A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in fulfilment of the requirements for the degree of Master of Commerce (Specialising in Taxation) Johannesburg, 2017 / Trusts are an essential tool for estate planning. The interest in trust structures by taxpayers has increased over the years and the South African Revenue Services (‘SARS’) and National Treasury (‘NT’) have placed trusts on their agenda due to their perceived tax avoidance resulting from the use of trust structures. Section 7C was introduced into the Income Tax Act 58 of 1962 (as amended) (‘the Act’) in order to curb the avoidance of estate duty. However, the work undertaken by SARS and NT over the years and the insertion of this section in the Act, created an impression that there is avoidance of taxation through the use of trust structures. This study will interrogate the provisions of s 7C in order to determine the effectiveness of this section in curbing the avoidance of estate duty and/or tax through the use of trust structures. The well thought out manner in which this section was drafted and the existence of other tax provisions in the Act which pertain to trusts and the funding mechanisms of trusts suggest that this new inclusion is a convenient and easy manner to monitor the abuse by SARS and NT and subsequently curb the perceived abuse. The interplay of this section with ss 7 and 31 of the Act indicate a risk of unintended double taxation. This and the circumvention options that taxpayers may embark on are matters that may render the section ineffective, although it is evidenced that this section closes that last door that remained open for taxpayers in respect of funding a trust. Key Words: Tax avoidance, estate duty avoidance, National Treasury, SARS, National Budget Speech, Davis Tax Committee Reports on estate duty, Interest-free and low interest loans, Affected Transactions (s 31), Donor attribution rules (s 7), Donations and donations tax, Double taxation. / GR2018

Debate over the meaning, extension, and proper form of national citizenship is central to American history. This dissertation considers a fundamental obligation of citizenship, the payment of taxes. Focusing on the ratification by the states of the 16th Amendment which made possible the taxation of incomes, it shows how new ideas about the mutual obligations of citizens changed the relationship between Americans and their government with profound consequences for the development of the American state in the 20th century. Ideas of national citizenship contributed to an outcome few at the time expected: 42 of 48 states in a nation steeped in libertarian culture since its founding ratified an amendment awarding the federal government broad, new taxing power. In a detailed analysis of the ratification process in three states - Wisconsin, Virginia and New York - this study demonstrates that ideas about national citizenship structured the politics of ratification. Wisconsin's position in the forefront of Progressive reform and its adoption of a state income tax during the period under study demonstrate the strong affinities between a "new citizenship" and the income tax, factors which led to easy ratification. Virginia's rejection of the amendment was exceptional in a region that largely supported the income tax. In Virginia, a plutocratic political machine, tied to Northeastern industrial interests and strengthened by the recent disenfranchisement of the state's poorer residents, weakened reform efforts and enabled local political elites to ignore the state's strong economic interest in a potential federal income tax. New York's first order economic interests suggested that it would be strongly disposed against the amendment. New Yorkers, then 10 percent of the nation's population, would pay more than 30 percent of an income tax. But unlikely bedfellows among New York's political leadership put forward a patriotic vision of national citizenship. This vision attracted segments of the economic elite, middle-class reformers, and working-class voters to support ratification. The surprising ratification of the 16th Amendment had profound consequences for American federalism. It meant that a minority of wealthy states now owed more to the federal government than their numbers dictated. It enabled a redistribution of income from wealthy states to poorer states that continues to the present day. Ratification also provides a powerful argument against material reductionism in explaining the nature of tax policy and politics in America. It suggests that moral and social considerations - aspects of a nation's political culture, expressed in the American context through evolving ideas of national citizenship - can be critically important in explaining significant changes and movements for tax reform.

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Canada and Taiwan have not entered into a tax treaty. Consequently, because each jurisdiction uses different connecting factors, that is 'residence' in Canada and 'income source' in Taiwan, double taxation may occur for individuals subject to tax in both jurisdictions. With the increasing number of Taiwanese immigrants to and investors in Canada, double taxation is becoming a significant problem. A treaty is probably the most efficient mechanism to resolve the double taxation problem. However, the political issue is how can a nation (Canada) enter into a treaty with a jurisdiction (Taiwan) that it does not recognize as a nation state? Despite facing the same problem, on May 29, 1996 Australia signed a tax agreement with Taiwan concerning the avoidance of double taxation and the prevention of tax evasion. The Australia-Taiwan Tax Agreement is unique because it was signed by two private sector organizations rather than by the respective governments. Using the same mechanism, New Zealand and Vietnam have signed tax agreements with Taiwan as well. This thesis analyses the likelihood of Canada entering into a tax treaty with Taiwan. In so doing, it considers how double taxation arises, reviews the foreign reporting rules and argues that a tax treaty between Canada and Taiwan is desirable. The conclusion is that, theoretically and pragmatically, a tax treaty (or agreement) between Canada and Taiwan is possible and needed in order to relieve punitive double taxation and to facilitate bilateral economic and trading relations between the two jurisdictions.

