Includes bibliographical references / South Africa has seen many developments in both the areas of corporate law and tax legislation. The legislation in question has developed from an apartheid or pre-democratic era to that of the current democratic South Africa, in which individuals have the freedom to become entrepreneurs, and have the opportunity to start up small to medium and larger enterprises, in order to firstly make a profit but also to ensure that they enjoy the benefits which the separate legal personality of Corporate Structures are entitled to. The focus of the research was to carefully study Corporate Structures created by directors and other entities and to show how these personalities make use of various arrangements to reduce tax liability, both by lawful and unlawful methods. In addition to this, the research involved a close analysis a of how a Corporate Structure is formed, from the date of incorporation of the entity, to the rights, and duties of the entity, the rights and duties of the role-players such as directors and shareholders, who control the entity and make the necessary decisions relating to the entity. The thesis focuses on the tests used by the courts to examine the true commercial substance of Corporate Structures and the arrangements put in place by these entities or individuals mentioned above. The above approach was applied by analysing the principle of Piercing the Corporate Veil both at common law and statutory level, the principles of Substance over Form, General Anti-Avoidance provisions and the Tax Administration Act 28 of 2011 provisions, in light of the Anti-Avoidance provisions. It is trite law that taxpayers are allowed to arrange their affairs or commercial activities in a manner in which they may gain a tax advantage provided they do so, within the ambit of the law. The effect of the taxpayer having such freedoms is that many of the contracting parties or taxpayers abuse the legislative provisions and enter into transactions and commercial activities which circumvent the legal provisions. The framework of the analysis was to look at the Companies Act 71 of 2008, Income Tax 58 of 1962 and the Tax Administration Act 28 of 2011 Acts respectively. The result of the research has shown that the tests put forward by the courts assist in ensuring that the principle of separate legal personality is upheld, taxpayers such as entities are free to arrange their affairs in a manner that allows a certain tax advantage provided it is within the ambit of the law. The study has shown that the doctrine of separate legal personality is upheld within our current legal system. There are many tax and legal benefits to natural persons establishing an entity; however these benefits should not lead to abuse by entities. Lastly, the courts will carefully scrutinise the commercial substance of a transaction and test whether the parties to the transaction have acted in accordance with the true principles of the transactions, the conclusion herein is therefore that the law should not interpret the modern commercial world with a closed minded approach and legislate strictly, without considering all the circumstances of a matter in light of the necessary law and policy considerations and in so doing, rather adopt a modern commercial minded approach. As a growing South African economy, entities should be permitted to arrange their commercial transactions and affairs in the best possible way to obtain a legal tax benefit and make profits which will ultimately ensure that we have a sustainable economy and strong Corporate Structures in place, in order to be placed in a stronger position in terms of an African perspective and compete more competitively at an International level.

Abstract In his Budget Speech on 28 February 2005, Trevor Manuel expressed his concern regarding the application of section 103 of the Income Tax Act no 58 of 1962 by the Courts and suggested that a revamped section 103 may be necessary. The formulation of an adequate anti-avoidance section has also presented a challenge to Revenue authorities elsewhere in the world. This report takes an indepth look at case law in the British courts to determine how the United Kingdom has dealt with the issue of anti avoidance. Secondly, the report deals with the approach of the South African courts and discusses the requirements of section 103(1) of the Act by looking at case law pertinent to each requirement. Thirdly the report investigates South African case law where the doctrine of substance over form has been dealt with. Finally, the report briefly compares the approaches adopted by the British judiciary and the South African judiciary.

No description available.

No description available.

Drawing upon media agenda-setting theory and previous studies in organizational impression management, this paper empirically investigates the influence of tax avoidance news on corporate tax reporting. This study is based on the pronounced discontinuity in the amount of news articles related to tax avoidance in the United Kingdom over two periods (2010-2011 and 2012-2013). A difference-in-differences design is employed in order to enable a comparison of the media effects on those firms that have been reported in tax avoidance news versus those without media attention. Using a sample of annual reports of UK FTSE 100 companies across the period 2010 to 2013, I test the impact of tax avoidance news on quality and quantity of tax disclosure. The results suggest that the recent increase in media attention on tax avoidance does not stimulate firms to improve the quality and the quantity of tax disclosure in their corporate reporting. Rather, firms can be discouraged from discussing the most relevant tax items in their reporting, as shown in the case of financial firms which were the subject of the largest amount of tax avoidance news. (author's abstract) / Series: WU International Taxation Research Paper Series

