A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements for the degree of Master of Commerce (specialising in Taxation) Johannesburg, 2017 / As a result of a weakening and slow global economy and rising debt, many foreign governments are finding it difficult to implement strategies to ensure continued inclusive and sustainable growth. It is based on this troubling perspective of global uncertainty that tax authorities worldwide have unanimously persisted in their fight against tax evasion through the under-declaration of income from foreign assets, the illegal movement of money abroad, the misapplication and / or manipulation of transfer pricing legislation and mistreatments of tax treaties. The G20 Leaders together with the Organisation for Economic Co-operation and Development (“OECD”) have developed standards such as the Common Reporting Standard (“CRS”) for the Automatic Exchange of Information (“AEOI”) between tax authorities to enhance the sharing of information and transparency of information between tax authorities worldwide. South Africa has pledged to implement the CRS and automatically share tax information with other jurisdictions on an annual basis in the fight against tax evasion and avoidance. Of significance, in terms of timing for South African tax residents, is that South Africa has undertaken to be one of the early adopters of the CRS and committed to commence the first exchange of information from 2017. In light of the standards and actions coming into place, it has become clear that before long the likelihood of the South African Revenue Services (“SARS”) and the South African Reserve Bank (“SARB”) detecting tax evasion and avoidance is increasingly high. Based on this, non-compliant taxpayers have a limited timeframe to manoeuvre freely in and what may be their last opportunity to voluntarily disclose these assets and the income derived therefrom to SARS and SARB without facing heavier penalties and possible criminal prosecution. / MT 2018

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

This study was undertaken to analyse the developments in the anti avoidance legislation over a five year period from 1 March 2006 to 28 February 2011. Emphasis were placed on describing the road from the old section 103 provisions leading to the new general anti avoidance rules (GAAR) as contained in sections 80A to 80L of the Income Tax Act 58 of 1962. The study began with a detailed analysis of the differences between tax evasion and tax avoidance based on definitions and interpretations by various courts. It then went further in chapter two to formulate an acceptable distinction between Tax evasion, Tax planning and impermissible tax avoidance as currently used by the South African Revenue Services (SARS). It appeared from the study that firstly, courts have historically reviewed the circumstances surrounding an arrangement when determining whether tax evasion has occurred. The new GAAR requires the individual steps of an arrangement to be reviewed in isolation. Secondly, the courts have historically held that the purpose test, when determining the taxpayer‘s purpose, was subjective. The wording of the new GAAR indicates that this test is now objective. Thirdly, the courts have historically viewed the abnormality of an arrangement based of the surrounding circumstances. The wording of the new GAAR requires an objective view of the arrangement. A comparison was made between countries that have adopted statutory GAAR with a view of understanding how they have applied these general anti avoidance provisions successfully to tax avoidance cases. This comparison revealed that there is an inconsistent application of these general anti avoidance provisions by different countries. Courts and administrators apply them differently, based on circumstances and the nature of avoidance. Lastly, it has been acknowledged that most avoidance schemes are very complex and their perpetrators are always on the look for gaps in tax systems, hence any avoidance legislation to effectively curb tax evasion will need to be revised on a regular basis. Therefore, the Commissioner would be expected to issue regular updates on anti avoidance provisions and latest developments in the form of interpretation and or practice notes. / Thesis (MBA)-University of KwaZulu-Natal, Westville, 2011.

Moneymaking schemes such as prostitution, drug dealing, fraud, corruption, pyramid schemes and the sale of counterfeit goods have been around for years. The taxing of these transactions/schemes has become a contentious issue. It has recently been reported in the press that SARS has lodged a claim for R183 million in income taxes against the estate of the slain mining magnate, Brett Kebble, in respect of the R2 billion allegedly stolen by him from the mining companies of which he was a director.4 It is further reported that the Master of the High Court has rejected the claim on the grounds that the amounts on which SARS sought to levy tax constituted money stolen by Kebble, and that stolen money is not subject to income tax. It has been reported that SARS is to take the Master’s decision in this regard on review.5 The Kebble case raises an interesting and unresolved tax issue and, in view of the large sum at stake, it may be a case that will go all the way to the Supreme Court of Appeal and bring long-overdue certainty to the law. The Income Tax Act No. 58 of 1962 (the Act) is of no assistance in determining the issue. Section 23(o) states that payments that are illegal in terms of Chapter 2 of the Prevention and Combating of Corrupt Activities Act No. 12 of 2004 or that constitute a fine or penalty for any “unlawful activity carried out in the Republic or in any other country if that activity.

