Browsing by Author "Roeleveld, Jennifer"
Now showing 1 - 20 of 69
Results Per Page
Sort Options
- ItemOpen AccessA comparative analysis of the foreign tax credit system of South Africa, with specific reference to corporate taxpayers and technical service fees(2021) Allanson, Douglas; Roeleveld, JenniferThe growth in the worldwide services economy combined with an expansion by South African multinational enterprises into the African market has often resulted in increased instances of double taxation for South African corporate taxpayers, as a result of the fact that the majority of the jurisdictions in Africa apply a withholding tax on technical service income paid to nonresidents. The ability to claim relief for the juridical double taxation suffered as a result of the withholding tax applied is governed in South African tax legislation by section 6quat of the Act. This paper analyses section 6quat of the Act with particular reference to the relief available and unavailable to taxpayers for foreign taxes paid in relation to withholding taxes on technical service fee income, in treaty and non-treaty scenarios. The issue of continued double taxation, despite the relief mechanisms of section 6quat, resulting from source issues and the provision of services remotely from South Africa or differing interpretation on the application of Double Taxation Agreements by South Africa and the foreign jurisdictions for example, are also reviewed. South Africa's relief mechanisms are then compared to the relief mechanisms of 5 other jurisdictions (peer nations who export services) to determine if any of these jurisdictions have more advanced ideas for the reduction of juridical double taxation in the context of technical service fees. It is determined in the final analysis that South African taxpayers are not alone with regard to the problem of unrelieved double taxation despite the best efforts of local legislation to provide some form of relief. None of the jurisdictions reviewed have mechanisms in place that provide full relief whilst also protecting the tax base. A number of recommendations are given for ways that South Africa could possibly improve the situation and reduce instances of juridical double taxation. The most obvious being a wide treaty network, with up-to-date treaties, with as many jurisdictions as possible, with a technical services article.
- ItemOpen AccessA critical analysis of South Africa’s domestic nexus requirements for the taxation of cross-border services(2019) Dunjane, Kate; Roeleveld, JenniferThe taxation of cross-border services has for a long time been a contentious topic of discussion across the international tax arena. The controversy of this debate stems predominantly as a result of the long held notion of the permanent establishment as a nexus requirement for source taxation; in a world where global trade, especially in services, can be significantly conducted without the need to establish a prolonged physical presence in the state of source. This is aided by digital technologies and advancements in telecommunications that enable business activities to be carried on remotely. Thus, significant economic activity can take place in a state without meeting the minimum taxable presence required to justify source-based taxation. The problem is that with cross-border transactions between developed and developing countries, where the developing country is typically a capital-importer of services, that developing country will never have the jurisdiction to tax active service-based business income, since the threshold relied on is high, relative to how global trade is conducted today, as it is predominantly dependent on satisfying a physical presence requirement. This study examines the nexus requirements contained in South Africa’s domestic legislation for the taxation of service fee income earned by non-residents. The analysis highlights how the threshold relied on to justify source-based taxation in South Africa is high, since it requires the physical presence of the service provider within the Republic. The study further highlights how South Africa’s policy choice in this regard is akin to a residence-based taxation system, by drawing parallels with the OECD model, which is renowned for its suitability to net capitalexporting and developed economies. Alternative proxies used to tax cross-border services, as noted in the United Nation’s Article 12A, the SADC Model Treaty and the domestic legislation of some BRICS member states, are introduced to the study as comparatives. The general finding hereon is that these alternative nexus requirements are predominantly akin to a policy choice slanted towards source-based taxation, contrasted by the residence-based approach evident in South Arica’s policy choice. Furthermore, the study conducts an analysis of the development of the taxation system in South Africa. The analysis reveals that South Africa’s policy choice to tax active income was largely influenced by the desire to ensure that South African tax laws were internationally compatible at the time when the South African economy was reintegrated with the global economy, postdemocratisation of the Republic. This led to the introduction of the permanent establishment 6 concept into South African domestic law, notwithstanding the knowledge of a not too distant future, where global trade would be conducted via digital technologies and telecommunications, which would render the requirement for physical presence to conduct trade obsolete. The objective of the study is to provide policy recommendations that support a gravitational pull towards more of a territorial-based taxation system. The impact thereof is envisaged to contribute to the strengthening of South Africa’s domestic source rules; the broadening of South Africa’s tax base and the enhancement of the competitiveness of South Africa’s economy.
