Tax competition between tax sovereignties is a fact. We focus here on the international tax competition. Taxation is one of the tools of governance that States use to direct their policies. Tax authorities try to diminish the burden of their taxpayers to improve the national economic and social welfare. To aim this objective, Governments intensify the competitiveness of the domestic trade and/or attract foreign investments. Because every States share the same goal, Governments compete with each other on the tax field. This tax competition is qualified as beneficial on the one hand, and one the other hand---ever more often---the adjective used to qualify this competition would be "harmful". At first, this thesis exposes the situation of tax competition, presenting the opposing views and the concurring ones. Then, we look at the position of the Organization of Economic Cooperation and Development and the position of the European Union on this issue of tax competition. Historic summaries explain the point of view of these two organizations that are the leaders in the fight against the "harmful" tax competition. Finally, we give subjective ideas to re-think tax competition in a fair way.

The purpose of this study was to review the provision of public and private retirement funding in both South Africa and the United Kingdom and the role of taxation in encouraging greater private provision for retirement. The study described the basis of taxation and determination of ‘taxable income’ in each jurisdiction, before addressing the relationship between taxation and retirement funding in each jurisdiction respectively. Both jurisdictions have introduced significant reforms of their systems of retirement funding and these reforms were accordingly addressed in the present research. The study compared the two jurisdictions based on the above mentioned areas to determine similarities or differences. The study concluded with recommendations, these being that South Africa should assess the feasibility of providing greater State provided retirement funding by possibly including a mandatory contribution, such as that used by the UK for its single-tier flat rate New State Pension. A further recommendation was that South Africa should encourage greater provision of private retirement funding by considering even greater tax deductions for contributions.

As the number of non-resident sports persons competing in South Africa increases so does the need to tax them more effectively. It was for this reason that the South African legislature decided to insert Part IlIA into the Income Tax Act which regulates the taxation of non-resident sports persons in South Africa. The new tax on foreign sports persons, which came into effect during August 2006, is a withholding tax placing the onus upon the organizer of the event to withhold the tax portion of the payment to the non-resident sportsperson and pay it over to the revenue services. The rate of taxation has been set at 15 percent on all amounts received by or accruing to a foreign sportsperson. The question which the research addressed is whether this new tax will prove to be an effective tax, both from the point of view of its equity and the administration of the tax. In order to determine the impact of the new tax, it was compared to similar taxes implemented in the United Kingdom and Australia and also to other withholding taxes levied in South Africa. The new tax was also measured against a theoretical model for effectiveness, compared to the pre-August 2006 situation and to the taxation of resident sportsmen and women, using hypothetical examples. The major shortcomings of the new withholding tax are the uncertainty with regard to the intention of the legislature on matters such as the taxation of capital income versus revenue income, the question whether payments to support staff are included in the ambit of the new tax, the taxation of the award of assets in lieu of cash payments and the definition of a resident. A further area of concern is that the rate of taxation of 15 percent appears to be too low and creates horizontal inequity between the taxation of resident and non-resident sports persons. The new tax on non-resident sports persons may have its shortcomings but, depending upon the administrative and support structures put in place to deal with it, will be an effective tax. The rate at which the tax is levied could result in a less tax being collected than before but, with the reduced administrative cost of tax collection, the effective/statutory ratio of the tax could well be much higher than it was. This is a new tax in South Africa and certain initial problems are inevitable and will undoubtedly be solved as the administrators gain experience and as the case law governing this tax develops. / KMBT_363

