OpenUCT :: Browsing by Author "Titus, Afton"

Browsing by Author "Titus, Afton"

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Open Access
A comparative analysis of emigration taxes for migrating individuals
(2024) du Plessis, Adelle Charlene; Titus, Afton
Emigration taxes have become increasingly relevant in a globalized world, where individuals frequently seek new opportunities abroad. when an individual taxpayer opts to relocate to another jurisdiction, effectively relinquishing their South African tax residence, a fiscal event is triggered. This event assumes the form of a deemed disposal of their assets, except for those that fall within specific exclusions, valuated at their prevailing fair market value. Consequently, an exit tax liability ensues, tethered to the theoretical capital gain arising from this fictional disposition. It is imperative to note that the South African exit tax system mandates the immediate payment of this tax obligation. Worth highlighting is the notable exemption, as it stands currently, pertaining to an emigrant's interest in retirement funds. However, the fiscal landscape faced a proposed amendment in the year 2021 when the National Treasury, in its National Budget Speech, endeavoured to incorporate such retirement fund interests into the purview of exit taxation. This proposed inclusion encountered vehement opposition from tax professionals and media outlets alike. The Canadian system's operative provisions are similar to the South African provisions in that when a Canadian resident becomes a non-resident for tax purposes, they are deemed to have disposed of certain types of property at their fair market value. This deemed disposition can result in a capital gain, which is subject to taxation. However, there are provisions in place to provide relief for certain assets, such as a principal residence and certain pension plans, to mitigate the tax burden on emigrants. Notably, the Canadian system provides for a deferral of payment of the exit tax as triggered on the date of cessation of tax residence. This minor dissertation embarks on a thorough comparative examination of the emigration tax regimes in South Africa and Canada, aiming to elucidate critical aspects encompassing tax residence, system introduction, application, implications for emigrants, and the administrative processes involved in each jurisdiction. It will also seek to identify areas for possible double taxation that could occur due to the application of either respective system. The study commences with an explanation of the fundamental concepts and determinants of emigration taxes, offering a comprehensive definition along with an explanation of the various types of emigration taxes. Furthermore, it delves into the temporal aspects associated with these taxes and explains the mechanisms employed for their recuperation. In light of the aforementioned aspects, the study furnishes the overarching rationale that underlies the imposition of emigration taxes. The research continues to delve into the core components of the two systems of emigration tax implemented by the respective jurisdictions, examining and comparing the mechanisms of each. It also briefly investigates the possible application of the emigration tax to retirement savings and the possible reason for its inclusion or exclusion. Furthermore, the study explores the administrative processes and compliance requirements associated with emigration taxation in South Africa and Canada. It analyses the ease of understanding, reporting, and adhering to these tax regulations, considering the potential influence of administrative complexity on emigration decisions. This comparative analysis aims to highlight key similarities and differences inherent in the two systems that form the subject of this minor dissertation. Following the aforementioned research and analysis, this dissertation will endeavour to compare the systems and accordingly discern potential advantages intrinsic to the Canadian framework that may offer pragmatic applicability within the South African context and vice versa.