- ItemOpen AccessA critical analysis of statutory deeming in the context of the interaction between South Africa's controlled foreign company regime and model-based bilateral tax treaties(2020) Daniels, Imran; Hattingh, Johann; Roeleveld, JenniferFiction in domestic tax law is a peculiar legal construct. Set in contradiction, the result is plainly counter-factual. The question arises as to what the fiction means when constructed in the context of tax treaties? This minor dissertation draws a comparative analysis between the statutory construction of two opposing international tax treaty cases, one more recent than the other, in regard to the effect of one particular fiction in domestic tax law – the ‘as if'. In 1997, the United Kingdom court of appeal ruled on Bricom Holdings Limited v IRC. The finding from that decision surrounded the interpretation of the ‘as if' fiction in British Controlled Foreign Company (CFC) rules. In that case, the court found that the reference to ‘as if' was a purely notional definition based on fictional assumptions. These assumptions resulted in a product of artificial calculation, such that when constructed in CFC rules, resulted in a tax charge that was not a charge on the CFC's actual income, but a notional amount based on a notional definition of that income. The notional amount could, therefore, not be provided relief by way of tax treaties. In 2000, South Africa followed the British court's reasoning by updating its domestic Controlled Foreign Company rules with the same ‘as if' terminology. In 2018, the principle which formulated that longstanding argument appeared to be rejected by the same British court in the decision of Fowler v HMRC. The court of appeal reached the opposite result by finding that the fiction arising from the ‘as if' terminology did not represent a notional tax charge. Instead, the ‘as if' assumption created a new and exclusive taxable subject matter on the same income source, alike to statutory deeming. The fictional income arising from that fictional treatment was the substitution of one (notional) source of taxable income for another (actual, but disregarded) source. The deemed character in the computation was, therefore, retained in tax treaties, allowing tax treaty relief. This minor dissertation analyses both cases in order to posit whether or not the net income imputed from South Africa's CFC rules, using the same ‘as if' terminology, may be construed as a deeming rule on the same CFC's income. The finding in this minor dissertation is that an ‘as if' fiction may not represent a purely notional definition. The computation of CFC net income in tax treaties may, therefore, be afforded tax treaty relief akin to statutory deeming.
- ItemOpen AccessA critical analysis of the recent change to the unilateral foreign employment income tax exemption in South Africa and its cross-border interaction(2021) Africa, Lee-Ann; Roeleveld, JenniferSouth Africa is at the forefront of implementing the Multilateral Convention to Implement Tax Treaty Related Measures of the OECD to prevent base erosion and profit shifting (MLI), the Base Erosion and Profit Shifting Project (BEPS) recommendations and the tackling of double non-taxation. In 2017, the National Treasury announced that the tax exemption for South African expatriates would be changing. The section would be amended so that foreign employment income would no longer be fully exempt in the hands of a resident. The section 10(1)(o)(ii) exemption in its original form was the relief mechanism for residents to prevent the possibility of double taxation on the employment income derived from working outside the republic. This being when South Africa converted from a source based to a residence-based tax system on 1 March 2001, and all South African residents became subject to tax on their world-wide income. Residents working abroad were at the risk of being subject to taxation on their employment income derived in two or more jurisdictions. Residents making use of the full tax exemption in terms of Section 10(1)(o)(ii) of the Income Tax Act and rendering services in countries where no employment tax was imposed or imposed at significantly low rates has therefore resulted in double non taxation. In 2017, South Africa's National Treasury published the Draft Taxation Laws Amendment Bill, initially repealing the foreign employment income exemption entirely. However, as a result of strong criticism in the form of public commentary, National Treasury proposed and later enacted an alternative amendment by reverting to the partial repeal of the foreign employment income exemption in the form of an ‘exemption threshold'. As per the enactment of the Taxation Laws Amendment, Act, No.17 of 2017 which has revised the Income Tax Act No.58 of 1962 (IT Act), specifically with reference to the wording of section 10(1)(o)(ii) to allow for R1 million of foreign remuneration to be exempt from tax in South Africa if the individual is outside of the Republic for a stipulated number of days. The legislative amendment came into effect on 1 March 2020 and states that South African tax residents abroad will be required to pay tax up to 45% on their foreign employment income, where it exceeds the R1million threshold. With the recent budget speech in 2020, the specific tax exemption has been increased to R1.25 million. This ‘exemption threshold' primarily aims to target high net worth individuals and thus still provide the relief to middle and lower income earners. The effect of the amendment would be that all residents working outside of the Republic and who derive foreign employment income in excess of R1.25million and who have previously enjoyed the benefit of the section 10(1)(o)(ii) exemption will now be subject to taxation and possibly double taxation and would need to seek relief elsewhere if necessary. In this minor dissertation we have considered the effect of the Section 10(1)(o)(ii) amendment and what this will mean for the individual working abroad in relation to domestic tax legislation and any double tax treaties (DTC's) in place. A key finding arising from the research in the minor dissertation is that many South African's have hastily made a decision to formally emigrate through the South African Reserve Bank (SARB) procedures in an effort not to pay income tax in South Africa on foreign remuneration earned overseas. However, in considering alternate mechanisms, such as applying the rebate afforded in section 6quat of the IT Act or applying a DTC if in place, may be a simpler and more cost-effective solution instead of taking a more drastic decision to emigrate. Further, the fact that an individual potentially could be subject to tax on the full remuneration if they make the decision to formally emigrate as opposed to maintaining South African residency and only paying tax on the excess remuneration above the threshold should be considered in any future tax planning.
