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

M.Comm. / Since the April 1994 elections the issue of economic empowerment and growth have had a high priority on the agenda of the Government of National Unity of South Africa. Small and medium enterprises (SME's) represent an important vehicle to address the challenges of job creation, economic growth and equity in our country. Throughout the world one finds that SME's are playing a critical role in absorbing labour, penetrating new markets and generally expanding economies in creative and innovative ways. Research indicates that there are more than 800 000 small and medium enterprises in South Africa, absorbing about a quarter of the approximately 15 million people which comprises the formal labour force. According to the White Paper on National Strategy for the Development and Promotion of Small Business in South Africa (1995:10), this does not include about 3,5 million people who are involved in some or other type of survivalist enterprise activity force. While the importance of large industrial, mining and other enterprises for the growth of the economy cannot be denied, there is ample evidence that the labour absorptive capacity of the small business sector is high, with the average capital cost per job created in this sector, usually being lower than in big businesses. In addition the small business sector's role in technical and other innovations is vital for the many challenges facing the South African economy. Notwithstanding the importance of small enterprises in the South African economy, they are still faced with a wide range of constraints and problems that are common to small enterprises. There can be no doubt that compared to big businesses in South Africa and small businesses in other countries, these problems have not been sufficiently addressed. The constraints relate, amongst others, to the legal and regulatory environment confronting SME's, the access to markets, finance, the acquisition of skills and management expertise and in some cases, the tax burden. This study will be aimed at addressing the problems that small enterprises experience with the South African Tax System. The dissertation is based on various Acts as effective during April 1997. Various factors were identified in the Interim Report of the Commission of Inquiry into certain aspects of the Tax Structure of South Africa, (Katz, November 1994:150) under the chairmanship of Prof. M.M. Katz. These factors include, amongst others, the following: Small and medium-sized enterprises have a greater dependence on the working proprietor as a source of funds, since they do not have access to public securities markets for the issue of equity or long term loan capital. The taxation of the income of the working proprietor therefore directly depletes their principal source of equity capital, requiring the entrepreneur to make greater use of short term debt finance. This in turn increases their risk exposure; Whereas savings which flow via financial institutions (for example, through pension and life insurance contributions) to the corporate sector enjoys tax relief, no equivalent relief is available to working proprietors who invest in their own businesses; There is considerable evidence that the compliance burden of taxation falls disproportionately on smaller enterprises, who do not have expertise in the completion of tax returns or in other aspects of tax compliance, and either make use of expensive professional assistance or rely on the proprietor's own efforts. The compliance burden is aggravated by frequent changes in the tax system, complicated structures and rules, and the lack of taxpayer education opportunities. The problem of the compliance burden on smaller enterprises has probably become more severe in recent years as a consequence of the introduction of Value Added Tax and the fact Jiat the present Standard Income Tax on Employees personal income tax requires more detailed personnel records than the former Final Deduction System which it replaced; The general bias in tax systems towards favouring capital investment and penalising employment through investment relief and social security contributions tends to favour large firms, which have easier access to sources of capital, and discriminates against smaller firms which tend to be more labour intensive.

No abstract available. / Theses (LL.M.)- University of Natal, Durban, 1999.

No abstract available. / Thesis (M.Com.)-University of KwaZulu-Natal, 2005.

The aim of this collection of essays is to provide a detailed and critical commentary on and analysis of the legislation and case law relating to the impact of the 'business purposes test' on section 103(1) of the Income Tax Act. The Income Tax Act No. 58 of 162 and case law that are the subject of these essays were promulgated on or before 28 February 1999. / Thesis (M.Acc.)-University of Natal, Durban, 1999.