Thesis (MComm)--University of Stellenbosch, 2004. / ENGLISH ABSTRACT: Despite the fact that transfer pricing legislation (i.e. section 31 of the Income Tax Act, 58 of 1962 (“the Act”) has been in force in South Africa since 1995, it has only been in the last three years that the South African Revenue Service (“SARS”) has embarked on a number of assessments of taxpayers’ cross border transactions with foreign group companies. In particular, the SARS targets taxpayers that have rendered cross border services (including financial assistance) to a foreign group company for no consideration and has assessed these taxpayers on the adjusted interest/ fee amounts. Since the burden of proof lies with the taxpayer to demonstrate that its cross border transactions with foreign group companies do not infringe the provisions of section 31(2) of the Act, this study provides taxpayers with guidance as to when its transactions would fall within the scope of application of section 31(2) of the Act and when the SARS would be excluded from applying the provision of section 31(2) of the Act. Following upon a critical analysis of the essential components of section 31(2) of the Act the following conclusions are drawn by the author: • If the taxpayer proves that it did not transact with a connected party (as defined in section 1 of the Act), or it did not supply goods or services in terms of an international agreement (as defined in section 31(1) of the Act), or its transfer price would be regarded as arm’s length, the Commissioner would be excluded from applying the provision of section 31(2) of the Act since all of the components to apply section 31(2) of the Act are not present. • The current view held by the South African Revenue Service and tax practitioners that transactions between a South African company and an offshore company, which are both directly or indirectly held more than fifty percent by an offshore parent company, are transactions between connected persons (as defined in 5 section 1 of the Act) is incorrect in law. Section 31 of the Act is not applicable to such transactions. • The Commissioner will be excluded from making a transfer pricing adjustment to a service provider’s taxable income where the following circumstances are present: o Where the cross border transaction with a connected party does not give rise to gross income, which is the starting point in the determination of taxable income, since the service provider agreed to render services for no consideration and was therefore not entitled to receive income (i.e. no receipt or accrual) and o Where the service provider can provide evidence that demonstrates that there was no practice of price manipulation as regards the transaction under review. / AFRIKAANSE OPSOMMING: Alhoewel oordragprysbeleid wetgewing (artikel 31 van die Inkomstebelastingwet 58 van 1962 (“die Wet”)) al sedert 1995 in Suid Afrika van krag is, het die Suid Afrikaanse Inkomstediens (“SAID”) eers werklik gedurende die laaste drie jaar begin om aanslae ten opsigte van belastingpligtiges se internasionale transaksies met buitelandse groepmaatskappye uit te reik. In die besonder teiken die SAID belastingpligtes wat dienste (insluitend lenings) aan buitelandse groepmaatskappye vir geen vergoeding lewer. Aangesien die bewyslas op die belastingpligtige rus om te bewys dat sy internasionale transaksies met buitelandse groepmaatskappye nie die bepalings van artikel 31(2) van die Wet oortree nie, word belastingpligtiges in hierdie studie van riglyne, wat aandui wanneer transaksies met buitelandse groepmaatskappye binne die omvang van artikel 31(2) van die Wet val asook onder welke omstandighede die SAID verhoed sal word om artikel 31(2) van die Wet toe te pas, voorsien. Na aanleiding van ‘n kritiese analise van die deurslaggewende komponente van artikel 31(2) van die Wet kom die skrywer tot die volgende gevolgtrekkings: • As die belastingpligte kan bewys dat hy nie met ‘n verbonde persoon (soos omskryf in artikel 1 van die Wet) handelgedryf het nie, of dat hy nie goedere of dienste in terme van ‘n internasionale ooreenkoms (soos omskryf in artikel 31(1) van die Wet) gelewer het nie, of dat sy oordragprys as arm lengte beskou kan word, sal die Kommissaris verhoed word om die bepaling van artikel 31(2) van die Wet toe te pas, aangesien al die komponente van artikel 31(2) van die Wet nie teenwoordig is nie. • Die huidige sienswyse van die SAID en belastingpraktisyns dat transaksies wat tussen ‘n Suid Afrikaanse maatskappy en ‘n buitelandse maatskappy plaasvind, waar ‘n buitelandse moedermaatskappy meer as vyftig persent van albei maatskappye se aandeelhouding (direk of indirek) hou, beskou kan word as 7 transaksies tussen verbonde persone (soos omskryf in artikel 1 van die Wet) is regstegnies nie korrek nie. Artikel 31(2) van die Wet is nie van toepassing op sulke transaksies nie. • Die Kommisaris sal onder die volgende omstandighede verhoed word om enige oordragprysaanpassing aan ‘n diensleweraar se belasbare inkomste te maak: o Waar die internasionale transaksie met ‘n verbonde persoon nie bruto inkomste (die beginpunt van ‘n belasbare inkomste berekening) voortbring nie, aangesien die diensleweraar ingestem het om dienste teen geen vergoeding te lewer, wat tot die gevolg het dat die diensleweraar nie geregtig is om inkomste te ontvang nie (dus geen ontvangste of toevalling) en o Waar die diensleweraar kan bewys dat die transaksie nie onderhewig aan prys manipulasie was nie.