- ItemOpen AccessA critical analysis of the taxation of income arising to contractors in relation to the execution of engineering, procurement, construction and installation (‘EPCI') contracts in the oil and gas sector(2020) Smith, Shirlynn; Roeleveld, JenniferGlobally, the past two years have been successful years in oil and gas exploration with discoveries almost doubling those made in 2017.1 Notwithstanding Africa's endowment in vast natural resources, including substantial oil and gas reserves, one of the most dramatic finds in Africa has been Mozambique's natural gas developments. Mozambique is set to become one of the largest and most dominant natural gas finds in the world. These developments have attracted the attention from countries around the world, the UAE, in particular, taking the lead. Engineering, procurement, construction and installation (“EPCI”) contracts, are a common form of contract in the oil and gas sector, which is used to undertake large scale oil and gas projects. The nature of these contracts consists of significant local (in-country work) and foreign (out-of-country work) elements. Due to the complex nature of EPCI contracts, one of the major areas of dispute in the taxation environment are the uncertainties around the taxation of profits arising to contractors under these contracts. The taxpayer and the Revenue Authorities have different views as to where the income arising from EPCI contracts is to be taxed. The taxpayer takes the stand that only such income from the project as is relatable to activities in the host state, should be taxed in the host state. The Revenue Authorities contend that EPCI contracts are to be considered as one and indivisible, and hence the entire income from the contract is liable to be taxed in the host state. Based on an examination of recent judgments passed by the Authority of Advanced Rulings (“AAR”) and various Tax Courts, currently, there seems to be no certainty regarding the taxation of income arising to contractors under an EPCI contract and this has in turn resulted in a number of contractors having to pay excessive taxes. This dissertation seeks to analyse the tax treatment of income arising to contractors, from supplies and services under an EPCI contract in the context of the oil and gas sector entered into between Mozambique and the United Arab Emirates (“UAE”), in Mozambique. The purpose of this analysis is to determine how these profits should be taxed, in light of the Mozambique-UAE Treaty2 and Mozambican domestic legislation. In other words, the question that this dissertation seeks to answer is, whether profits arising from an EPCI contract in the oil and gas sector, should be taxed as a whole in Mozambique, or per the various components of the EPCI contract. 1 Fuel for thought, Africa oil and gas review, 2019, Current developments and a look into the future, www.pwc.co.za/oil-gas review [November 2019]. 2 Convention between the Republic of Mozambique and the Government of the United Arab Emirates for the Avoidance of Double Taxation with respect to Taxes on Income and Capital (2003). The key finding arising from the research presented in this dissertation is that although an EPCI contract is entered into in Mozambique (consisting of both offshore and onshore elements), this would not make the entire income from that contract to be taxable in Mozambique. Importantly, only such part of the income as is attributable to the operations carried out in Mozambique can be taxed in Mozambique. Following the analysis, as described above, this dissertation finally endeavors to provide recommendations on how contractors should approach and structure EPCI arrangements in order to create the best possible situation for themselves within the limits of what the law allows, and to reduce potential tax litigation. This can serve to inform other developing countries who have oil and gas operations.
- ItemOpen AccessA technical analysis of the difference in treatment of technical fees in relation to the receipt of management fees by a resident of South Africa, sourced from Botswana and Zambia, including the impact of domestic and treaty relief(2019) Begg, Nazreen; Roeleveld, JenniferWith international developments there has over the past few years been an increase in the provision of cross border services. By nature, services are often intangible and can in most cases be provided remotely. As such, an individual or enterprise providing personal services can substantially be involved in another state’s economy without establishing a permanent establishment or fixed base. This phenomenon proved problematic, especially in developing countries who are large importers of services, in that the country paying for the services would not be in a position to tax these activities however would, in terms of application of their domestic laws, be required to provide a deduction in relation to the payment for services where it relates to legitimate costs incurred in the production of income. In light of this, and in an attempt to protect their tax base, it is found that majority of developing countries would incorporate in domestic law a tax on technical services paid to nonresidents. This is usually in the form of a withholding tax. This practice was undesirable for both taxpayers and tax authorities in that it resulted in unrelieved double taxation or double non-taxation which in turn causes difficult disputes whilst consuming scarce resources. In light of this, a new Article 12A- Fees on technical services had been drafted into the 2017 United Nation Double Taxation Convention between Developed and Developing Countries (the “UN Model”). This article provides a Source State to tax certain technical services defined as “any payment in consideration for any service of a managerial, technical or consultancy nature, at a rate agreed between the two States, on a gross basis”. By performing qualitative research, based on a simplistic scenario for management fees, it is found that the inclusion in a treaty of an article similar to Article 12A makes the application of treaty relief easier and neutralises the tax effect for a South African resident. However, where no distributive rules to technical services (in particular management fees) apply in a treaty it may become burdensome to prove that treaty relief should apply in a case where double taxation occurs. Based on the results of the research (due to the economic impact it may have on South Africa), it is recommended that South African treaties with other developing countries which levy a withholding tax on management fees, should be updated by protocol or renegotiation of the treaty to include a similar article to the new Article 12A in the UN Model.
