58/1962) met verwysing na hofsake en kommentaar, ‘n kritiese evaluasie van Brummerria Renaissance saak supra (2007:205), om vas te stel wat die uitwerking daarvan is op die aftrekbaarheid van die uitgawes wat verband hou met die hoeveelheid en die aard van die voordeel bedrag ontvang in terme van die lewensreg, asook die evaluering van die relevante rekeningkundige standaarde ten opsigte van die feite van die transaksie om te bepaal of ‘n alternatiewe waardasie model van die voordeel beskikbaar is. Daar is besluit dat die aftrekkings wat eerstens toegelaat en dan verbied word aangespreek moet word in ooreenstemming met die Inkomstebelastingwet (58/1962). Daar is verder bepaal of die voorsiening van die reg om te gebruik deur middel van die lewensreg, ‘n uitgawe in die hande van die ontwikkelaar kan wees. Daar is tot die gevolgtrekking gekom dat die aangaan van algemene uitgawes voldoen aan die vereistes van artikel 11(a) en aftrekbaar is. Dit is ook vasgestel dat die voorsiening van die lewensreg as uitgawe aftrekbaar sal wees teen inkomste. In albei hierdie gevalle is die aftrekbaarheid onderworpe daaraan dat die bedrag ontvang soos vasgestel in Brummeria Renaissance saak supra (2007:205) inkomste van aard is. Die aftrekbaarheid van die herstel- of voorbereidingskostes is ook ondersoek in terme van artikel 11(d). Die onderskeid tussen herstel en verbetering is bespreek en bepaal. Daar is vasgestel dat die bepaling van wanneer die “inkomste ontvangbaar” is, krities is in die bepaling van die aftrekbaarheid daarvan. Daar is tot die gevolgtrekking gekom dat die vereiste nagekom is as die eiendom in ‘n toestand is om inkomste te ontvang ongeag of die reg tot die inkomste bepaal is teen die tyd dat die uitgawes aangegaan is. Die toepassing van hierdie artikel is ook onderworpe daaraan dat die bedrag ontvang soos bepaal in Brummeria Renaissance saak supra (2007:205) inkomste van aard is. Die vereiste van “inkomste” is krities in die toepassing van artikel 11(a) en artikel 11(d) van die Inkomstebelastingwet (58/1962) omrede geen aftrekking toegelaat sal word indien die bedrag kapitaal van aard is nie. Geen besluit is geneem oor die aard van die regte, die tydstip van die toevalling en die waardasiemetode van die bedrag in die uitspraak in Brummeria Renaissance saak supra (2007:205), en as gevolg daarvan vorm dit deel van die navorsing. ‘n Analise van die aard van die bedrag is gedoen en daar is tot die gevolgtrekking gekom dat die bedrag inkomste van aard is. Die verskillende hofsake en kommentaar, insluitende SARS se IN 58, is ook analiseer om te bepaal watter waardasiemetode van die voordeel mees gepas sal wees in die toepassing van die Inkomstebelastingwet (58/1962). Tot hierdie mate is dit aanvaar dat daar drie moontlike waardasiemetodes van toepassing kan wees, naamlik die waardasie van die voordeel op die lening in ‘n armslengte transaksie, die waardasie van die voordeel as die verkoop van ‘n vruggebruik of die voordeel van die bedrag kan verteenwoordig word deur die markverwante huurinkomste in ‘n armslengte transaksie. In bepaling van die waarde en die tydstip van die voordeel is die gevolgtrekking gemaak dat die mees gepaste waardasiemetode sal wees om rente op die sigwaarde van die lening te bereken deur ‘n markverwantrentekoers te gebruik. Die voordeel sal dan erken word oor die tydperk van die lening deur die die rente jaarliks te bereken op die waarde van die lening. Die verskillende rekeningkundige moontlikhede is ondersoek om die metode te bepaal wat waardasie van die voordeel soos in Brummeria Renaissance saak supra (2007:205) die beste verteenwoordig. Daar is tot die gevolgtrekking gekom dat die mees gepaste rekeningkundige standpunt IAS 32 is waarvolgens die voordeel op ‘n jaarlikse basis bepaal word in verhouding met die lening as ’n finansiële instrument. Daar is tot die gevolgtrekking gekom dat die metode van die waardasie en erkenning van die voordeel vir rekeningkundige doeleindes regstreeks verband hou met die voorgestelde toevalling en tydstip daarvan vir belastingdoeleindes. Copyright / Dissertation (MCom)--University of Pretoria, 2012. / Taxation / unrestricted