Thesis (MComm)--Stellenbosch University, 2006. / AFRIKAANSE OPSOMMING: Hierdie werkstuk begin deur te ondersoek watter rol rekeningkundige beginsels en praktyk tot op datum by die uitleg van die inkomstebelastingwetgewing in Suid-Afrika gespeel het. Die gevolgtrekking word gemaak dat rekeningkundige beginsels 'n baie beperkte rei gespeel het. Die beginsels van wetsuitleg word dan ondersoek en die gevolgtrekking word gemaak dat daar wei ruimte vir rekeningkundige beginsels en praktyk is om 'n meer uitgebreide rol in die uitleg van die inkomstebelastingwetgewing, en meer spesifiek die bruto inkomste-omskrywing en die algemene aftrekkingsformule, te speel. Die werkstuk oorweeg dan die rol wat rekeningkundige beginsels en praktyk in die uitleg van die inkomstebelastingwetgewing in beide Australie en die Verenigde Koninkryk gespeel het. Die gevolgtrekking word gemaak dat rekeningkundige praktyk in beide hierdie jurisdiksies 'n meer uitgebreide rei in die uitleg van inkomstebelastingwetgewing as in Suid-Afrika gespeel het. Die mening word uitgespreek dat Suid-Afrika baat kan vind deur 'n soortgelyke benadering te volg as wat in bogenoemde jurisdiksies gevolg word. Die werkstuk sluit dan af deur die voor- en nadele van 'n stelsel te ondersoek waar die belasbare inkomste en rekeningkundige inkomste ooreenstem. Die gevolgtrekking word gemaak dat 'n mate van ooreenstemming aan te bevel is, maar dat volkome ooreenstemming nie sinvol is nie. Die inagneming van rekeningkundige beginsels in die uitleg van inkomstebelastingwetgewing kan bydra om die optimale graad van ooreenstemming te bereik. / ENGLISH ABSTRACT: Traditionaly accounting principles and practice played a very limited role in the interpretation of the income tax legislation in South Africa. This study starts off by investigating the role that accounting principles and practice played to date in the interpretation of the income tax legislation in South Africa. The conclusion is reached that accounting principles played a limited role. The principles of interpretation of legislation is then considered and a conclusion is reached that there is scope for accounting principles and practice to play an extended role in the interpretation of the income tax legislation, especially in the interpretation of the gross income definition and the general deduction formula. The study then considers the role that accounting principles and practice played in the interpretation of the income tax legislation in both Australia and the United Kingdom. The conclution is reached that in both these jurisdictions accounting practice played a more extensive role in the interpretation of income tax legislation than in South Africa. The opinion is expressed that South Africa can benefit from a similar approach as was taken in the abovementioned jurisdictions. The study concludes with an investigation into the advantages and disadvantages of having the calculation of taxable income conform to the calculation of income for accounting purposes. The conclusion is reached that conformity to some degree is advisable but that total conformity is not sensible. Taking accounting principles and practice into account in the interpretation of income tax legislation can help attain the optimal degree of conformity.