- ItemOpen AccessAn analysis of options for reform of South Africa’s unilateral income tax exemption of foreign pensions, with an emphasis on the cross-border interaction with pensions derived from the United Kingdom and Germany(2018) Oliver, Ashley; Hattingh, Johann; Roeleveld, JenniferSouth Africa, recently reformed the tax policy regarding the taxation a South African resident’s foreign employment income and is in the process of reviewing the tax policy of foreign pensions. The unilateral foreign pension exemption was only meant to be on a temporary basis, but yet uncertainty existed ever since its introduction in 2000 of whether, and for how long, the exemption would be retained that is until 2016. South Africa’s Treasury proposed various reforms to South Africa’s unilateral exemption of foreign employment income in the last two years. The prevalent nexus between the foreign employment income and foreign pension exemptions, is a strong indication that the various reforms considered for the foreign employment exemption may be considered in regards to South Africa’s tax policy reform of foreign pensions. This minor dissertation seeks to answer is what the impact of the proposed future reforms are on the income tax consequences of a SA tax resident’s foreign pension, in light of the recent international trends in the mitigation of double non-taxation. The key finding arising from the research in this minor dissertation is that South African residents currently benefit from double non-taxation of UK pension annuities, UK pension lump sums and lump sums, and a German lump sum arising from a pension commitment prior to 1 January 2005. The enactment of the proposed future reforms would result in United Kingdom pension annuity becoming taxable in South Africa. German pension benefits in the form of an annuity arising from a pension commitment prior to 1 January 2005 and after 31 December 2004 will be taxed either in Germany or South Africa, or both. In the case of a SA resident’s UK lump sum or German lump sum arising from a pension commitment prior to 1 January 2005, a SA resident will continue to benefit from double non-taxation under the proposed future reforms under both the 1973 and 2008 SA-Germany DTC. In the case of a SA resident’s lump sum arising from a pension commitment after 31 December 2004 it will still be taxed in Germany under both the 1973 and 2008 SA-Germany DTC, regardless of the proposed future reforms. Following the analysis of the impact of the proposed future reforms on the income tax consequences of a South African tax resident’s German or United Kingdom pension benefits, this dissertation finally aims to provide recommendations in relation to issues identified in respect of the proposed future reforms, if any.
- ItemOpen AccessAn analysis of the current framework for the exchange of taxpayer information, with special reference to the taxpayer in South Africa's constitutional rights to privacy and just administrative action(2016) Möller, Louise; Hattingh, Johann; Roeleveld, JenniferInternationally, as well as in South Africa, legal reform aimed at increasing taxpayer information transparency has gained momentum over the past few years, especially in the light of the G20 led Base Erosion and Profit Shifting ('BEPS') Project. Ensuring that the fundamental rights of the taxpayer, guaranteed by the Constitution1, remain protected amidst the hurried implementation of these reforms is of paramount importance and cannot be overlooked or deferred. To a great extent, the question as to whether the current rules, regulations, and practices surrounding exchange of taxpayer information in South Africa would pass constitutional muster has, as yet, gone unasked and unanswered in academic literature. This minor dissertation seeks to identify and analyse the constitutional questions raised by these existing rules and practices, with special reference to the constitutional rights of taxpayers in South Africa. Specifically, the current framework for both the automatic exchange of information and exchange upon request is considered in the context of two constitutional rights, namely the right to privacy and the right to just administrative action, with due recognition of the general limitation of rights provided for in the Constitution. Importantly, this paper does not dispute the need for exchange of taxpayer information in principle, nor the desirability of effective tax administration. It is furthermore appreciated and acknowledged that a balance must be struck between the often competing interests of the South African Revenue Service ('SARS') as an administrator seeking to discharge its mandate in the most efficient manner possible, and the fundamental rights of the taxpayer.
