*Electronic Theses and Dissertations (Masters)
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Item A critical analysis of Section 19 and Paragraph 12a of the eighth schedule of the Income Tax Act for debt transactions(2020) Tifflin, TanyaThe Income Tax Act 58 of 1962 was amended, with effect from 1 January 2013, by the introduction of a set of structured debt relief rules (also referred to as the debt relief provisions). The rules were stipulated in section 19 and paragraph 12A of the Eighth Schedule of the Income Tax Act. These rules have been amended several times since they came into effect on 1 January 2013. Section 19 and paragraph 12A of the Eighth Schedule of the Income Tax Act regulate the situation where a debt is cancelled, waived, forgiven or discharged for no consideration (or for a consideration which is less than the amount of the debt). The rules were intended to assist distressed debtors by simplifying the debt reduction process without creating further tax liabilities. Since the introduction of section 19 and paragraph 12A of the Eighth Schedule, there have been many issues raised in the media around the application and interpretation of various aspects of the legislation. This has resulted in numerous amendments. The purpose of this study is to analyse the legislation from its inception to establish whether (despite the numerous amendments) there are any unintended consequences in the legislation applicable to the 2020 tax year, in order to suggest possible solutions. The study revealed flaws and unintended consequences of the exclusions to the debt relief rules which relate to donations tax, estate duty and liquidated companies. Appropriate recommendations have been suggested to solve these problems. The study identified issues with the concepts of ‘market value’ and ‘effective interest’ in the context of debt to share conversions and recommended, among other things, that interpretation notes be provided to solve the problems. In addition, the study discussed the loophole which exists in section 19(6A) and paragraph 12A(4) of the Eighth Schedule. This loophole has resulted in the application of the debt relief rules not triggering any income tax in instances where assets are sold in the same tax year in which a debt benefit arises. Finally, the study discussed the implications and consequences of the retrospective application of the 2019 amendment to section 19(6A) and paragraph 12A(4) of the Eighth Schedule of the Income Tax Act and recommended that these amendments only apply to transactions which were concluded from 1 January 2019.Item A critical analysis of section 45 of the income tax act 58 of 1962.(2023) Nyoka, Rejoice NombuleloThe introduction of CGT in SA resulted in the birth of the corporate restructuring rollover tax relief to avoid tax on the transfer of assets within the same economic unit. Section 45 of the Act specifically provides a deferral tax rollover relief for the transfer of assets within the same group of companies. The built-in anti-avoidance rules in section 45 of the Act did not prevent taxpayers from abusing this tax rollover relief, instead it gave birth to innovative tax-free exit from investments and debt-push down schemes. Lawmakers mitigated the tax relief abuse by implementing burdensome rule-based anti-avoidance rules. This study aims to critically analyse the intended purpose of section 45 of the Act and how the rule-based anti-avoidance rules in section 45 of the Act unduly hamper the efficacy of this tax relief.Item A critical analysis of the corporate restructuring rules(2023) Botha, Petrus HendrikAs a result of Covid-19, there is likely to be an increase in company restructuring in South Africa. The Income Tax Act 58 of 1962 contains group relief measures, also commonly referred to as the “corporate rules”. The purpose of the corporate rules, considering the policy objectives of competitiveness, was twofold, firstly, to encourage domestic restructuring of South African companies to promote growth and, secondly, to alleviate unintended hardships caused by the introduction of capital gains tax, which was introduced at the same time. The corporate rules provide relief from capital gains tax and normal tax consequences. In addition, the corporate rules defer the payment of dividends tax, transfer duty, donations tax, securities transfer tax and value-added tax. In this report the corporate rules contained in the Income Tax Act are critically analysed to ascertain whether the rules are economically and administratively efficient and whether the purpose and needs for which they were introduced, are met. In the current study, where the corporate rules are found to be inefficient, suitable recommendations are made. In analysing the corporate rules, the recommendations made during March 2018 by the Davis Tax Committee in its report to the Minister of Finance, are considered. In addition, this research investigates whether successive transactions utilising the corporate rules could be implemented, as well as whether the general anti-avoidance rules contained in the Income Tax Act could apply to corporate rule transactions. A group company taxation regime, as an alternative to the corporate rules, is also briefly discussed. The report concludes that the corporate rules currently achieve the purpose for which the rules were implemented, that is, to alleviate unforeseen hardship caused by the enactment of capital gains tax in 2001, as well as normal tax and to encourage domestic restructuring of South African groups of companies