Thesis (MComm)--Stellenbosch University, 2004. / ENGLISH ABSTRACT: Like any other item of expenditure, interest expenditure's deductibility is determined by subjecting it to the tests laid down in the general deduction formula contained in section 11(a), together with section 23(f) and 23(g) of the Income Tax Act, as well as the special deductions applicable to interest. In this study there will be only concentrated on the tests laid down in the general deduction formula contained in section 11(a), together with section 23(f) and 23(g) of the Income Tax Act. The general test according to section 11(a) as laid down by the courts to ascertain if an expense incurred in trade is deductible, is firstly to ascertain the act entailing the expenditure. If it is performed for the purpose of earning income, the expenditure attendant upon is deductible. Secondly, the closeness of the connection between the expenditure incurred and the trade must be ascertained. If the expense incurred is so closely connected with the business operation that it may be regarded as part of the cost of performing it, the expenditure will be deductible. The courts have considered many factors to ascertain if interest expenditure complies with the statutory requirements as set out in section 11(a), read together with section 23(f) and 23(g) of the Income Tax Act. There seems to be one test which can be applied to most of the statutory requirements and can be seen as the conclusive factor in determining the deductibility of interest expenses and that is the test of the original purpose of the loan that leads to the interest expense. Firstly in this study, the factors considered by the courts to ascertain if the deductibility of an interest expenditure complies with the statutory requirements as set out in the introduction of section 11(a), together with section 23(f) and 23(g), will be examined with specific reference to the purpose of the loan. Then the possibility of a change in the original purpose of a loan and the effect on the deductibility of an interest expenditure will be examined. / AFRIKAANSE OPSOMMING: Soos enige ander uitgawe, word rente uitgawes se aftrekbaarheid bepaal deur dit te onderwerp aan die toetse soos neergele in die algemene aftrekkingsformule, vervat in artikel 11(a), saamgelees met artikel 23(f) en 23(g) van die Inkomstebelastingwet, asook die spesiale aftrekkings wat op rente van toepassing is. In hierdie studie word slegs op die algemene aftrekkingsformule, vervat in artikel 11(a), saamgelees met artikel 23(f) en 23(g) van die Inkomstebelastingwet gekonsentreer. Die algemene toets volgens artikel 11(a) wat deur die howe neergele is om te bepaal of 'n uitgawe aangegaan in 'n bedryf aftrekbaar is, is om eerstens te bepaal of die handeling waaraan die uitgawe verbind is by die voortbrenging van inkomste aangegaan is en tweedens of die uitgawe wat aangegaan is nou genoeg verwant is aan die bedryf sod at dit as deel van die koste beskou kan word om die bedryf te beoefen. Die howe het verskeie faktore oorweeg om te bepaal of die aftrekbaarheid van rente uitgawes voldoen aan die statutere vereistes soos bepaal deur artikel 11(a), saamgelees met artikel 23(f) en 23(g) van die Inkomstebelastingwet. Daar blyk een toets te wees wat op die meeste statutêre vereistes toegepas kan word en wat ook as die bepalende factor beskou kan word om die aftrekbaarheid van rente uitgawes te beoordeel en dit is die oorspronklike doel waarmee die lening aangegaan is wat die rente uitgawe tot gevolg het. In hierdie studie word eerstens ondersoek ingestel na die faktore wat die howe oorweeg om te bepaal of 'n rente uitgawe aan die vereistes, soos uiteengesit in die inleiding van artikel 11(a), saamgelees met artikel 23(f) en 23(g), voldoen met spesifieke verwysing na die doel waarmee 'n lening aangegaan word. Die moontlikheid word dan ondersoek dat die oorspronklike doel van die lening kan verander en watter effek dit op die aftreknbaarheid van ‘n rente uitgawe kan hê.

