Browsing by Author "Roeleveld, Jennifer"
Now showing 1 - 20 of 73
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 Global Solution On Taxing The Digital Economy: "Does Article 12B of the UN MC adequately solve the problems encountered by the adopted unilateral measures (DSTs) to taxing the Digital Economy?"(2023) Mayebe, Francis; Roeleveld, JenniferThe rapid growth of the digital economy has created significant tax challenges, particularly for developing countries. As identified in this dissertation, the current tax framework is inadequate in solving the tax challenges as non-resident digital entities can generate income in a market/source jurisdiction without the need of having any physical presence. The OECD and the UN have been relentlessly searching for solutions to address the challenges of the digital economy. On the other hand, many states have not been patient enough to wait for a solution but have resorted to implementing unilateral measures in the form of Digital Services Taxes (DSTs) and equalisation levies. As it can be already noted from recent trends in international tax policy and seems, as well as the unilateral actions taken in the European Union (EU), that the permanent establishment nexus requirement to assume taxing rights is ill-suited to deal with certain complexities that can be ascertained from the core of the digital economy. It is clearly evident from the nature of the digital economy that an enterprise may attain a significant level of economic benefits in a foreign jurisdiction without having the physical factors embedded in the PE Principle. In this instance, it is widely seen that the digital enterprise or through the use of digital means, an enterprise without physical presence in the market jurisdiction may be entitled to a wide range of public benefits in that state which may include legal protection. In support of this argument, the EU has taken a view that a wide gap indeed exists between economic presence and physical presence in light of the increasing levels of technological advancement and increased globalization. It is certain from this view by the EU that one has seen an increase in unilateral measures to tax the digital economy amongst EU states through the introduction of the DST. The DST introduced in the EU states is targeted at taxing gross revenue in three instances: firstly, in instances where adverts are placed on the website, software or apps; secondly, where a digital platform allows users to find and interact with each other in a way that allows or facilitates the supply of goods and services; lastly, where data is collected by digital means and subsequently used to generate revenue. It is evident from the above that the measures adopted are narrowly focused on digital services that are reliant on user value creation. The United Nations made a shift away from an intense physical presence requirement by first introducing Article 12A into its Model Tax Treaty which allowed states to tax fees paid for technical services irrespective of physical presence in the source country. In a recent case, the US Supreme Court made an interesting finding in South Dakota v Wayfair, were it held that all states have a right to impose taxes on supplies made to their residents by non-residents irrespective of the lack of physical presence by the supplier in that instance. It is in this light clear that the introduction of Article 12B by the United Nations is a drive towards the right direction in solving the issue of taxing the digital economy. Article 12B which is focused on taxing Automated Digital Services (ADS) seeks to provide a way in which market jurisdictions can benefit from taxing entities participating in their markets without much physical presence. It gives an opportunity to avoid double taxation resulting from unilateral measures discussed above and by using a system of withholding taxes, it could potentially increase compliance and reduce disputes around interpretation. However, Article 12B also poses a few concerns in its application such as containing a ring-fencing proposal, the uncertainty of the concept of payer and the use of the gross income as a fundamental basis for calculations. It is certainly clear that it has weaknesses and strengths, and it is upon this basis that l will be exploring its application further in the relevant chapters.
- ItemOpen AccessA South African perspective: Do excise duties imposed on tobacco products drive the illicit trade in tobacco products?(2024) Matlala, Tshegofatso; Roeleveld, JenniferThe use of tobacco products is said to be the second leading cause of preventable deaths and disability in the world, accounting for approximately eight million deaths around the world annually, with about one million deaths as a result of exposure to secondhand smoke. South Africa and many other countries have recognized the need for tobacco control measures and have adopted strategies and policies to combat the use of tobacco products. According to the World Health Organization (WHO), the imposition of excise duties on tobacco products is considered one of the most effective tobacco control measures. South Africa imposes an excise duty on tobacco products that are intended to be consumed within South Africa. The South African Government has been consistently increasing excise duties on tobacco products from the early 1900s. The consistent increase in the excise duties on tobacco products over the years has resulted in a significant decrease in the consumption of cigarettes in South Africa. From as far back as 1997, the tobacco industry in South Africa has argued against the increase of excise duties on tobacco products, claiming that it would result in an increase in the illicit trade in tobacco products. The illicit trade in tobacco products is on the rise and the tobacco industry has attributed this increase to the continual increase of excise duties on tobacco products. In this regard, the tobacco industry made a submission to the Standing Committee on Finance wherein it requested that the South African government cease the increase of excise duties for a period of three years in order to address the issue of illicit trade. The purpose of this dissertation is to consider whether the claims made by the tobacco industry are true and to consider what drives the illicit trade in tobacco products in South Africa. To this end, an analysis of the way in which tobacco products are taxed; the characteristics and consequences of the illicit trade in tobacco products; and the drivers of the illicit trade in tobacco products was performed. The experience of Brazil and Georgia were considered alongside the WHO Framework Convention on Tobacco Control (WHO FCTC). Article 6 of the WHO FCTC provides price and tax measures which are to be implemented to reduce the demand for tobacco products, while Article 15 provides measures to address the illicit trade in tobacco products. This dissertation finds that the illicit trade in tobacco products is not solely driven by tax and price differential, but by a combination of varying factors including weak tax administration, weak border control, corruption, as well as tax and price differentials. More specifically from a South African perspective, this dissertation finds that the growth in the illicit trade in tobacco products in recent years has been as a result of weak administration and the disbanding of the High-Risk Investigation Unit (HRIU) in 2014.
- 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 tax treatment of home office expenditure sought by salaried employees(2024) Jacobs, Alicia; Roeleveld, JenniferThe South African Revenue Service (SARS) disallowed 60% of home office claims during the 2021 tax year. This is a consequence of the fact that the home office of these taxpayers did not meet the requirements of section 23(b) of the Income Tax Act No.58 of 1963 (IT Act). In this dissertation, various issues have been identified as to the problems taxpayers encountered and continue to encounter when making home office claims on their Personal Income Tax returns. The main issues identified with SARS disallowing the home office claims is resultant of these taxpayers not meeting the “regularly” and “exclusively” requirement. These specific requirements place these taxpayers in a position where they do not have a big enough dwelling-house or domestic premises or they just cannot afford to acquire one, in which they can dedicate a room/area in their living space for regular and exclusive use as a home office. They, therefore, will not meet the home office requirements for tax purposes and will not be able to enjoy a home office tax benefit. In support of the reasons why these taxpayers fail to qualify for a home office tax deduction, several case studies and examples have been provided to illustrate the problems of meeting the home office requirements under the current version of section 23(b). Based on the overall findings and analysis, the current tax treatment of home expenditure fails to practise the principles of a good and fair tax system for all its taxpayers. These tax principles are the foundation of tax reform in South Africa. It is therefore submitted that the provisions of section 23(b) be revaluated to make it fairer for taxpayers to claim home office expenditure regardless of their economic positions. In addition, the ongoing electrical outages in South Africa, the ever-changing working environment and technological advancements, have necessitated the need to work from home. This kind of work arrangement is increasing, and more taxpayers will be making home office claims in the future on their Personal Income Tax returns. An efficient way of dealing with the administrative burden of these taxpayers home office claims being disallowed by SARS as a result of not meeting the section 23(b) requirements, is for SARS to consider granting an allowance or a reimbursement allowance for business expenditure incurred in the course of employment. This method of dealing with a home office expenditure claim is a probable solution for South Africa and in turn will ease the administrative burden of SARS having to deal with numerous objections and appeals.
- 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.