to promote growth. Ultimately, the shortcomings of the corporate rules, such as the mechanical nature of the rules due to the rules being rules based, possible double taxation and the various complex antiavoidance provisions should be considered further by the legislature.Item A critical evaluation and comparative study on section 10(1)(o)(ii) foreign employment exemption(2022) Margolius, CarynIn 2001, South Africa changed to a residence-based system of taxation to align with international best practice and to limit the opportunities for tax arbitrage (Manuel, 2000, 36.). Section 10(1)(o)(ii) of the Income Tax Act 58 of 1962 (the Act) was amended to exempt foreign employment income of a resident if the resident was outside his or her country of residence for a period exceeding 183 days (National Treasury, 2000, 5). National Treasury cautioned against this exemption and in the Explanatory Memorandum on the Revenue Laws Amendment Bill, 2000 it was stated, The effect of the relief measure will be monitored to determine whether certain categories of employees abuse it to earn foreign employment income without foreign taxation. The main purpose of the exemption was to prevent double taxation from occurring, considering the limited number of double taxation agreements concluded between South Africa and other countries at the time (Mzizi, 2017, 10). The exemption created an opportunity for double non-taxation where the source country imposes little or no tax on employment income and no tax was applied in South Africa (Legwaila, 2019). Consequently, in the Budget Review 2017, National Treasury sought to amend the provisions of s 10(1)(o)(ii) as it was seen to be ‘excessively generous’. At first, National Treasury proposed to repeal the exemption, however after much consultation and public comments received, National Treasury introduced a capped exemption limited to R1 million in line with the principle of fairness and progressivity (National Treasury, 2017b, 7). Subsequently, in the 2020 Budget Review, the exemption threshold was revised upwards to R1.25 million per year from 1 March 2020 to encourage all South Africans working abroad to maintain their ties to South Africa. In this report, the researcher investigates the qualifying requirements and implications of s 10(1)(o)(ii) on South African resident expatriates, their employers (local and foreign) and the South African Revenue Service (SARS).Item An analysis of Circular Economy disclosures and the impact on Integrated Reporting(2022) Mahadew, KashmiraThe impact of global markets on the natural environment has resulted in a rapid depletion of resources. The circular economy (CE) model is a sustainable business model which aims to stay within the limits of the planet and reduce the impact on the environment by decreasing excessive resource use, minimizing waste, and converting end-of-life goods into resources for further use. This research aims to investigate disclosures by Johannesburg Stock Exchange (JSE) listed companies by analysing the type of investments in developing and achieving a CE, the quality and nature of disclosures on a CE, and the related impact on the six capitals. A content analysis method was used to analyse a sample of integrated reports of JSE listed companies. Correlation coefficients were used to evaluate the relationships between the CE disclosures and 21 identified elements, and the Kruskal-Wallis and Jonckheere-Terpstra tests were used to evaluate the significant differences among industries, company size, and year when analysing the CE disclosures. This paper finds that a significant number of CE disclosures are located in the value creation and business model location of the integrated reports, the quality and type of investments to achieve a CE model tending to differ across different industries, company sizes, and year. The research revealed that CE disclosures are becoming more prominent in South Africa. The quality of reporting is moderately low. Industries which have a higher environmental impact and have extensive physical infrastructure tend to have better disclosure on their investments in the six capitals than service-driven industries. Both the quantity and quality of disclosures are better for larger companies. The research finds that companies are increasingly investing in research and development, and partnerships with research groups, think tanks and other third parties to drive their CE adoption. This paper contributes to both corporate reporting and the CE concept by evaluating the link between a CE model and integrated reporting and the impact which CE disclosures have on the six capitals of a companyItem An analysis of the section level of detail and disclosure of the six capitals in the strategy, risk and performance sections of the integrated reports of top JSE-listed companies(2022) Steenkamp, Amy Catherine ReginaPurpose: This thesis assesses the level of detail of the strategy, risk and performance sections of 240 integrated reports of 30 companies selected from the top 100 JSE-listed companies by market capitalisation on 09 June 2021 for their 2013 to 2020 financial years. It also assesses whether the six capitals of the IIRC’s Framework are addressed in these sections. Method: A disclosure checklist was developed interpretively, based on relevant literature. Content analysis was used to evaluate the level of detail of the respective sections of the sampled companies’ integrated reports and whether the six capitals are addressed in these sections. Descriptive statistical tools, Kruskal-Wallis