Open Access
A critical analysis of the implications of the fourth industrial revolution on tax regulation: relevance of the robot tax debate in South Africa from a developing country perspective
(2020) James, Evidence; Titus, Afton
The world is experiencing a paradigm shift exhibited by the unprecedented convergence of the biological, physical, and technological environments. This paradigm shift, occasioned by the Fourth Industrial Revolution (4IR), is transforming the way of life, work, business, the law, and government policy across the world. The introduction of 4IR technologies such as robotization and Artificial Intelligence is threatening massive labour displacements and resultant significant erosion of the tax base. With the full extent of the 4IR yet to obtain scholars, international organisations such as the Organisation for Economic Cooperation and Development (OECD), World Economic Forum (WEF) and governments have initiated policy inquiries and debates to respond to the looming threats and to maximise on opportunities presented by the 4IR. This research falls within the broader context and out of similar concerns to the OECD Base Erosion and Profit Shifting project (BEPs) and as expressed under Action 1 which deals with the taxation of the digital economy. Amongst the proposals to respond to robotization threats to the tax base is the imposition of a robot tax. Therefore, the robot tax debate is the foci of this research. So far, the robot tax debate has been restricted to developed countries and now slowly gaining momentum in developing countries. The South African president, Cyril Ramaphosa constituted the Commission on the Fourth Industrial Revolution in 2019 in response to the dawning realities of the 4IR. The commission is tasked with the mammoth task of deciphering the 4IR and diagnosing its impact across various sectors in South Africa and to report its findings and recommendations. The establishment of the commission on 4IR underscores the imperativeness of this study whose crux is to explore the relevance of the robot tax debate in the South African context representative of developing countries. This is in cognisance of the struggle against inequality, rising unemployment, a broadening budget deficit, stagnant economic growth, and declining revenue collections against a growing demand for free education and social security. Using a doctrinal approach, this research finds that the robot tax debate is not only relevant but imperative in developing countries and that the socioeconomic circumstances present in these countries aggravate the negative impact of 4IR.
Open Access
A warning by press release that the retrospective application of legislation to completed transactions will be applied: A case analysis of the Pienaar Brothers (Pty) Ltd v Commissioner of the South African Revenue Services and Another (2017)
(2018) Parker, Mashooma; Titus, Afton
Pienaar Brothers (Pty) Ltd was an amalgamated company who sought to introduce a BEE element of ownership into its company in a tax efficient manner. Upon consulting their legal experts they were advised that the best manner in which they could achieve this objective was to enter into an amalgamation agreement in terms of section 44 of the ITA. At this particular time, the law was structured in a way in which it was possible to achieve this objective in a tax efficient matter, particularly because any distribution made by parties to the amalgamation transaction would be tax free. The problem however was that the tax collecting agency never intended the section 44 of the ITA amalgamation process to be STC free, and instead intended a temporary deferral thereof. To address this, the taxing authorities accordingly started putting mechanisms in place to limit the loss of such STC. On the 10 January 2007, SARS issued a public announcement stating that they planned to investigate certain corporate entities which had elaborate corporate structures that led to an impermissible loss of tax. On the 21 February 2007, the Minister of Finance stated that section 44 of the ITA, as it stood, allowed for a loss of STC as opposed to a deferral thereof, and that the taxing authorities intended on withdrawing such STC exemption in order to align it with their initial intention, and to further make such amendment retrospective to the date of such announcement. This was then once again cemented in the form of a press release on the part of SARS on that same day. Thereafter, this proposed amendment was submitted to Parliament in the Draft Taxation Laws Amendment Bill on 27 February 2007, and in May 2007, the Taxpayer completed its amalgamation transaction and achieved its BEE objective into its ownership. On the 7th June 2007 the Taxation Laws Amendment Bill was published together with an Explanatory memorandum which however no longer proposed the withdrawal of the STC exemption contained in section 44 of the ITA, but instead introduced a new addition into section 44 of the ITA. This provision now targeted a resultant company’s equity share capital and share premium, instead of the distribution of company income at the amalgamated company’s level. This new insertion was then promulgated into law on 8 August 2007 as section 44(9A) of the ITA. In complete difference to the initial proposal contained in the forewarning, the practical consequence of section 44(9A) of the ITA was that the income which rolled over from the amalgamated company to the Taxpayer (the resultant company) had in the process changed its nature from revenue to capital which was caught up in the share premium account of the Taxpayer. Section 44(9A) of the ITA accordingly targeted any distribution made by the resultant company of this share premium. The Taxpayer’s problem in the present matter arose in 2011 when SARS sought to tax the Taxpayer on its May 2007 completed transaction, particularly its distribution of its share premium at the time. In addition to this assessment, SARS furthermore also levied interest on such outstanding STC payment from 8 August 2007, the date on which the final enactment was promulgated into law. This was that which accordingly prompted the Taxpayer to bring its matter before the High Court. Here, the prime relief sought by the Taxpayer was an order of constitutional invalidity, while the second order, couched as an alternative to the first was an interpretational argument which had the effect that section 44(9A) of the ITA did not apply to Taxpayer’s distribution when it was made because it was a completed transaction. The gist of the Taxpayer’s constitutional issue requested of the court to declare that the provision did not pass constitutional muster to the extent of its retrospectivity. The court however dismissed the Taxpayer’s claims and held in favour of SARS. The paper seeks to analyse this case alongside the values of legal certainty, as espoused in the Rule of Law, and to consider the probability of success on the part of the Taxpayer if they opted to take the matter on appeal.