The Income Tax Bill (2012) proposes certain changes to the existing Income Tax Act that will impact on the method used to determine the taxable income of a taxpayer in Zimbabwe. Therefore, it is important to understand the tax consequences the Income Tax Bill creates for the taxpayer. The research aimed to elaborate on and explain the tax consequences that will arise as a result of applying the Income Tax Bill in Zimbabwe. The research was based on a qualitative method which involved the analysis and the interpretation of extracts from legislation and articles written on the proposed changes. The current “gross income” of a taxpayer consists of amounts earned from a source within or deemed to be from within Zimbabwe The proposed changes to the Act will change the tax system to a residence-based system, where resident taxpayers are taxed on amounts earned from all sources. Therefore, the driving factor which determines the taxability of an amount will become the taxpayer’s residency. Clause 2 of the proposed Act provides that income earned by a taxpayer should be separated into employment income, business income, property income and other specified income. This will make it unnecessary to determine the nature of an amount because capital amounts will be subject to income tax. The current Act provides for the deduction of expenditure incurred for the purpose of trade or in the production of income. Section 31(1)(a) of the proposed Act will restrict permissible deductions to expenditure incurred in the production of income. Consequently, expenditure not incurred for the purpose of earning income will no longer be deductible when the Income Tax Bill is implemented. The proposed Income Tax Act will increase the taxable income of a taxpayer as it makes amounts that are not currently subject to tax taxable, whilst restricting the deductions claimable.

M.Com. / The existence of a person is a prerequisite before any liability for tax can come into being. Some of the most successfultax avoidance schemes of the past few years have relied on this principle, but the legislator has now . apparently closed these loopholes by specifically bringing the trust and the deceased estate within the definition of a person as far as the taxability of these entities is concerned. The courts have, however, set the following general principles relating to the taxation of non-existent persons: (i) The existence of a person is an absolute prerequisite before liability for tax can come into being, nor can there be any representative taxpayer if there is no person to represent. (ii) An aggregate of assets and liabilities, although no legal persona, can to a limited extent take part in day to day economic activities. It is here argued that these principles may be applied to otherareas of the mercantile and private law, resulting in unforseen and beneficial consequences for the taxpayer. Section 35 of the Companies Act creates a possibility for a company to enter into contracts and acquire rights from these, even before being duly incorporated. The company, not being a legal persona before incorporation, would thus not be taxable on income it may receive or which may accrue to it up to the date of incorporation. At present, only two special tax court cases address the issue of pre-incorporation profits. Neither of the decisions handed down, however, reflects the above view, a situation which is highly unsatisfactory and supported by dubious authority. When proper consideration is given to the difference between a person professing to act as agent, and a person professing to act as trustee of a company not yet incorporated, the vesting of income andthe tax effects of retrospective contracts,it becomes clear thata real possibilityfor substantial tax savings does exist. South African writers on this subject are divided, some of them meekly accepting the present unsatisfactory situation, others acknowledging the obvious flaws in it, but declining to make definite suggestions as to how this issue should be approached. A human being becomes a legal persona at time of birth. The nasciturus fiction which stems from Roman law, provides that the rights to an inheritance are kept floating until birth of the nesduuus, to determine whether the nasciturus should share in the bequest. Depending on the interpretation of the legal effects of the nasciturus fiction, and the vesting of the right to income from the inheritance, there is a distinct possibility that liability for tax on income, until time of birth of the nasciturus, may altogether be avoided. Provisions similar to section 35 of the Companies Act and the nasciturus fiction also exist in foreign legal systems. It could, however, not be established how the tax implications resulting from the application of these legal fictions are accommodated within these systems.