H tests, Jonckheere-Terpstra tests, and correlation tests (Spearman’s rho and Kendall’s tau-b), were performed to analyse the data and determine if there are significant associations between year, industry, market capitalisation (grouping variables), and level of detail and capital presence (dependent variables). Key findings: There was a great level of detail in the strategy, risk and performance sections of the integrated reports. In the respective sections, the companies mentioned their strategy, risk and performance factors. They provided descriptions of these factors and/or provided company specific results on the factors mentioned. Significant positive associations were evident between level of detail and the grouping variables. The six capitals were often included in the sections. On average, companies included between 4 and 6 capitals in all integrated report sections. The presence of financial capital and social and relationship capital were prominent in the various sections. The presence of natural capital was the least referenced of the six capitals. Significant differences were evident between the grouping variables and various capitals in the sections. Contribution: This paper is an exploratory study which assesses the level of detail and capital presence in specific integrated reporting sections. The longitudinal nature of the study (which coincides with the publication of the IIRC’s Framework (2013) and King IV (2016)) can add to the limited number of studies on integrated thinking and reporting. A basic level of detail analysis of the strategy, risk and performance sections may be useful to understand content which firms are relaying about their value creation processes. This paper can assist stakeholders in better understanding integrated thinking through the IIRC’s six-capital model.Item An analysis of where the transfer pricing rules and the controlled foreign company rules interact: application to intra-group loans(2022) Kamoetie, DiwanIt has become increasingly important for South African tax residents to correctly reflect an arm’s length price for which they transfer goods or services, and in the case of intellectual property, grant a use, right of use or permission to use of the intellectual property, to nonresidents, as this may attract adverse tax consequences for failure to do so. This is of particular importance when funding cross-border operations. Furthermore, the ownership structure of the non-resident is also of importance, as the ownership structure adopted by the non-resident may have South African income tax consequences, for the South African tax resident, if that non-resident is a connected person to the South African tax resident,1 the nonresident is a controlled foreign company as defined in section 9D of the Income Tax Act, or both instances are applicable. Therefore, the controlled foreign company rules and the transfer pricing rules must be considered,2 amongst other factors, when engaging in crossborder tax structuring to correctly structure these transactions. This research report critically examines the South African transfer pricing rules and South African controlled foreign company rules and discusses the overlap of the two sets of rules. This analysis goes further in identifying the means to manage transfer pricing risk using a controlled foreign company in relation to a South African taxpayer, with a specific focus on intra-group loans.Item An analysis of whether the two‐pillar Solution is an equitable solution for developing countries in addressing tax challenges of a digital economy(2022) van Dyk, TertiaThe purpose of this research report is to determine whether key elements of the Organisation for Economic Co‐operation and Development (OECD) Two‐Pillar Solution are equitable to developing countries. The key principles contained in the Two‐Pillar Solution will be critically discussed to determine whether these rules are designed in a manner that: I. Allows for appropriate and acceptable tax competition for developing countries to fairly compete with larger economies; and II. Ensures that multinational enterprises pay adequate tax in the developing countries where they operate, extract value and generate profits. The report seeks to understand who the key role players are, what base erosion and profit shifting (BEPS) challenges have arisen caused by the digitalisation of the global economy, and how the OECD Two‐Pillar Solution seeks to address these challenges. This analysis is conducted through the lens of developing countries, which are vulnerable to inequitable allocation of taxing rights. The report seeks to assess whether the key elements of the Two‐Pillar Solution are consistent with existing international tax rules that govern the allocation of taxing rights and, in some instances, challenges whether the existing rules on international tax are equitable to developing countries in the first place. The role of tax policy and tax competition from the perspective of developing countries will be discussed. Finally, the effectiveness of alternative mechanisms to address tax abuse will be assessed, including digital services tax and controlled foreign company rules, will be examined.Item An assessment and comparison of South Africa’s retirement tax reforms(2022) Setshedi, Sphiwe JohannahThe purpose of this research is to establish whether the retirement tax reforms effected in South Africa are beneficial for individuals. The research analyses whether individuals are better off, given the introduction of the amendments and