The purpose of the study was to critically analyse sections 15 and 36 of the South African Income Tax Act which deals with capital allowances for mining taxpayers from an alluvial diamond miners’ perspective. The South African analysis was also compared to that of Canada and Namibia. In the analysis it was found that the ring fencing provisos in section 36 is unfair towards the alluvial diamond mine due to the potential loss of capital cost allowances and that there are grey areas in this proviso that may lead to disputes between SARS and the taxpayer. It was also found that the cross over from prospecting to mining activities in relation to alluvial diamond mining presents a grey area which might lead to disputes between the tax payer and SARS. It was also found that there is no case law, SARS interpretation notes or practise notes on the application of these sections to provide certainty as to the tax payers’ position. It was recommended that SARS and treasury evaluate and address the identified grey areas and short comings in the current legislation and practises to ensure a fair and equitable tax dispensation for the alluvial diamond miners. Copyright / Dissertation (MCom)--University of Pretoria, 2009. / Taxation / unrestricted

Tax practitioners in South Africa have been operating in an unregulated tax industry. This has allowed certain tax practitioners to fail in their duties to their clients, as many do not have to abide by any code of conduct or ethical principles, to the detriment of the public. Other than the provisions in the Income Tax Act, 58 of 1962, there has been no regulation. As a result of losses suffered by taxpayers either through the incompetence, ignorance or negligence of a tax practitioner, as substantiated by case law, and increased costs borne by the South African Revenue Services due to unnecessary queries and tax disputes, the Minister of Finance, Trevor Manuel, introduced the concept of tax industry regulation in his Budget Speech in 2002. This resulted in the introduction of section 67 A into the Income Tax Act, providing for a registration process for tax practitioners. All practising tax practitioners were required to register with the Commissioner for the South African Revenue Services by 30 June 2005. In addition, a discussion paper was issued in 2002 setting out the proposal of the Revenue Services to regulate the tax industry through the formation of an Association of Tax Practitioners. This proposal includes various contentious issues and casts significant doubt on whether the proposed model is the most suitable. The goal of the research was therefore to evaluate the current status of tax advisory services in order to demonstrate the need for regulation and to compare the proposed SARS model with two established regulatory authorities: the Estate Agency Affairs Board and the Australian Tax Agents Board. A conceptual model for regulation was developed in order to test all the models against a simple regulatory framework to determine whether each was aligned to certain best practices proposed in this framework. The research methodology was qualitative in nature, involving the critical interpretation of documentary data and data generated during a public discussion forum of tax practitioners. It was concluded that the SARS proposal is too prescriptive and, at the same time, too broad in its scope. In order to address the key objective, identified as protection of the taxpaying public, a simplified regulation procedure was recommended, which would adhere to the proposed regulatory framework. / KMBT_363

In this thesis the tax treatment of equity option contracts is examined. The writer gives an overview of the derivatives market in general and discusses the nature and effect of equity options in detail. Limited amendments have been made to the South African Income Tax Act No 58 of 1962 ('the Act') since the emergence of derivative instruments and at present only three types of derivative instruments are recognised: forward exchange and option contracts relating to forward exchange, interest rate swaps based on notional capital amounts and option contracts. Other than section 241 of the Act which deems all receipts and accruals from foreign exchange contracts to be income, the other sections dealing with derivatives do not concern themselves with capital or revenue classification. Accordingly, the classification of receipts and accruals arising from an equity option transaction is generally governed by the ordinary principles of South African tax law with the added problem of there being limited South African case law applying these general prinCiples to such transactions. The research undertaken in this thesis results in the establishment of a framework designed to determine the classification as revenue or capital the receipts and accruals arising from equity option contracts. Speculating, trading and investing in equity options is examined with regard to the general principles of South African tax and available case law. Hedging transactions are analysed with specific reference to their exact nature as well as general tax principles and available case law. The analogy of Krugerrands is used to draw parallels with the tax treatment of receipts and accruals arising from equity options used for hedging purposes. Once the theoretical framework has been established for revenue or capital classification, the actual tax treatment of both revenue and capital receipts is examined with reference to the Act and issues such as the gross income definition, the general deduction formula, trading stock and timing provisions are analysed and applied to receipts and accruals arising from equity option transactions. The thesis concludes with a summary of the findings and recommendations are made based on the research conducted.