Open Access
An analysis of the proposed annual mark-to-market taxation of the capital gains of long-term insurance policyholders
(2013) Johnson, Niel; Titus, Afton; Gutuza, Tracy
This dissertation explores National Treasury's mark-to-market proposal which aims to tax the unrealised capital gains of long-term insurance policyholders on an annual basis. Although the proposal was ultimately rejected it remains under consideration. The mark-to-market proposal is evaluated against its intended purpose. The intended purpose is understood to be the collection by the South African Revenue Service (SARS) of capital gains tax (CGT) which has been 'effectively withheld' from policyholders by the insurer. Having gained an understanding of the mark-to-market proposal and its intended purpose, the proposal will be measured against the following criteria: Does it succeed in recovering capital gains taxes which have been 'effectively withheld' from policyholders? What are the side-effects of the proposal, if any?
Open Access
Are South Africa's section 23m interest limitation rules sufficiently targeted and effective in combatting base erosion and profit shifting through earnings stripping schemes by associated enterprises?
(2022) Gwaambuka, Tatenda; Titus, Afton
Earnings stripping is a simple structure whereby one affiliate company resident in a low or no tax jurisdiction advances an intra-group loan to another affiliate member company resident in a high tax jurisdiction so that the latter makes excessive deductible interest payments. The overall effect of the structure is to move profits from a high tax jurisdiction through the interest payments to a low tax jurisdiction and thus reduce the multinational group's effective tax rate. This study focuses on how such a structure can arise in the South African tax system and if the measures in section 23M are sufficiently targeted and effective to address the problem without affecting legitimate corporate financing decisions. Considering that South Africa is a medium to high tax jurisdiction, the study focuses on those structures in which the borrower is resident in South Africa and the lender is resident in a low or no tax jurisdiction. To achieve these objectives, the study outlines how earnings stripping schemes arise in the South African context, finding that two conditions should simultaneously exist: a deduction/exemption mismatch in South Africa and low or no foreign taxation on interest in the lender's jurisdiction of residence. The study also finds that on an analysis of the normal and withholding tax systems in South Africa, a deduction/exemption mismatch can only arise from the operation of treaty law limits on South African taxing rights. This means problematic, tax motivated earnings stripping schemes which take advantage of the deduction/exemption mismatch arise from treaty abuse. This reformulation of the problem as being treaty-based informs this study's analysis of whether section 23M is sufficiently effective and targeted. The study finds that because of its domestic focus, section 23M is neither sufficiently effective nor specific in addressing earnings stripping schemes. The author, therefore, proposes a radical shift in how South Africa deals with earnings stripping schemes: amending section 23M to account for the foreign tax treatment of interest and reframing the rule as a provisional measure while South Africa focuses its long-term efforts on treaty-based reforms.
Open Access
The deductibility of interest expenditure in leveraged buyout transactions under South African Income Tax Law : a critical examination of recent developments
(2014) Deetlefs, David; Titus, Afton
The aims of this paper, are twofold: first, to provide an overview of the South African tax law principles governing the deductibility of interest expenditure incurred by taxpayers in respect of LBO transactions, as altered by the recent changes to the Act, and secondly, to critically consider and comment on the nature and perceived effect of such amendments.