investigates whether there are any shortcomings from a policy perspective. This paper also takes into consideration whether policy-makers could have implemented a different set of retirement tax reforms. The retirement tax reforms were formally introduced in the Taxation Laws Amendment Bill of 2019 (hereafter TLAB). The main purpose was to ensure uniform tax treatment across the various retirement funds (Taxation Laws Amendment Bill of 2019). In an attempt to achieve these objectives, the tax treatment of provident funds was amended, as follows (Taxation Laws Amendment Bill of 2019): • Employer contributions to provident funds would be treated as a taxable fringe benefit in the employee’s hands. • Members of provident funds, similar to other retirement funds, are required to annuitize upon retirement. The research also investigates whether South Africans are saving enough for retirement, as well as the incentives adopted by the South African government to promote savings for retirement and beyond. During the 2021 Budget Speech, Finance Minister, Tito Mboweni, emphasised that “the proposed amendments to Regulation 28 seek to make it easier for retirement funds to increase investments in South Africa’s infrastructure” (Mboweni 2021). He also reiterated that “provident fund members will continue to enjoy a tax deduction on their retirement contributions, thus continuing the objective of encouraging people to save more towards their retirement” (Mboweni 2021). Once the above has been investigated, South Africans’ retirement tax reform is then compared with the retirement tax regimes of other developing African countries, namely, Namibia and Nigeria’s retirement tax regimes. This comparison is conducted as a means of assessing whether South Africa’s retirement tax provisions are better than the countries mentioned above. 4 This will prove that South Africa’s retirement tax reform is developing, and that government is set on modernising the tax provisions for the benefit of individual taxpayers.Item An evaluation of the use of professional judgement in corporate valuations in South Africa.(2022) Gaibie, TasneemCorporate valuations can be considered the heart of finance with sensible financial and investment decisions depending largely on the value of a firm. Investment analysts rely on corporate valuation estimates to make investment decisions while financial managers use these corporate valuations for capital budgeting as well as merger and acquisition activities. Global merger and acquisition and capital market activity has increased over the last decade with a significant number of deals being concluded on an annual basis. While the number of deals in South Africa make up a minority portion of the total global deals, foreign investors have shown an interest to invest in South Africa. Whilst finance research makes extensive reference to firm value, the professional judgement that is applied in its calculation has not been interrogated within the South African market. The focus of this research study was to examine the use of professional judgement within valuations in the South African context. The research aims at identifying aspects in corporate valuations requiring professional judgement and understanding why this professional judgement is necessary. Explanatory sequential design is the mixed method research technique that was employed to conduct this research. According to this design, the researcher begins by conducting a quantitative study and follows up with subsequent qualitative techniques to help explain the quantitative results. The research was carried out in four parts. Part one involved collecting data from respondents by means of a survey. A sample of 30 experts were used. The small population size in terms of the number of professionals performing valuations in South Africa made it difficult to select a larger sample. Part two involved descriptive statistical analysis of the survey responses. The content of the surveys was summarised using descriptive statistics and were used to inform further questions for the semi-structured interviews. Part three involved semi-structured interviews to add richness, reliability and to corroborate the trends identified. The researcher employed a phenomenological methodology to identify the perception of valuation experts regarding the judgement that they are required to apply when performing corporate valuations. The data collected was analysed by identifying common themes and arriving at a description relating to the phenomenon based on their experience. A sample of six valuation practitioners from the original survey sample were interviewed. While a larger sample would provide a broader range of data, obtaining a detailed account of the experience of the six valuation practitioners was sufficient to uncover the core elements of the professional judgment applied in the corporate valuations that they perform. During part four, the results and findings were interpreted to answer the research question and identify areas of future research. The results of this research indicate that professional judgement is needed when determining which valuation models to apply, when calculating or applying certain inputs within the theoretical models and when considering adjustments that are processed to the valuation models. Industry nuances is a key reason for why professional judgement in necessary in South African valuations. This along with the limited number of companies listed on the Johannesburg Stock Exchange, make it more difficult to identity