3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item An analysis of tax challenges arising due to digitalisation in South Africa(2019) Mochusi, ThabangSince e-commerce started, a lot of studies on its taxability and possible solutions have been done with the aim of enforcing compliance to protect governments from eroding tax bases. The traditional way of doing business is rapidly changing and companies are using e-commerce to trade with each other. Goods and services are exchanged digitally using the internet and various software without physical presence in the state which the goods and services are being provided. As a result, the current traditional tax rules do not effectively address the issue of digitalised business models. At present the enforceability of relevant tax legislation to cater for digitalisation remains a challenge in South Africa and globally. Hence, the focus of this study is to critically analyse the challenges which are brought about by digitalisation to South African tax and recommendations on how the tax rules can be modified to effectively address taxation of digital transactions. It has been reviewed and found that the greatest challenge that relate to fourth industry revolution from a tax perspective is the enforceability of the relevant tax legislation that was amended to make provision for digital transactions by South Africa. On the other hand, digitalisation also brought with its tremendous opportunities from an enforcement perspective as information can now be collated and linked in order to identify and detect evasion or avoidance with the use of specialised software which tax authorities can use. The research gives details of these main challenges and recommendations to tax policy makers.Item The taxation of trusts: a comparative study of South Africa and the United Kingdom(2018) Rudd, ReinhardTrusts are widely used both in South Africa and internationally for a variety of different purposes. In South Africa, trusts have come under fire from National Treasury as a result of what is perceived to be the use of trusts as a tax avoidance vehicle. Not only in South Africa, but also globally, the trust has become somewhat notorious for its use as an instrument for tax avoidance and the concealment of wealth. In South Africa, National Treasury has responded to these concerns by proposing a number of amendments to the existing tax legislation aimed at curbing the use of trusts for tax avoidance purposes, some of which have been severely criticised by the public. The fact that the use of trusts to avoid tax is an international phenomenon raises the question on how jurisdictions other than South Africa are taxing trusts and whether the South African legislature can apply the principles used in other jurisdictions in determining the direction that our own legislation should take. In this report, this is assessed through a comparative analysis of the rules relating to the taxation of trusts in South Africa with those of another jurisdiction, namely the United Kingdom. At its outset, this report provides an overview of the history of the modern trust of South Africa and the United Kingdom, both of which have their roots in the English common law trust. This is followed by an analysis of the taxation regime relating to trusts in each state. Finally, a comparative analysis is done of the taxation of trusts in each state, with the aim of determining the main differences between the taxation regimes applied in each state.Item A critical analysis of the South African tax and exchange control implications of royalty payments to non-residents(2018) Kubyane, Mahommed MalepengUnder the current tax regime in South Africa, non-residents are taxed on amounts received or accrued by such person from a source within the Republic. The general principle is that income derived from royalties on the exploitation of intellectual property is regarded as sourced in South Africa if the intellectual property was developed in South Africa. South Africa imposes withholding taxes on royalties paid to non-residents on the exploitation of intellectual property regardless of actual source through the deeming source provisions incorporated in the Income Tax Act 58 of 1962. Withholding tax provisions are introduced in many tax systems across the world to facilitate the collection of taxes from non-residents and to limit the tax base erosion of that country through the tax deduction claimed by the South African taxpayer. This research intend to critically analyse the definition of ‘royalty’ in terms of the current tax legislation in South Africa in the context of withholding taxes on royalties. The question arises mainly due to the difficulty in the interpretation of the definition of royalty as defined in section 49A of the Income Tax Act with respect to amounts accrued or received by foreign persons for the imparting of knowledge and information, widely known as ‘know-how’. The research will also provide a review of the nature of payments for computer software programs that are technically for the use or right of use of that computer software program. Other tax considerations covered in this research includes a discussion of the concept of effectively connected with a permanent establishment and some of the discrepancies between the domestic law and double tax agreements when a foreign person seeks to obtain relief for a reduction in the withholding tax rate. This second part of this research report provides a comprehensive understanding of the exchange control regulations applicable to South African residents on the payment of royalty payments to non-residents. Furthermore, the researcher analyses the penalties that arise because of noncompliance with the regulations and what the impact is on the parties’ contractual obligations.Item The effectiveness of the introduction of Section 7C into the Income Tax Act to curb the avoidance of taxation through the use of trusts(2017) Mukoma, Tshepisho LucyTrusts 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.Item Standards and programmes designed to mitigate tax evasion: an international appraisal(2017) De Souza, Michelle AdrianaAs 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.