The global economy is still recovering from the effects of the sub-prime crisis. The economic downturn has created international tax policies that seem to encourage debt funding. Some commentators are of the view that debt and equity should have a uniform tax treatment. South Africa has not escaped the aftermath of the economic meltdown and had three credit downgrades since the second half of 2009. The first objective of this treatise was to determine whether loan funding still has a role to play in a SME environment. This was considered in the context of interest-free or low-interest rate loans advanced by companies to shareholders or other connected persons and interest-bearing loans due by companies that in substance clearly have equity features. The primary enquiry pertaining to debit loans is whether the debt arose by virtue of any share held in the company. It is submitted that a causal connection is required between any share in that company and the advance made. Where a company parts with funds for no quid pro quo a deemed dividend in specie is triggered. Conversely, where a loan was made on commercial grounds the company will not be in breach, even if the loan is interest-free. A loan that lacks a reasonable redemption period is more akin to equity and to this extent a deemed dividend will be triggered where a loan owing by a company to a shareholder or other connected person is not redeemable within 30 years. There is ambiguity with regards to the inception of the 30-year period for pre-existing loan agreements. Taking the contra fiscum rule into account, it is submitted that the 30-year period should only commence from the effective date due to the impracticalities involved and because the concept of an ‘instrument’ did not previously exist. It is submitted that shareholder and other connected person loans are not by default equity, to the extent that the transaction is on commercial grounds and in substance a loan. It is further submitted that loan funding still has a role to play in a SME environment and that South Africa has no need for uniform tax rules pertaining to debt and equity, due to the anti-avoidance provisions highlighted above. The poor state of the local economy prompted Treasury to introduce new debt relief rules to assist distressed debtors. The second objective of this treatise was to analyse whether the new rules will provide tangible relief to distressed debtors as this was one of the short comings of the previous system. It is submitted that the new ordering rules delay the incurrence of an immediate tax as trading stock held and not disposed of, the base cost of an asset or the balance of an assessed capital loss is first reduced compared to the old rules where it instantly triggered a recoupment or a deemed disposal for CGT purposes. Tangible relief is provided to distressed debtors as a tax debt reduced has no normal tax consequences. This provides an opportunity for companies under business rescue because SARS rank on par with concurrent creditors. As a result, the tax debt reduced is likely to be higher under business rescue than liquidation.

The aim of this treatise is to identify the income tax implications of the persons becoming South African tax residents. It will provide a clear understanding of the income tax implications for natural and non-natural persons wishing to take up residence in South Africa. The definition of “resident” in section 1 of the Income Tax Act, 1962, has a direct impact on the tax implications bearing down on any foreigner planning to reside within the Republic of South Africa, especially in relation to the prevention of the double taxation. The following issues or areas have been identified, these issues are summarised below. The persons receiving foreign pensions may be exempt from normal tax under section 10 (1)(gC) and in terms of the tax treaty, they may also escape taxation in their former country of residence. The treatise will look at various treaties that exist between the South Africa and other countries and to discuss the taxing rights. There is a case of double non-taxation and good reason for immigrants to come and avoid tax in South Africa. It is suggested that the legislation and the double tax agreements should be amended. A person who becomes a resident will receive a step-up in base cost for assets other than South African immovable property and assets of a permanent establishment in South Africa under paragraph 12(2)(a) of the Eighth Schedule. The main purpose of the legislation is to ensure that these assets are correctly valued, determining the base cost, when the person becomes a tax resident. The valuation of these assets carries with it the problem of securing sufficient evidence long after the valuation. Most of the tax planning for such for immigrants revolves around estate duty and donations tax. The person would donate his assets to an offshore discretionary trust before taking up residence in South Africa. The advantage is that donations tax will be avoided because there are exemptions in terms of section 56, for assets acquired before becoming a resident. The income and capital gains vested in nonbeneficiary can be taxed in the hands of the donor in terms of section 7 and paragraph 72 of the Eighth Schedule. The donor should be aware of the antiavoidance measures; section 7(2) to 7(8) and paragraph 72 of the Eighth Schedule will deem a different person other than the person who is entitled to the income to be taxable on that person. The income and gains received by the beneficiary of a trust can be taxable in the hands of the donor. The assets owned by the trust will be sheltered from South African estate duty. The foreign discretionary trust, as a non-resident, will not be liable for tax in South Africa. The beneficiaries of such a trust will be liable for income tax from the trust distributions, once they have acquired a vested right to the income. The liability of income tax is deferred to the year when the trustees decide to make distributions. The distribution by the trustees in a subsequent year creates a delay or postponement for taxes which should be paid by the beneficiaries. The trustees are most likely to make distributions in a tax year when the tax rates are low. There are tax opportunities for the immigrants who intend to take up residence. The tax resident might be subject to withholding taxes on foreign income from the previous country of residence, but might be subject to Double Tax Agreement between South Africa and other countries.

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.