directly comparable companies which can be used for input estimation within the valuation models. In an emerging economy like South Africa, there is uncertainty associated with future growth and market conditions. Richness of market information and suitable benchmarks are also challenges faced in the South African economy. Market information and future growth are key inputs within a corporate valuation model. The challenges and uncertainties around these inputs requires the valuation practitioner to apply their professional judgement. Despite the challenges and uncertainties around valuation inputs, valuation practitioners are all in agreement that having a standard valuation model structure in place is beneficial and creates consistency in the approach to performing corporate valuations. Unfortunately, the level of professional judgement applied within these corporate valuation models can have a material impact on the final value and ultimately impact the management decisions which are made based on these valuations. Based on this, we can conclude that estimating valuation parameters is a key aspect that needs to be considered by both valuation practitioners and academics. This research report contributes by identifying challenges and uncertainties which necessitate the use of professional judgement within corporate valuations. Identification of these challenges and uncertainties can assist valuation practitioners to place more emphasis on the inputs which have a large level of uncertainty associated with them. The report can further assist valuations practitioners to understand what is considered best practice for corporate valuations in South Africa. Identifying “best practices” and standardising the estimation practices will be beneficial to valuation practitioners by reducing the differences in corporate valuations. More accurate valuations will result in better information, assisting with more accurate and informed financial decisions being made.Item An exploratory study of biodiversity, ecological and extinction reporting among JSE-listed entities(2021) da Mata, Dino MarcoThe purpose of this research is to explore the level of biodiversity, ecological and extinction reporting among 50 Top JSE-listed entities and the possible determinants of biodiversity, ecological and extinction reporting. This is important because unprecedented biodiversity loss is a major ecological and business risk affecting South African organisations. The thesis is grounded in an interpretive approach to collecting and analysing data and employs a mixedmethods approach. Qualitative content and thematic analysis were used to evaluate what content companies disclose in their integrated reports and to gauge the level of biodiversity, ecological and extinction reporting over the 2018 to 2020 reports. This was followed by the use of quantitative methods to test for associations between identified determinants and the level of reporting. The findings show that, overall, the level of disclosures have increased since 2018. Unfortunately, most of the disclosures are still vague, generic or focus on positive information. The findings also showed that there is a significant relationship between the type of industry and the level of biodiversity, ecological and extinction reporting. Interestingly, the study found that secondary listed JSE companies have a much higher level of biodiversity, ecological and extinction reporting. The research found that there is a significant relationship between the level of reporting and if the company has a biodiversity partnership or has disclosed the importance of biodiversity. Suggesting that companies are beginning to understand the need to protect biodiversity and prevent further biodiversity loss. This change in mindset is, unfortunately, occurring at a slow pace and more needs to be done by companies, stakeholders and society in general. This thesis is the first study to explore biodiversity, ecology and extinction elements concurrently. It is also the first South African study to explore biodiversity, ecological and extinction reporting across a range of industries.Item An overview of the moderating effect of a simplified tax administration system on compliance and taxpayers’ perceptions(2022) Manganya, Andile KhulekaniThe Tax Administration Act and systems are the most important pieces of legislation and mechanisms that should be in place and need to be executed with thorough care, efficiency, and considering the taxpayer’s attitude, behaviours, and the general economic and tax environment. In the South African context, there is a need to increase the collection of revenue and enforcement to provide quality services. There are still challenges and uncertainties across multiple tax disciplines, and difficulties in the implementation of these tax laws. Therefore, there are misalignments and challenges within the administration processes, both from a legislative and practical perspective. Several significant changes have been identified and has led to the improvements within the South African tax system, these changes to the system arise from various interventions such as “remodeling of the independent tax and customs administration.” These and many other significant changes have aided and contributed to a relatively robust and competitive tax system. The current South African administration system is stable and favourably compared with those of many developed and emerging economies. The study concluded and noted multiple variables that can be identified as misalignments