This treatise was undertaken to critically analyse the new general anti avoidance rules (new GAAR) as set out in sections 80A to 80L of the Income Tax Act1. A discussion on the difference between tax evasion and tax avoidance was performed in the first chapter. The goals of this treatise were then set out. An analysis of the requirements for the application of the new GAAR was performed in the second chapter. The courts have historically reviewed the circumstances surrounding an arrangement when determining whether tax avoidance has occurred. The new GAAR requires the individual steps of an arrangement to be reviewed in isolation. Secondly, the courts have historically held that the purpose test, when determining the taxpayer‘s purpose, was subjective. The wording of the new GAAR indicates that this test is now objective. Thirdly, the courts have historically viewed the abnormality of an arrangement based of the surrounding circumstances. The wording of the new GAAR requires an objective view of the arrangement. An analysis of the secondary provisions contained in sections 80I, 80B and 80J of the new GAAR was performed in the third chapter. With regards to section 80B, it was submitted that the Commissioner should issue an Interpretation Note detailing all the methods ―he deems appropriate.

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements for the degree of Master of Commerce (specialising in Taxation) / Tax avoidance is the legal utilisation of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. Tax evasion entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities in order to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating the deductions). The revised general anti-avoidance measures were introduced in the Income Tax Act 58 of 1962 ('the Act') on 2 November 2006 in the form of section 80A to 80L, in order to replace the complicated and confusing as well as ineffective anti-avoidance measures contained in section 103(1). / AC 2018

Tax avoidance has been the subject of intense scrutiny lately by both the South African Revenue Service ("the SARS") and the media. This attention stems largely from the recent withdrawal of section 103(1) together with the introduction of section 80A to 80L of the South African Income Tax Act. However, this attention is not limited to South Africa. Revenue authorities worldwide have focused on the task of challenging tax avoidance. The approach of the SARS to tackling tax avoidance has been multi-faceted. In the Discussion Paper on Tax Avoidance and Section 103 (1) of the South African Income Tax Act they begin with a review of the distinction between tax evasion, tax avoidance and tax planning. Following a call for comment the SARS issued an Interim Response followed by the Revised Proposals which culminated in the withdrawal of the longstanding general anti-avoidance rules housed in section 103(1) and the introduction of new and more comprehensive anti-avoidance rules. In addition, the SARS has adopted an ongoing media campaign stressing the importance of paying tax in a country with a large development agenda like that of South Africa, the need for taxpayers to adopt a responsible attitude to the management of tax and the inclusion of responsible tax management as the greatest measure of a taxpayer's corporate and social investment. In tandem with this message the SARS have sought to vilify those taxpayers who engage in tax avoidance. The message is clear: tax avoidance carries reputational risks; those who engage in tax avoidance are unpatriotic or immoral and their actions simply result in an unfair shifting of the tax burden. The SARS is not alone in the above approach. Around the world tax authorities have been echoing the same message. The message appears to be working. Accounting firms speak of a "creeping conservatism" that has pervaded company boardrooms. What is not clear, however, is whether taxpayers, in becoming more conservative, are simply more fully aware of tax risks and are making informed decisions or whether they are simply responding to external events, such as the worldwide focus by revenue authorities and the media on tax avoidance. Whatever the reason, it is now critical, particularly in the case of corporate taxpayers, that their policies for tax and its attendant risks need to be as sophisticated, coherent and transparent as its policies in all other areas involving multiple stakeholders, such as suppliers, customers, staff and investors. How does a company begin to set its tax philosophy and strategic direction or to determine its appetite for risk? A starting point, it is submitted would be a review of the distinction between tax evasion, avoidance and planning with a heightened sensitivity to the unfamiliar ethical, moral and social risks. The goal of this thesis was to clearly define the distinction between tax evasion, tax avoidance and tax planning from a legal interpretive, ethical and historical perspective in order to develop a rudimentary framework for the responsible management of strategic tax decisions, in the light of the new South African general anti-avoidance legislation. The research methodology entails a qualitative research orientation consisting of a critical conceptual analysis of tax evasion and tax avoidance, with a view to establishing a basic framework to be used by taxpayers to make informed decisions on tax matters. The analysis of the distinction in this work culminated in a diagrammatic representation of the distinction between tax evasion, tax avoidance and tax planning emphasising the different types of tax avoidance from least aggressive to the most abusive and from the least objectionable to most objectionable. It is anticipated that a visual representation of the distinction, however flawed, would result in a far more pragmatic tool to taxpayers than a lengthy document. From a glance taxpayers can determine the following: That tax avoidance is legal; that different forms of tax avoidance exist, some forms being more aggressive than others; that aggressive forms of tax avoidance carry reputational risks; and that in certain circumstances aggressive tax avoidance schemes may border on tax evasion. This, it is envisaged, may prompt taxpayers to ask the right questions when faced with an external or in-house tax avoidance arrangement rather than simply blindly accepting or rejecting the arrangement.