Die gevolge van 'n belastingpligtige se handelinge word binne die belastingreg beoordeel aan die hand van verskillende maatstawwe. Die maatstaf van doel word deur die Wetgewer by die klassifikasie van die belastingpligtige se handelinge by die toepassing van verskeie belastingreëls voorgeskryf. Die howe het oak by geleentheid die maatstaf van doel by die interpretasie van verskeie belastingreëls, waar dit nie uitdruklik voorgeskryf is nie, toegepas. Verskeie vertakkinge van die reg onderskei tussen motief, doel en bedoeling wannear die maatstaf van doel of bedoeling toegepas moet word. Hierdie begrippe is by die interpretasie van verskeie belastingreëls, waar die toepassing van die maatstaf van doel voorgeskryf word, ingevoer. Sommige kenners meen dat 'n soortgelyke onderskeiding nie in die belastingreg tuishoort nie. Die doel van hierdie ondersoek was om, met verwysing na die betekenis en toepassing. van die begrippe, motief, doel en bedoeling in ander regsvertakkinge, die betekenis en toepassing daarvan in die Suid-Afrikaanse belastingreg vas te stel. Met ander woorde, die ondersoek behoort aan te toon of 'n onderskeiding tussen motief, doel en bedoeling in die belastingreg toegepas word, en indien dit nie toe gepas word nie, of dit wei nuttig toegepas kan word. Verder is gepoog om die beperkings van en noodsaaklikheid vir die toepassing van die maatstaf van doel in die belastingreg vas te stel. Dit blyk uit die ondersoek dat die toepassing van die maatstaf van doel by die toepassing van bepaalde belastingreëls nag nie gesuiwer is nie en dat dit lei tot regsonsekerheid en onbillikheid. Verder blyk dit duidelik uit die ondersoek dat die toepassing van die maatstaf van doel wei gesuiwer kan word deur die betekenisse van die begrippe, motief, doel en bedoeling te onderskei en gevolglik korrek toe te pas. In die laaste plek toon die ondersoek aan dat die toepassing van die maatstaf van doel in die belastingreg deur verskeie faktore beperk word, maar dat die toepassing daarvan om verskeie redes noodsaaklik is. Daar word aanbeveel dat die Wetgewer kennis moet neem van die betekenisse van die begrippe motief, doel en bedoeling en 'n vermenging daarvan by die formulering van belastingreëls moet vermy. Dit sal 'n bydrae lewer tot eenvoudiger interpretasie van die betrokke reëls asook 'n meer korrekte toepassing daarvan op die handelinge van die belastingpligtige. Verder behoort die howe nie die onderskeiding van motief, doel en bedoeling by die toepassing van die maatstaf van doel, by die uitleg van belastingreëls te vermy nie. Dit sal onsekerheid en onbillikheid met betrekking tot die toepassing van die betrokke reëls verhoed. ENGLISH : The Income Tax Law in South Africa requires that a taxpayer's actions or transactions are to be classified Qudged) with reference to various criteria. The Legislature requires the application of the criterium of purpose to classify a taxpayer's activities and transactions in terms of various tax rules. Even the Courts applied the criterium of purpose in the interpretation of various tax rules where the criteria has not been specifically required by the legislature. Various branches of the law distinguishes between motive, purpose and intention where the criteria of purpose or intention are required to classify activities. The study indicated that various learned writers are of the opinion that a similar distinction cannot be applied in the Income Tax Law of South Africa. The purpose of this study was to determine the meaning of motive, purpose and intention within the South African Income Tax Law by studying the meaning of the words as they are used in other branches of the law. In other words, the result of the study should indicate whether a similar distinction between motive, purpose and intention is applied in the Income Tax Law and if not, whether such a distinction can be applied in the Income Tax Law. Furthermore, the limitations and necessity of the application of the criteria of purpose in the Income Tax Law was determined. The study indicated that the application of the criterium of purpose in the interpretation of various tax rules had not been clearly distinguished and defined. This fact leads to uncertainty and unfairness in the application of these tax rules. It also became apparent that the application of the criteria of motive, purpose and intention could be more clearly defined and distincted in order to lead to more certain and fair application of income tax rules. Lastly, the study indicated that the application of the criteria of purpose and intention in the Income Tax Law are being limited by various factors but that the application thereof in the Income Tax Law are, because of various reasons, inevitable. It is proposed that the Legislature must take cognisance of the meaning of the criteria of motive, purpose and intention in other branches of the law and that the correct distinction in the formulating of tax rules must be applied. This will contribute to a more just interpretation of the various tax rules as well as a more proper application thereof in the classification of the taxpayer's actions or transactions. Furthermore, it is proposed that the Courts, in the interpretation of the various tax rules, should not avoid to distinguish between motive, purpose and intention. This will have the result that uncertainty and unfairness will be reduced in the application of the various tax rules. Copyright / Dissertation (MCom)--University of Pretoria, 2012. / Auditing / Unrestricted