and gaps within the administration, these range from both operational and legislative perspectives, such as the audit process, SARS service delivery during COVID-19, granting extensions, difficulties within the use of E-filing, debt management process, difficulties around the implementations of the health promotional levy, SARS in working with various stakeholders and regulatory bodies and many more other issues. As a result, tax compliance depends on many factors, other than deterrence, and the perceptions of taxpayers are more likely to be influenced by these factors and gaps within the tax administration system. Therefore, it is important to work towards creating a balance in our tax system by improving the administration system, while simultaneously bringing in more revenue collection without impairing the taxpayer’s behaviour and perceptions.Item An analysis of entrepreneurial intentions of future Chartered Accountants in South Africa(2020) Mshunqane, XhantiThe purpose of this study was to evaluate the entrepreneurial intent of future Chartered Accountants (CAs) in South Africa. It was inspired by the renewed interest for entrepreneurship to become a possible tool to rectify the poor macroeconomic conditions in the country. A questionnaire was sent to fourth year HDipAcc students and to trainees on the CA training programmes in various accounting firms. Exploratory factor analysis was used to identify the factors that influence entrepreneurial intentions. Six key factors were found to influence the entrepreneurial intent of future CA’s, namely, family support, perceived desirability and feasibility, locus of control, career mentors, role model and community support. Two tailed t -Tests were also conducted to determine whether there were significant differences for each factor in terms of the gender, level of study (4th year / Trainees in Practice) and place of practice (TIPP/TOPP) of the respondents. The t -Tests revealed significant differences for perceived desirability and feasibility, locus of control and the role model and community support factors. Furthermore, it was also found that family support is a key factor in determining the desirability and feasibility of starting a new venture. The study highlights the factors that drive entrepreneurial intention in order to encourage entrepreneurship as a career path among Chartered Accountants. Finally, the study concludes by making suggestions on how to foster entrepreneurial intentItem An analysis of the deductibility of interest expenditure rules in South Africa(2019) Pillay, KerushaTaxpayers are broadly financed in two ways, namely through the use of debt and equity. The returns on capital and debt are treated differently from an income tax perspective (SARS 2013). The interest expense incurred by taxpayers in the production of income by a person carrying on a trade, are deductible in determining taxable income, subject to certain conditions and limitations. The number of provisions contained in the Income Tax Act of 1962 (the Act) which deal with the tax treatment of interest income and interest expenditure have gradually increased over time. There are numerous aspects to be borne in mind by resident and foreign companies when considering the income tax and withholding tax implications which may arise in respect of transactions giving rise to interest income and interest expenditure (SAICA 2015). This is affirmed by the number of provisions in the income tax act dealing with the deductibility of interest primarily dealt with in section 24J of the Act as well as indicated by the 2014 amendments to section 8F, the introduction of section 8FA, sections 23M and 23N into the legislation. The purpose of this report is to assess whether the Department of National Treasury (National Treasury) have taken the number of provisions of the deductibility of interest too far.Item An analysis of the implications of the amendment of the section 10 (1)(0)(ii) foreign remuneration exemption from the perspective of the South African economy, global employer and expatriate(2019) Swart, Johannes PetrusThe purpose of this report is to evaluate the amendment of the Foreign Remuneration Exemption contained in s 10(1)(o)(ii) of the South African Income Tax Act 58 of 1962 (the Act). This report firstly examines the history, definitions and concepts applicable to the relevant exemptions. South Africa has long been regarded as the starting point for investors to expand into Africa (la Grange, da Silva, Madden, Gouws, Duffy, van Wyk & de Villiers 2017:6). Therefore this report will examine the implications, resulting from the above mentioned amendment, on the South African economy, its taxpayers (employees) and employers. In addition, this report will be from a global mobility perspective therefore making reference to expatriates and global employers. As the Foreign Remuneration Exemption is not the only tax relief mechanism available to taxpayers, the report will also examine the other available tax relief mechanisms (for example double taxation treaties and foreign tax credits) and their implications. The ultimate purpose of this report will be to conclude, from a global mobility perspective, on whether the amendment to s 10(1)(o)(ii) will have a negative impact on global employers, expatriates and the South African Economy.Item An analysis of the income tax provisions applied to the tax exemption for Foreign Employment Income(2021) Gumede, WendyThe taxation of foreign employment income has been a major issue in South Africa and the amendment toS10(1)(o)(ii) of the Income Tax Act 58 of 1962 (‘the Act’) has presented more complications. S 10(1)(o)(ii) stated that all income received in respect of services performed outside of South Africa was free from taxation in South Africa if the employee performing such services was based outside of South Africa prior to 01 March 2020:“...(aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and (bb) for a continuous period exceeding 60 full days during that period of 12 months, and those services were rendered during that period or periods...”1 (Income tax Act 58 of 1962) In the 2017 budget speech the finance minister, Pravin Gordhan, highlighted that in 2016 there had been a R30 billion shortfall in taxes collected. This was primarily due to Personal Income Tax, Value Added Tax(VAT) and Customs Duties. Amongst other proposals to reduce the shortfall, he proposed that the S10(1)(o)(ii) exemption of the Act be repealed as the exemption on foreign employment income appeared to be “excessively generous”. That meant that foreign employment income would be fully taxed, with the only relief available being a tax credit for foreign taxes paid. Several members of the sector and the general public wrote to the finance minister requesting that the draft change be reconsidered. The National Treasury responded and took into consideration some of the comments submitted by the public. One of the National Treasury’s response was to extend the date that the amendment to S10(1)(o)(ii) was set to come into effect to 01 March 2020.Another response was to increase the value of the amount to be exempted to R1.25 million instead of R 1 million for the year of assessment ending February 2021( National Treasury 2017a). The purpose of this report is to discuss how the amendments of S 10(1)(o)(ii) of the Act came about, how it will impact South African expatriates and possibly have them consider ceasing residency in South Africa, the benefits and process of ceasing residency. It is also to examine the legislative, administrative and judicial approaches of the taxation of foreign employment income. This report includes a comparative calculation of a South African tax resident working in another country compared to when that individual has ceased residency and lives in a country that South African expatriates are known to likely emigrate to as they either already work there or a country that has a strong economic structureItem An analysis: the possible consequences of a potential wealth tax on immovable property in South Africa(2019) Ignatova, AlbertaThe Davis Tax Committee issued a media statement on 25 April 2017, calling for written submissions on the introduction of a possible wealth tax in South Africa (Davis Tax Committee, 2017, p 1). The discussion of a potential wealth tax came two months after an increase applying to the top income tax bracket for individuals by 4% to 45%, resulting in an effective capital gains tax rate for individuals of 18% (ENS Africa, n.d. par 2). This should be seen on the back of the capital gains tax increase of nearly five percentage points from 13.32% in the 2014 year of assessment to 18% in 2017 (ENS Africa, n.d. par 2). The Davis Tax Committee had been tasked to review South Africa’s tax system and had consequently launched a public debate on one of the most controversial possible moves on its agenda, wealth tax (Reuters, 2017, par 1). There is an ongoing debate among South Africans on whether the government should implement such a tax to lessen the glaring inequality in Africa’s most industrialised economy (Reuters, 2017, par 2). South Africa is grappling with weak economic growth and unemployment of more than 25% and the minority still controls a disproportionately big share of the economy (Reuters, 2017, par 9). The public debate on wealth taxes often focuses on redistribution of land, and consequently one of the potential forms of wealth tax could be a wealth tax on property (Davis Tax Committee, 2017, p 1). As taxes on land and property have both fiscal and non-fiscal effects, it is therefore useful to analyse the possible positive and possible negative impact of the potential wealth tax on immovable property on the revenue authority, and taxpayers. The aim of this research report is to analyse the possible consequences of the potential wealth tax specifically with a focus on immovable property. Firstly, consideration will be given to what the possible definition of immovable property could be. Secondly, the potential types of wealth tax on immovable property will be analysed together with existing wealth taxes imposed by the Income Tax Act 58 of 1962 (the Act), municipal legislation (Municipal Property Rates Act, 2004), Estate Duty Act (Estate Duty Act 45 of 1955) and Transfer Duty Act (Transfer Duty Act 40 of 1949). Thereafter the research will consist of an objective analysis of the possible positive and possible negative consequences of the potential wealth tax on immovable property.Item Anti-avoidance provisions limiting interest deductions: a comparative analysis between the OECD and South Africa(2021) Williams, NebrescaCompanies have two options to finance their operations: equity injections from their shareholders or loans (SARS, 2013, p. 3). The cash outflows as a result of these two methods of financing are dividends and interest respectively (SARS, 2013, p. 3). Since dividends are not allowed as a tax deduction in South Africa, it is clear that companies would benefit by financing their businesses with debt rather than equity since the interest expense on