Thesis (MComm)--Stellenbosch University, 2004. / ENGLISH ABSTRACT: The aim of this study is to determine the applicability of the various South African Income Taxation Act sections on the deduction of software costs. A distinction is made between the various deduction sections in the Income Taxation Act that are applicable to software costs. By doing this an appropriate taxation deduction is recommended for the different types of software costs that the taxpayer incurs. Software assets and expenditure can be divided into various categories based on the acquisition agreement. The rights and assets that are obtained, differ for each category of software cost. In some instances a copyright is obtained and in other instances only a right of use is obtained. Furthermore the taxpayer receives intellectual property, an intangible asset, and/or a tangible asset. A literature study and an analysis of the different types of software costs and the four concerned Income Taxation Act sections serve as background for the consideration of the applicability of each specific deduction section in the Income Taxation Act on the various categories of software costs. By using the information obtained in the literature study and the analyses, a recommendation is made of the most applicable deduction article for each category of software cost. / AFRIKAANSE OPSOMMING: Hierdie studie het ten doel om die toepaslikheid van die verskillende Suid-Afrikaanse Inkomstebelastingwetsartikels, op die aftrekking van sagtewarekoste te bepaal. 'n Onderskeid word getref tussen die verskillende aftrekkingsartikels wat van toepassing is op sagtewarekoste in die Inkomstebelastingwet. Sodoende word 'n geskikte belastingaftrekking vir die verskillende tipes sagtewarekoste voorgestel wat deur elke belastingpligtige aangegaan word. Sagtewarebates of -uitgawes kan in verskillende kategoriee verdeel word na aanleiding van die verkrygingsooreenkoms wat aangegaan is. Die regte en bates wat verkry word verskil ten opsigte van elke kategorie sagtewarekoste. In sommige gevalle word 'n outeursreg verkry en in ander gevalle slegs 'n gebruiksreg. Verder kan of intellekuele eiendom, 'n ontasbare bate, en/of 'n tasbare bate verkry word. 'n Literatuurstudie en analise van die verskillende tipes sagtewarekoste en die vIer betrokke Inkomstebelastingwetsartikels dien as agtergrond vir die oorweging van die toepaslikheid van elke spesifieke aftrekkingsartikel in die Inkomstebelastingwet op die onderskeie kategoriee sagtewarekoste. Daama word die inligting wat bekom is in die literatuurstudie en analise gebruik om die mees toepaslike aftrekkingsartikel vir elke kategorieë sagtewarekoste voor te stel.

Inflation, especially recently, has distorted the nominal historical-cost measurement of gains and losses from transactions in assets. This distortion has exacerbated the existing controversy over the federal taxation of such gains and losses realized by individuals. The main purpose of the study was to examine the equity of actual and proposed methods respecting such taxation in view of these inflation distortions. Particularly, the study investigated how the applicable law, as it was in the immediate past (1977 Law), as it is now (1979 Law), and as many have proposed that it should be (the Reform Plan), compared under the traditional ability-to-pay theory of equity. The Reform Plan combines two current and popular tax reform proposals, the comprehensive income tax and indexing. As it was interpreted and applied in this study, gains and losses from transactions in assets were fully included in income, after they were indexed for inflation. Indexing consists of multiplying the historical cost of an asset by the ratio of some price index (herein the CPI) at the time of disposition to the index at the time of acquisition. Subtracting the result from the disposition price gives a gain or loss measured in real, inflation-adjusted terms. The comparisons of the three taxing methods were based upon historical tax-return data of 224 individual taxpayers for 1970-1977. The non-random manner in which the taxpayers were selected precludes the results and conclusions of the study from being statistically extended to the population of U.S. taxpayers. Significantly, however, the tax characteristics of the selected taxpayers indicated that they were more sensitive to effects of inflation than their national counterparts. Provisions of 1979 Law and the Reform Plan were simulated on the historical data, resulting in recomputed incomes and tax liabilities. The historical and recomputed incomes and taxes were then averaged by taxpayer over the eight years. These averages gave better approximations of the normal financial status of the taxpayers than single-year data. Data generated in the Reform Plan simulation indicated that the selected taxpayers' historical gains and losses were substantially distorted by inflation. Moreover, the proportional effects of inflation