This paper investigates whether managers that have a propensity for personal tax aggressiveness are associated with tax avoidance at the firm level. Motivated by Dhaliwal, Erickson, and Heitzman (2009) and Hanlon and Heitzman (2009), I construct a measure of personally tax aggressive ("aggressive") managers and determine whether corporate tax avoidance activities increase in their presence. The results of my study indicate that aggressive managers are associated with firm-level tax avoidance. The neoclassical view would suggest that aggressive managers' tax expertise could benefit shareholders through lower tax payments. Since aggressive managers extract their personal tax savings from shareholders, non-tax agency costs potentially increase in their presence. This has implications for the association between aggressive managers and firm value. Using the framework established through the agency view of tax avoidance (Desai and Dharmapala, 2008) I find that on average the presence of aggressive managers is associated with increased firm value. However, consistent with recent research, governance is an important moderating factor whereby firm value in the presence of aggressive managers tends to increase only for relatively better-governed firms.

I hypothesize and find that the variation in corporate tax avoidance is jointly determined by firms’ incentive and opportunities to avoid taxes. Specifically, the positive relation between financial constraints (my proxy for an incentive to avoid taxes) and tax avoidance is significantly stronger for firms with high tax planning opportunities (TPO), where TPO is the distance between a firm’s actual and predicted ETRs. I further show that firms with TPOs based on high permanent (temporary) book-tax differences exhibit more permanent (temporary) book-tax differences under financial constraints. From a risk perspective, I find no evidence that financially constrained firms with low TPO exhibit more tax risk but some evidence that those with high TPO do so. In general, the findings in this paper provide evidence consistent with an incentive-opportunity interaction story to help explain differences in corporate tax avoidance.

In June 2007, the Court of Appeal in New Zealand disallowed the taxpayers appeal and decided that Trinity Scheme is a tax avoidance arrangement. The decision is significant not only for NZD3billion which is at stake but also for its jurisprudence on tax avoidance. This paper analyses the implication of Accent decision on the development of judicial approach on tax avoidance. Purposive approach of interpretation is codified in New Zealand since mid-19th century. Although New Zealand courts are not reluctant in using purposive approach in judicial reasoning, the final decisions rarely depart from literal meaning of the Act. The tension between general anti-avoidance provision and the specific provision within the Act has long been recognised by the court. The Court of Appeal in Accent proposed a judicial technique which would involve seeing tax avoidance cases in three different categories.

I examine the relation between tax avoidance and firm investment by drawing on two capital market imperfections, adverse selection and moral hazard, to provide a link between tax avoidance and investment. Firms experiencing capital rationing because of adverse selection rely on internal resources to fund investment opportunities because of costly external financing. Tax avoidance can provide additional cash-flows that may alleviate capital rationing. Alternatively, tax avoidance can exacerbate problems of moral hazard by facilitating managerial rent extraction in the form of overinvestment. I find a positive relation between tax avoidance and investment suggesting effects of either capital rationing or overinvestment. To distinguish between these two effects, I examine how the relation between tax avoidance and investment varies in settings where capital rationing or overinvestment is more likely to occur. My findings suggest that firms rely on the cash savings from tax avoidance to alleviate capital rationing.

This study uses corporate takeovers as a setting to examine how tax uncertainty affects managers' real investment decisions. Specifically, I investigate whether uncertainty about target firms' income taxes influences takeover premiums. Drawing on theories from finance, I predict that tax uncertainty leads to increased divergence of opinion among target shareholders about target value, which in turn leads to higher takeover premiums. I also predict a positive direct association between measures of target tax uncertainty and takeover premiums because investments with tax uncertainty provide flexibility in reporting book income that bidding managers value. Consistent with both predictions, I find a positive association between divergence of target shareholder opinion about taxes and takeover premiums as well as a positive association between target tax uncertainty and takeover premiums. The association between tax uncertainty and premiums is more positive when the acquiring firm faces greater capital market pressures. Finally, all positive associations persist in recent years despite newly required financial statement disclosures of tax uncertainty. / text