- ItemOpen AccessThe availability of treaty relief for secondary transfer pricing adjustments taking the form of a deemed distribution of an asset in specie in South Africa(2017) Strauss, Carien; Roeleveld, JenniferThe number of MNEs have increased substantially in recent years, putting a strain on international tax rules which have not developed at the same pace. Many of these MNEs have kept their tax bill at a minimum by shifting profits to low tax jurisdictions by using transfer prices that do not accord with economic reality. In response hereto, many tax jurisdictions have implemented domestic anti-avoidance legislation to assist tax authorities in curbing tax avoidance resulting from the manipulation of transfer prices. SA is an example of such a country. These anti-avoidance provisions typically involve a primary and secondary adjustment. The primary adjustment requires that an adjustment be made to the transfer price used by the MNE in the event that the said price does not reflect an arm's length price. The secondary adjustment concerns itself with making the actual allocation of funds consistent with the primary adjustment by deeming there to be another transaction, i.e. the secondary transaction. In SA, this secondary adjustment takes the form of a deemed distribution of an asset in specie in the case of residents who are companies. As such, this secondary transaction (i.e. the deemed dividend) is subject to Dividends Tax in SA levied at the domestic rate. This study considered whether such a deemed dividend will qualify for treaty relief in the form of the reduced rate provided for by Article 10 of the OECD MTC and UN MTC. In making this analysis, three main issues where specifically considered, namely (i) whether the SA company paying the Dividends Tax will have access to treaty relief in cases where Dividends Tax is not listed as a covered tax in the relevant tax treaty, (ii) whether a deemed dividend under a secondary adjustment in terms of SA domestic law falls within the dividend definition contained in Article 10.3 of the OECD and UN MTC, and finally (iii) whether the relevant deemed dividend can be regarded as 'paid' for purposes of Article 10.1 and 10.2 of the OECD MTC and UN MTC. It was concluded that the SA Company will not qualify for the reduced rate provided for by tax treaties modelled on the OECD MTC and UN MTC as the deemed dividend does not fall within the ambit of the dividend definition contained in these model treaties. However, some of SA's tax treaties currently in force, deviate from the wording used in these model treaties to such an extent that it brings deemed dividends under a secondary adjustment in SA within the scope of the dividend definition, and in doing so, provides the SA Company with access to the reduced rates provided for in tax treaties. Examples hereof are the tax treaties that SA have concluded with the UK and NZ. Should SA decide to adopt a more 'forgiving' approach towards the availability of relief for secondary adjustments, it is recommended that SA either amend the domestic relief provisions to allow access to such relief, or amend the dividend definition contained in the tax treaties it currently has in force to include deemed dividends in terms of secondary adjustments in SA. The first approach is preferred as it is not always possible and timely to amend tax treaties currently in force.
- ItemOpen AccessA comparative analysis of the meaning of 'mining operations' for income tax purposes(2017) Fourie, Christine; Roeleveld, JenniferThe South African ("SA") mining industry played (and continues to play) a pivotal role in the development of the SA economy. It is therefore no surprise that the industry has long been the beneficiary of favourable tax concessions. One of these favourable tax concessions is the 100% capital expenditure allowance. Access to this allowance is dependent on the interpretation of the definition of "mining operations" in section 1(1) of the Income Tax Act, No. 58 of 1962 ("the ITA"). Currently, there is legal uncertainty in SA regarding the meaning of "mining operations". This is so because central to the term "mining operations" is the term "mineral", which is not defined in the ITA, nor does it have an ordinary fixed meaning. SA courts have further not authoritatively dealt with the meaning of "mining operations" despite being presented with the opportunity to do so in recent case law. This legal uncertainty is further fuelled by a recent draft interpretation note issued by the South African Revenue Service ("SARS"), expressing the view that quarrying operations for inter alia clay for brickmaking and limestone for the manufacture of cement, do not constitute "mining operations". Practically, this legal uncertainty may act as a deterrent to mining companies incurring capital expenditure, essentially curbing the development of the SA mining industry. This study seeks to analyse the different meanings attributed by SARS, SA academic writers and SA courts to the definition of "mining operations" (and the related meaning of "mineral") for income tax purposes. The purpose of this analysis is to determine whether the extraction of clay for brickmaking and limestone for the manufacture of cement constitutes "mining operations". Against this background, Australian legislation and case law on the interpretation of the term "mining operations" and "mineral" will be studied in order to draw a comparison between SA and Australia's treatment of "mining operations". This study further interprets the meaning of "mining operations" through the application of the Savignian interpetation model in terms of which it is concluded that useful guidance can be sought by SA from Australian jurisprudence when interpreting the meaning of the term "mining operations" for income tax purposes and that the purposive test applied in Australia should be adopted by SA courts. Based on the application of this guidance, the key finding of this dissertation is that the extraction of clay for brickmaking and limestone for the manufacture of cement should in principle qualify as "mining operations" and that the capital expenditure incurred in this regard should be eligible for the 100% capital expenditure allowance.
- ItemOpen AccessA critical analysis of the taxation applicable to South African sports organisations(2017) Heeger, Peter John; Roeleveld, JenniferThe study examined tax legislation that affects Public Benefit Organisations (PBOs) with specific emphasis on sports organisations. The relevance of the legislation was examined and secondly, where applicable, a review on how specific sports organisations (PBOs and recreational clubs) implemented the tax legislation was performed. A detailed analysis of the national and international sports environment was presented in order to inform the study. This was followed by a comprehensive examination of each section of the Income Tax Act in relation to PBOs and sport. A brief comparative study was also undertaken to benchmark South Africa against countries playing the same or similar sports. As the tax on Public Benefit Organisations is a relatively recent tax, little or no analysis has yet been conducted on its relevance and the implementation thereof. This study served to critically analyse the implementation of this tax by sports organisations using the limited data available in the public domain. The results revealed that the legislation is excessive, particularly for recreational clubs, taking into consideration South Africa's sporting development needs. In support of the findings, it is recommended that the Treasury consider separating the legislation affecting sports organisations from legislation affecting other Public Benefit Organisations.