Tax avoidance through interest deductions has been highlighted internationally as a concern with the effect of eroding tax revenues of countries, including South Africa (SA). The evident cause of this concern is what is termed base erosion and profit shifting (BEPS) mainly orchestrated by multinational companies using aggressive tax planning schemes. Although the concern continues to exist, comprehensive measures are in place in SA such as the anti-avoidance rules and exchange control regulations to mitigate the concern. The study was undertaken to analyse the legislation on interest deductions in terms of the Income Tax Act No 58 of 1962 (‘the Act’) with particular focus on anti-avoidance. A number of issues pertaining to the operation of the provisions in the Act; administrative challenges as well the possible exploitation of loopholes within the provisions were identified. Furthermore, a comparative analysis conducted against Australia and the United Kingdom indicated that the measures adopted in SA are relatively similar, if not ahead. The effect the anti-avoidance measures have on the economic growth was considered. The results were positive in that the measures do not counteract the pursuit of economic growth. Lastly, the study assessed the position of SA against the internationally recommended best practice on the subject matter and it became evident that opportunities exist to improve the current measures applied in SA to mitigate the BEPS risks through interest deductions.

The aim of this treatise is to provide an analysis of the tax implications of making use of limited real rights in tax planning. In order to understand the tax implications of making use of limited real rights it is necessary to understand the nature and legal form of these rights. The importance of this understanding lies in the determination of the tax legislation applicable to the right in question, and the subsequent tax implications. The next step in working through an analysis of the tax implications of making use of limited real rights is therefore to define the scope of applicable legislation. This required an analysis of the scoping provisions of our tax legislation. Once the scope of applicable legislation had been defined, it was then possible to move onto an analysis of the application of the legislation identified to the various “stages” of limited real rights. The conclusion from this analysis is that the tax implications of making use of limited real rights are spread fairly broadly across several different pieces of legislation, and need to be carefully and fully considered when making a decision to make use of limited real rights in a tax planning strategy. The conclusion on the analysis of certain selected tax planning strategies that make use of limited real rights is that it is possible to make fairly substantial cash flow savings when deciding to implement a particular strategy which makes use of limited real rights. But, that use of these strategies is not without risk. For example, SARS may examine a particular strategy in terms of the “new” GAAR. The financial implications of the successful application of the GAAR may be disastrous to the taxpayer, and the tax planner will need to have considered and advised on the possibility of such a challenge from SARS. In addition, in some of the strategies, there are risks associated with the anticipated life expectancy of parties to the tax plan being shorter than anticipated. The conclusion is that the use of limited real rights in tax planning can be effective and provide savings, but that the use of such a strategy requires, inter alia, a very careful consideration of the interaction and application of our tax legislation to the strategy.

Tax evasion and avoidance costs South Africa billions of rand each year. This treatise examines the judiciary’s view and/or attitude to the dividing line between legitimate and illegitimate tax avoidance. It seeks to find out how South African courts have ultimately dealt with the old GAAR section 103(1). The treatise seeks to establish the role that the judiciary plays in tax avoidance and whether it has been pro-fiscus or pro-taxpayer in its deliberations of tax avoidance cases. The treatise focuses specifically on the judicial responses to the General Anti-avoidance Rule Section 103 of the Income Tax Act No. 58 of 1962. In order to show the judicial approaches and/or responses to tax avoidance in South Africa, a selection of income tax cases have been used to illustrate how the judges have interpreted the GAAR and whether they have been sympathetic to the tax payer or to the fiscus. The cases used in this study stem from the old GAAR section 103. There have not been important cases dealing with the new GAAR section 80A to 80L of the Income Tax Act. In the final analysis of this research it would seem that the effectiveness and scope of the GAAR depends ultimately on its interpretation by the courts. Many of the cases that have been decided under section 103 (1) have provided disappointing outcomes for SARS. However it is noteworthy that the courts which were previously taking a restrictive approach and were pro-taxpayer in their deliberations are beginning to take a different approach and are gallant in their interpretation of the GAAR. Judges are slowly abandoning the long standing judicial approach which was that taxpayers are entitled to arrange their affairs in any legal way in order to minimize their tax and are going further and examining the real substance and purpose of the transactions entered into by taxpayers as opposed to the form of the transactions. The Supreme Court of Appeal has now set a precedent which goes deeper and examines the true intention of parties in entering into transactions and does not tie itself to labels that parties have attached to their transactions. This recent judicial attitude and zeal exhibited by the courts will without a doubt hinder tax avoidance activity and strengthen the effectiveness and scope of the new GAAR sections 80A to 80L.