a loan is deductible for tax purposes under s 24J of the Income Tax Act 58 of 1962 (the Act)(SARS, 2013, p. 3). A study completed by de Mooij, R. & Hebous, S. suggests that debt/asset ratios increase by at least 0.14% -0.46% for corporations every time there is a 1% increase in the tax rate, which proves company tax bias towards debt (Hebous & de Mooij, 2017). Using debt rather than equity also allows for the existing owners in a company to raise funding without the possibility of losing control of the company, which may be the case when equity instead of debt funding is utilised (Halka, et al., 2017, pp. 182-183).For multinational enterprises, it may be easier to raise debt funding from a company within the same group of companies versus debt obtained from external parties such as banks as they can take advantage of internal synergies (Reynolds & Wier, 2016, p. 4) this creates a problem for tax authorities in certain instances. The reason for concern is that some multinational enterprises choose to engage in excessive debt financing particularly from companies within their group to charge high interest rates to those branches situated in high tax jurisdictions (Palanský, 2019). Some groups issue loans from a company based in a low-tax jurisdiction allowing the borrower to deduct their interest costs in the high tax jurisdiction resulting in large interest deductions that lower not just the net tax bill for the group but also erodes the tax base in the high-tax jurisdiction (OECD, 2017a, p. 23). This research report will review how multinational enterprises use debt funding as an opportunity to avoid tax and what the regulations are in South Africa to protect the tax base in comparison with the recommendations from the Organisation for Economic Co-operation and Development. Section24J of the Act governs the fundamentals of interest deductibility. Section 31(2) of the Act limits interest deductions to the arm’s length amount of cross-border debt and interest. Section 23N of the Act limits interest deductions by a company on debt obtained to purchase assets or shares in reorganisation and acquisition transactions. Section 23M limits the deductibility of interest on debt from a foreign person that is not subject to tax in South Africa and is in a controlling relationship with the resident borrowerItem Application of South African VAT on e-commerce transactions(2017) Xaba, Nduduzo JustifiedThe present study sought to investigate self-selection among internal and international migrants in Gauteng by making use of the Gauteng City Region Quality of Life Survey data. The present study also sought to disentangle the effects of observed and unobserved characteristics in the self-selection of migrants by conducting Oaxaca-Blinder decomposition on overall employment and self-employment outcome variables. Preliminary descriptive statistics indicated that international migrants experienced markedly higher levels of employment than both locals and internal migrants driven by higher rates of informal and self-employment. System GMM analysis of pseudo panel data confirmed these results and showed that international migrants had a higher probability of employment and self-employment. Oaxaca Blinder decomposition indicated that unobserved characteristics explained the greatest share of the differences in the rates employment and self-employment of locals, internal migrants and international migrants. These results provide evidence for the positive selection of international migrants to Gauteng on unobservable characteristics relevant to the region’s labour market. Key Words Self-Selection; Migration; Self-Employment; EmploymentItem The arm’s length pricing for intra-group services – transfer pricing(2017) Lee, Yi YingThe purpose of this research report is to identify any improvements that can be made to the South African transfer pricing legislation for intra-group services. South Africa’s transfer pricing legislation for intra-group services will be compared to Aligning Transfer Pricing Outcomes with Value Creation, Action 8-10, 2015 Final Reports, OECD/G20 Base Erosion and Profit Shifting Project (‘BEPS Action Plan’) released by the Organisation for Economic Co-operation and Development (‘OECD’). The Action 10 of the BEPS Action Plan introduces a simplified transfer pricing approach for low value-adding intra-group services. The simplified approach aims to reduce base erosion payments through excessive management fees and head office expenses (OECD, 2015:141). According to Verlinden and Katz (2015:1): ‘… the simplified approach lowers the burden on multinational enterprise groups to demonstrate the beneficial nature of the low value-adding activities for other MNE group members; and allows for an elective approach for reducing the administration involved in the pricing of low value-adding services. The OECD is achieving an appropriate balance between theoretical sophistication and practical application that is commensurate with the tax at stake in the countries paying and receiving the charges … .’ This approach will benefit tax authorities with limited resources in performing transfer pricing audits enabling them to verify the arm’s length nature within the intra-group services charge (Watson, 2015:8). Key words: Anti-avoidance, BEPS Action Plan, Transfer Pricing, Arm’s Length Method, Arm’s Length Price, Intra-Group Services, Low Value-Adding Intra-Group Services, Comparable Uncontrolled Price Method, Resale Price Method, Cost Plus Method, Transactional Net Margin Method, OECD Guidelines, OECD.