- ItemOpen AccessA critical comparative analysis of seven existing carbon tax systems with a view to deriving a related best practice within a South African context(2010) Robertson, Ross; Roeleveld, JenniferSolutions to the proven threat of climate change have attracted a vast amount of attention as evidenced by the convention on Climate Change hosted by the United Nations in Copenhagen very recently. But this was only the most recent in a series of conventions, treaties and other forms of agreements entered into in an attempt to stop the climate change effect from spiralling out of control. However, in the wake of such conferences a harsh question remains, how many of the proposed action plans are just those: plans? A plan is no more than a formalized thought until it is implemented and the effects thereof are tangibly observable to the general populace. Most importantly though is the factor of time. The planet cannot afford a drawn out and lengthy debate on the merits of the threats posed by global warming and then only contemplate possible resolutions to the threats so agreed to. Action needs to be taken immediately, and the action plans designed and implemented need to be effective without delay. Two of these tangible solutions that have been proposed are those of setting carbon emission caps and subsequently granting credits so as to facilitate a trading of these credits, namely the ‘cap and trade’ approach, and the other is that of legislating and implementing a carbon tax. Variations of both of these systems have been implemented by individual countries the world over with varying levels of success However, as one looks to the future; there is no consensus on a global solution to what is very much a global problem.
- ItemOpen AccessThe cross border supply of services and the need to harmonise the VAT rules that apply(2016) Brown, Christopher; Roeleveld, JenniferServices cannot be subject to border controls in the same way as goods, which makes the charging and collection of VAT in these instances more complex. In many jurisdictions, VAT is collected on the cross-border supply of services via the reverse charge mechanism. This mechanism transfers the liability for the payment of VAT to the local recipient of the service (ie the customer), which creates a situation where foreign suppliers are not required to register in these jurisdictions and accordingly decreases the cost of compliance - a key contributor to the principle of VAT neutrality. In most cases, where the local recipient is liable for the payment of reverse charge VAT in respect of an imported service, a corresponding input tax credit is available where the service is on-supplied, resulting in a VAT neutral position for the local recipient. The problem arises where the reverse charge mechanism is applied inconsistently from country to country - where in some instances the VAT accounted for on imported services cannot be claimed as a credit due on the supply. In such instances, the reverse charge VAT represents an actual cost to the recipient of the service, which will then invariably be on-charged to the final consumer. In such cases, VAT will be levied on VAT and the final consumer will be subject to double VAT taxation. The Organisation for Economic Co-operation and Development (OECD) released the International VAT/GST Guidelines in April 2014 which has the "aim of reducing the uncertainty and risks of double taxation and unintended non-taxation that result from inconsistencies in the application of VAT in a cross-border context." These guidelines are not aimed at providing detailed prescriptions for national legislation but rather seek to identify objectives and suggest means for achieving them. These Guidelines are an important step in initiating a more harmonised approach to VAT. While not binding, they represent the key principles of a successful VAT structure that should be inherent in all VAT legislation. This paper is an analysis of the feasibility of implementing a harmonised approach to VAT in Africa, with particular regard to the application of the reverse charge mechanism, and the different means by which the incidence of double VAT taxation that results, can be prevented. This position is compared to that of the European Community (EC) in order to highlight the need for consistency in the application of VAT legislation of different African jurisdictions. The varying application of the reverse charge mechanism in African countries is one such example of how uncoordinated unilateral measures can result, and have the potential, not only to increase the cost of compliance and doing business in Africa, but also to create barriers and discourage, particularly, cross-border trade in services. By initiating a more harmonised approached to VAT legislation across Africa, the inconsistencies in the application of similar principles can be avoided, facilitating trade and easing the compliance burden on vendors.
- ItemOpen AccessDesigning an optimum shipping tax regime by applying an updated multi-analytical framework(2022) Hitchens, Barry Grant; West, Craig; Roeleveld, JenniferThe thesis observes that taxes may be utilised for purposes other than revenue generation. The thesis submits that sea power should constitute a critical objective for designing an optimal shipping tax regime. This submission is partly based on considering the historical development of the American and British registered merchant fleets. The thesis observes that States compete under certain conditions despite globalisation. Therefore, sea power remains a valid underlying objective. The thesis submits that registered merchant vessels constitute a reasonable indicator for assessing a critical component of a State's sea power. The thesis advances the argument that shipping income should primarily be produced from the navigation of these vessels for carrying goods and passengers by sea. This feature of the maritime adventure supports the exceptional mobility of shipping income and is crucial for promoting a State's sea power. These activities are, therefore, primarily deserving of special tax treatment. The thesis constructs a Model Analytical Framework to support the design of an optimal shipping tax regime. The Smithian Framework is a key component. The latter is constructed to, broadly, accord with the tax design principles of the G20 States. The thesis utilises the 1998 OECD Framework assessing harmful tax practices and preferential regimes, as updated by BEPS 5, as the other key component. The significance of this other component is that its key factors should be satisfied for designing preferential regimes that have broader legitimacy internationally. The thesis ranks the benchmarked efficiency and simplicity criteria as dominant priorities to counter the high mobility of the particular tax base. The thesis applies super efficiency intensely to better level the playing fields between the local and foreign ship registers. The thesis observes that the substantial activity factor, as updated by BEPS 5, although having the potential to reduce the mobility of the tax base, is unlikely to do so without more. As a model for an optimal shipping tax regime that exhibits uniformity and simplicity extensively and can promote a State's sea power, the thesis recommends the basic Panamanian design incorporating broader features of the Greek regime.