Tax amnesties are government programs that typically allow a short period of time for tax evaders to voluntarily repay previously evaded taxes without being subject to penalties and prosecution that discovery of such tax evasion normally brings. Tax amnesties differ widely in terms of coverage, tax types, and incentives offered. A state’s Voluntary Disclosure Programme is another avenue available to taxpayers to assist them in resolving their state tax delinquencies. This programme is an on-going programme as compared to a tax amnesty, which is there for a limited time period only. The main goal of the research was to describe the tax amnesty and the voluntary disclosure programmes in South Africa and to assess their advantages and disadvantages. This thesis also discussed another form of voluntary disclosure programme, referred to as an Offshore Voluntary Disclosure Programme, which allows taxpayers with unreported foreign bank accounts, and presumably unreported foreign income, to voluntarily disclose their affairs. The study found that, due to tax amnesties, Government raises more tax revenue not only in the short run from collecting overdue taxes but also by bringing former non-filers back into the tax system for the long run. It was also found that, initially short-run revenue brought in from overdue taxes will be positive for the first amnesty and then decline each time the amnesty is offered repeatedly. The reason for the decline in revenue might be that tax amnesties provide incentives for otherwise honest taxpayers to start evading taxes because they will anticipate the offering of future amnesties, thereby weakening tax compliance. The costs associated with amnesty programmes include negative long run revenue impact and also that amnesty programmes reduce compliance by taxpayers in the long-run. In South Africa tax amnesties, especially the voluntary disclosure programme, are likely to be successful since they will increase the revenue yield and also bring non-filers back on the tax rolls.

The additional tax ("penalties") imposable in terms of section 76(1) of the Income Tax Act (No 58 of 1962) when a taxpayer is in default, can be very harsh (up to 200% of the tax properly chargeable). The Commissioner may, in terms of section 76(2)(a), remit any penalty imposed, as he sees fit. However, when there was intent on the part of the taxpayer to evade the payment of tax, the Commissioner may not remit any portion of the 200% penalty imposable, unless he is of the opinion that "extenuating circumstances" exist. This dissertation examines the meaning of "extenuating circumstances", as interpreted by the judiciary, and lists the factors and defences that a taxpayer may plead to justify a remission of penalties, both in the case of an intention by the taxpayer to evade tax and in cases where the taxpayer is merely in default of section 76(1). / Accounting / MCOM (Accounting)

Mercantile law / LLM (Tax Law)