Open Access
How are professional football player transfers taxed in South Africa
(2023) Nqiwa, Fezile; Titus, Afton
ABSTRACT In a document entitled Guide on the Taxation of Professional Sports Clubs and Players, the South African Revenue Service (“SARS”) states that it is unlikely that professional soccer clubs could be said to trade in player contracts, and accordingly, player transfers are unlikely to constitute revenue receipts or expenditure as anticipated by the Income Tax Act. The author critically evaluates SARS's assertion by applying the applicable football regulations and well-established South African common-law tax principles to practical scenarios premised upon common player transfer methods, which include combinations of permanent player transfers, temporary player transfers, free player transfers, a bridge player transfer, a buy-out player transfer and buy-back player transfers. The key outcomes and recommendations from this paper are that: I. the commercialisation of football has influenced a change in the player transfer market – clubs are increasingly engaging in speculative player transfer practices. Accordingly, SARS should acknowledge these developments and publish a guideline dedicated to the tax treatment player transfers. II. the Income Tax Act should be amended to include a limited tax exemption on training compensation received by clubs who train young players to become professionals, as the development of young players is social good which should be encouraged and rewarded.
Open Access
Illicit Financial Flows in Zambia's Integrated Economy: Analysing the effects of illegal taxation practices in the extractives industry on value addition
(2022) Mulenga, Mwaba Chileya; Titus, Afton; Chege, Kennedy
Mining is an important sector of Zambia's economy. Using the Constitution, legislative measures, and other policy pronouncements, efforts are being made by the Zambian government to maximise opportunities for diversification and value addition from mining to other sectors of the economy. Opportunities have been identified mainly in the form of employment creation, skills development, increased production using local goods and services, and integration into the mining value chain. Traditionally, Zambia's mining industry has been dominated by foreign multinational companies since the early 1900s. Therefore, multinational companies as major capital investors are key actors that anchor other service providers in the mining value chain. Their involvement therefore largely contributes to, and in some instances detracts from, the success of these measures to maximise value addition. This research explores the interaction of these companies and other local Zambian businesses in the light of the country's goals for industrialisation and diversification in an integrated multi-sector economy. By analysing the overall legal and economic context in which multinational companies operate, this research demonstrates that illegal tax practices by multinational companies have discernible adverse effects on revenue where funds are syphoned out of the economy illicitly. Also, this research evaluates the multi-dimensional effects of these practices and emphasises that value addition efforts throughout the mining value chain are particularly adversely impacted. The research identifies and critiques inadequacies in the law that fail to address the resultant challenges for local businesses such as lost opportunities for funding and capacity.
Open Access
Law by Decree: A critique of section 5(2) of the Income Tax Act
(2022) Cronin, Benjamin; Titus, Afton
This thesis addresses the question of whether section 5(2) of the Income Tax Act 58 of 1962 (the Income Tax Act) infringes upon the Separation of Powers Doctrine and constitutes an unlawful delegation of the power to impose or reduce taxes, in terms of the Constitution. The power to determine the rate of income tax is a fiat legislative power that directly impacts upon the lives of millions of people in South Africa. This question, while one centred on the law of taxation, also implicates fundamental public law questions related to the powers of law-making by the Legislature and delegated law-making powers to the Executive. Balancing these different powers in the area of tax law has increasingly become contentious, as more powers have been delegated over the years, raising separation of powers concerns. In terms of sections 5(2)(a) and (b) of the Income Tax Act, the Minister of Finance is purportedly empowered to ‘alter' the income tax rate by virtue of the annual national budget, with effect from the ‘date or dates determined by the Minister in that announcement'. This power to ‘alter' or amend tax rates by virtue of an ‘announcement' will, in terms of section 5(2)(b) of the Income Tax Act, remain in force for a period of 12 months from the date announced ‘subject to Parliament passing legislation giving effect to that announcement'. While the unique power to raise or lower national taxes has been provided for in an Act of Parliament, the exercise of this power remains to be tested in court against the objects and language of the South African Constitution. During the course of this thesis, I will endeavour to determine whether section 5(2) of the Income Tax Act would likely survive a challenge in light of the apparent assignment of a purely legislative function to a member of the executive.