decreased as taxpayers' income increased. These findings were fully consistent with two published studies. Various procedures measured and compared the horizontal equities and vertical equities (progressivities) of the three disparite taxing methods. None of them exhibited any clear, unambiguous superior ratings. The Reform Plan was only slightly more horizontally equitable and only slightly more progressive than 1977 Law; 1979 Law ranked last in both analyses, but by small margins. Importantly, under all three methods, progressivity was maintained at higher income levels, but only when income was defined in real terms. When income was defined in nominal terms, a marked decrease in progressivity was manifested. This finding suggests that the appearance at these levels of reduced progressivity, and hence of reduced vertical equity, may be an illusion. Given the above findings, perhaps too much historical emphasis has been placed on the equity benchmark in evaluating the taxation of individuals' gains and losses from transactions in assets. If so, then other judgmental criteria would seem to take on relatively greater importance. Four such criteria deemed pertinent were neutrality, simplicity, mitigation of the "lock-in effect" and stimulation of capital information. The Reform Plan appeared to be more neutral than either 1977 or 1979 Law. Whether it is simpler is questionable. Probably less unrealized gains would be locked-in under the Reform Plan. However, with respect to capital formation, considerable theoretical disagreement precluded a conclusion as to which taxing method would be more stimulative.

M.Com. (South African and International Taxation) / The term “beneficial ownership” was first included in Articles 10, 11 and 12 of the OECD’s Model Tax Convention in 1977 but it is not defined in the OECD’s Model Tax Convention and most countries do not have a definition in their domestic tax laws. There is a need for South African revenue authorities to consider how the concept of beneficial ownership will be applied in an international tax context especially with the introduction of withholding tax on dividends and the pending implementation of withholding tax on interest. A review and analysis of interpretation principles from the Vienna Convention, the OECD, selected countries and experts revealed that there are common interpretation principles which are being applied consistently when determining beneficial ownership for international tax purposes. When applied against relevant, recent international tax case law, it was interesting to note that these common interpretation principles did not consistently yield results which were in line with the courts’ judgements. The common interpretation principles represent attributes which can be used to determine beneficial ownership in international tax and could prove useful to South African revenue authorities in constructing a domestic definition for “beneficial ownership.”

A research report submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the degree of Master of Commerce (Taxation). Johannesburg, April 2017. / Technological advancements have introduced new methods of operating and transacting between business and targeted markets. Electronic interaction by business with respective target markets has enabled business to transact from any location around the world, instantaneously delivering goods and services to markets globally. Although benefits have been derived by business, the impact of e-commerce on established income tax principles has raised concern to governments around the world, as e-commerce grows as a method of transacting with targeted markets (Hubbard: 2016). Transacting in a digital environment has posed challenges to the taxation of residents and non-residents in South Africa which has resulted in the avoidance of income tax by taxpayers in countries of operation. Losses in tax revenue resulting from business conducted in e-commerce have been experienced (OECD, 2014a:5) by governments, as the application of income tax legislation is challenged by business operations in e-commerce (OECD, 2015:5). Transacting in a digital environment has provided business with the ability to operate in a market in the absence of physical premises established in that market, challenging income tax principles which rely on an association with a physical place or presence of an entity for taxation. This research report analyses the taxation of non-resident business operations in e-commerce in South Africa and the arising challenges due to ecommerce. An examination of the income tax legislation is performed to understand how tax is avoided by non-residents when operating in e-commerce. The possible solutions to address challenges posed to income tax by e-commerce will be examined as part of the research report. Keywords: BEPS; double tax agreements; e-commerce; income tax; non-residents; resident; source; permanent establishment. / GR2018