- ItemOpen AccessDeveloping a foundation for a globally coordinated approach to the taxation of crypto-asset transactions(2022) Parsons, Shaun; West, Craig; Roeleveld, JenniferCrypto-assets and blockchain technology have created much uncertainty within the field of taxation. While some jurisdictions have attempted to formulate responses, others have yet to meaningfully engage with the topic. In contrast to the taxation of the digitalised economy, a coordinated global approach to the taxation of crypto-asset transactions is notably lacking. Rather than focusing on individual jurisdictions, this study addresses the consequences of crypto-asset transactions within the international tax system. It begins by applying an adapted form of the constant comparison method traditionally employed in grounded theory research to a selection of crypto-assets white papers to inductively identify possible taxable events, and from these to develop ten transaction categories, each with definitive characteristics. These categories then form the basis of a doctrinal analysis of the nature within the international tax system of the income arising and its classification within the text of the articles of the model tax conventions. Finally, the study considers the potential future impact of measures to tax the digitalised economy. The study finds that while it is possible to classify each of the identified transaction categories within the articles of the model tax conventions, alternative constructions within treaties and existing differences in interpretation may still significantly impact the allocation of taxing rights. In addition, crypto-asset transactions may further challenge the role of the permanent establishment concept in determining taxing rights and contribute to base erosion. While such transactions may fall within the measures to tax the digitalised economy, the pseudonymous, decentralised nature of blockchain technology may frustrate the application of these measures. This study may inform individual jurisdictions in designing the scope and outcomes of a comprehensive response to crypto-asset transactions. It may also provide a basis for the classification of these transactions within the international tax system, and support the development of a globally coordinated response to the taxation of crypto-assets. Finally, it may contribute to the broader development of the taxation of the digitalised economy, in which crypto-asset transactions may play an increasingly significant role in the future.
- ItemOpen AccessDividend payments from employee share scheme trusts(2017) Lock, Nicholas; Tickle, Deborah; Roeleveld, JenniferIn the past, there has been confusion regarding the taxation of dividends received from employee share scheme trusts. Conflicting interpretations of the definitions in section 8C and certain provisions of 10(1)(k) of the Income Tax Act No. 58 of 1962 (ITA) have caused administrators of these schemes to treat the taxation of dividends in various ways. Section 10(1)(k)(i)(ii) was introduced in the Taxation Laws Amendment Act (TLAA) of 2013 to address the situation where employers are disguising salaries and bonuses as dividend payments to members of employee share scheme trusts. The intention behind this new section 10(1)(k)(i)(ii) is quite clear but it is not entirely certain whether it is having the desired effect as there is still uncertainty around the treatment of dividends from unrestricted equity instruments. The Davis Tax Committee (DTC) published recommendations on the taxation of trusts in its first interim report on estate duty. These recommendations could further complicate matters and have significant tax implications for all the parties involved in these employee share scheme trusts. To try and understand the uncertainty around these dividend payments an analysis was conducted on section 10(1)(k)(i)(dd) and 10(1)(k)(i)(ii) of the ITA. It was also necessary to look at the different types of employee share schemes that are available and also the nature of dividends, dividends withholding tax (DWT) and capital gains tax (CGT). Section 8C and the definitions therein were also analysed to understand the taxation of taxpayers on vesting of equity instruments. A brief look at the treatment of dividend payments from United Kingdom employee share scheme trusts also provided some useful context from an international perspective. Two case studies were conducted to analyse the overall tax effect based on the current tax legislation and also taking into consideration the recommendations made by the first DTC Report.
- ItemOpen AccessDividend yields, business conditions, and expected security returns : a South African perspective(2003) Kennedy-Good, Jonathan; Wormald, Michael; Roeleveld, JenniferThe analysis of this topic has continued to draw attention from academics such as Jensen Johnson and Mercer (1996), Patelis (1997) and Booth and Booth (2001) who examine the results of Fama et al. (1988) under differing monetary policy regimes. Jensen et al. (1996) posit that monetary stringency affects investors' required rate of return, which is consistent with Fama et al.'s (1989) arguments that predictable variation in returns reflects rational variation in required returns. Patelis (1997) finds that monetary variables used in his analysis are marginally significant predictors of security returns across different time horizons, while Booth et al. (2001) find that measures of the stance of monetary policy contain significant explanatory information that may be used to forecast expected stock and bond returns.
- ItemOpen AccessDoes the South African GAAR criteria of the "misuse or abuse" of a provision included in Section 80A(c)(ii) of the Income Tax Act add any value?(2016) Langenhoven, Allenda Glynn; Roeleveld, JenniferTax planning, where taxpayers arrange their affairs so as to minimize the resulting tax liability, has evolved over the last couple of decades as a result of the change in the way business is conducted by virtue of globalisation and the development in technology. It appears to have become more and more aggressive as taxpayers have the opportunity to access tax benefits not only through utilising loopholes in domestic legislation, but also through international tax loopholes. Revenue Authorities have to respond to this by employing mitigating anti-avoidance mechanisms. One such mechanism employed in South Africa ("SA") is the use of General anti-avoidance Rules ("GAAR") found in s80A-L of the Income Tax Act No. 58 of 1962 ("ITA"). To combat certain shortcomings in this GAAR's predecessor and to stay abreast of international trends, for the first time ever, a Statutory Purpose Element has been included in GAAR. This Statutory Purpose Element, as included in s80A(c)(ii) of the ITA, evaluates the misuse or abuse of the provisions of the ITA as a means to identify impermissible tax avoidance arrangements. Essentially, this calls for the application of the modern approach to statutory interpretation, where the purpose and context of the provisions of the ITA are first identified, before the misuse or abuse of these provisions can be proven. This study evaluates whether the inclusion of this Statutory Purpose Element in GAAR, adds any value or provides any additional powers to SARS when applying GAAR, especially in light of s39(2) included in the Bill of Rights of the Constitution, of 1996, ("Constitution"). The Constitution, the supreme law in SA, already calls for the modern approach to be applied to any statutory interpretation and the findings of this study indicate that s80A(c)(ii) appears to be completely superfluous as it does not award any additional powers to SARS, which were not already granted by the Constitution. If anything, s80A(c)(ii) broadens the scope of GAAR to such an extent, that it most likely will only cause further confusion for taxpayers wanting to engage in tax planning.
- ItemOpen AccessThe double tax consequence of the new double tax treaty between South Africa and Mauritius for persons other than individuals(2016) Broun, Stanley; Roeleveld, JenniferMauritius continues to be among the most competitive, stable, and successful economies in Africa. Mauritius actively seeks foreign investment and prides itself on being open to foreign investment. Mauritius amongst other countries is one of the recipients of high volume foreign direct investment (FDI) and is well known for its favourable tax regime. This favourable tax regime remains one of the key reasons why South Africans use Mauritius as a preferred jurisdiction, well suited for passive investments as well as being an investment hub to establish and grow their foreign business activities. In 1996 SA concluded a double tax treaty ('DTT') with Mauritius to guard against potential double taxation. This could occur when a person is considered a tax resident in both South Africa and Mauritius by virtue of the application of the respective tax laws of these countries. The application of the DTT will however result in such a person being deemed to be resident in only one of the countries party to the DTT. On the 17 March 2013 SA signed a new DTT with Mauritius, which will bring about some significant changes for South Africans who have FDI in Mauritius. Of significance are the amendments to Article 4 in the DTT. The new tiebreaker rule provides that the Competent Authorities of the two Contracting States will by mutual agreement endeavour to decide which country has taxing rights in the case of persons other than individuals. This significant change has multiple effects on persons other than individuals and this can lead to a person in fact becoming subject to double taxation. This paper will investigate the effect of the change between Article 4 in the DTT concluded in1996 (in force from 20 June 1997) and the new Article 4 in the DTT signed on the 17 May2013 which came into effect from the 1 January 2016 for South Africans who have foreign direct investments in Mauritius. In conclusion the principles outlined in the relevant chapters will be presented through a practical application of determining if a person other than an individual is subject to double taxation. The application of the domestic laws of both SA and Mauritius and the application of the New IN6 will be applied to an offshore trust established in Mauritius. With the application of the principles and procedures one will be able to see the effect of the tie-breaker rule in the new DTT concluded on the 17 March 2013 between SA and Mauritius.
- ItemOpen AccessEvaluation of the "source " rules as contained in section 9 of the South African Income Tax Act as relating to software in the context of the digital economy(2016) Flynn, Byron; Roeleveld, JenniferIn recent decades, the rise of the digital economy has drastically changed the way the world does business. Business can now be conducted without regard to geographical boundaries and limitations and organisations have the ability to conduct business making use of mobile and sophisticated software in South Africa without having a significant physical presence in the country. In addition, the characterisation of income from new software-related arrangements may be difficult to determine in this new economy. In response to the above, there is a general move globally to align taxation with economic substance and value creation and there is an increased focus on source-based taxation. Consequently, this dissertation conducts an analysis of the relevance and appropriateness of South Africa's source rules pertaining to software arrangements as contained in section 9 of the Income Tax Act (ITA) and as espoused in the common law. It is submitted that there are four main income characterisations applicable to software arrangements (sales, service arrangements, leases and royalties arrangements) and that it is possible to apportion a software-related payment into these various components for tax purposes. It is only once this characterisation has been completed that the source rules applicable to the various components should be applied. In relation to this, it is submitted that with the exception of show-how as espoused in section 49A of the ITA, the concepts of a royalty and know-how are consistent in the OECD Model Tax Convention and the ITA. Specifically, in determining if a software payment constitutes a royalty, a distinction should be made between the copyrighted article and the copyright itself, unless the component of the payment attributable to one of the items is clearly insignificant. Only the component of the payment attributable to the use of a copyright would constitute a royalty for South African tax purposes.