Open Access
‘Tax exceptionalism': a South African tax law perspective
(2024) Tembe, Fezile; Titus, Afton
This study examines the manner in which South African courts approach the interpretation of fiscal legislation – by asking whether, courts are developing some sort of exceptional approach in statutory interpretation when it comes to tax law? This is the crux of the concept ‘tax exceptionalism', the misconception that tax law is fundamentally different and therefore should not be governed by the same rule of statutory interpretation that generally apply in the interpretation of all other legislation. For the first time this study examines this concept from South African perspective. In the discussion, the study makes an analysis to the recent court decisions namely Pienaar Bros, NWK and Brummeria cases, and looks at the approaches employed in the interpretation of these cases as tax matters. It further asks whether the same conclusions would have been reached if the above cases were not tax cases. Having considered the above decisions, the conclusion reached is that even after more than two decades of the Constitutional dispensation ‘tax exceptionalism' still exists in South Africa, and evidenced by the constant creation of new rules that apply exceptionally in the interpretation of fiscal legislation and not in all other legislations.
Open Access
The fourth industrial revolution and South African income tax: an investigation into the exigencies placed on the tax and legal environment by crypto asset airdrops
(2023) Doidge, Christopher John; Titus, Afton
Over the last five years regulators across the globe have made a concerted effort towards comprehensive regulation of distributed ledger technology, and blockchain. For fear of falling foul of laws governing the issuance of financial securities, there has been a recent hastening of the proliferation crypto asset distribution through the socalled ‘airdrop'. Under the developed framework of what constitutes a good system of taxation is the notion that it should be characterised by simplicity and certainty, both in the substance of the law and the manner in which tax subjects are required to comply. By its nature alone taxation is complex due to it being necessarily informed by many other branches of law; moreover, where a situation would precipitate a certain tax treatment, a subtle variation of the facts have a much amplified effect on the ultimate outcome. Consequently, the nuances of distributed ledger technology may have unanticipated tax effects in opposition to these principles. This research established that a crypto asset is classified for tax purposes as financial property, not currency. However, public guidance by the tax authority has not made it clear how, or under what circumstances, airdrops are to be taxed. A gross income analysis of airdrops (using the Flare Network as a case study) demonstrated that their tax treatment is able to be analysed in principle under the current primary sources of tax law. However, an inconsistency in its application arose in that non-custodial holders, being subjected to the exigencies of a stipulatio alteri, had a number of varying outcomes in comparison to a taxpayer who self-custodies assets. The observed results also illustrated variations in classification of the nature of accrual, as well as the timing. The latter had the effect of introducing possible avoidance opportunities not ostensibly covered by the General Anti-Avoidance rules as they arise through deliberate deferment of positive action. Notwithstanding that outwardly an airdrop has the countenance of ‘free money', the inevitable conclusion is the tax effects are highly complex and sensitive to obscure technicalities of law. The position of the South African Revenue Services is there is no need for a rigorous analysis per an interpretation note on crypto asset taxation, regarding established law as sufficient. The findings of this research challenge this position as being erroneous – the tax effects are not simply understood by taxpayers, violate the principle of neutrality (as custodial and non-custodial holders should attract the same tax incidence), and no certainty has been provided by tax authorities with respect to airdrops. The final recommendation is for the South African Treasury, in consultation with the tax authority, to mobilise the Legislature in passing a statute which overrides the attendant law of general application in favour of a single, unified approach to airdrop taxation.
Open Access
Unaddressed tax disputes: the case of South Sudan's dysfunctional Tax Appeals Board and lessons from Uganda and South Africa
(2022) Anei, Joseph Majak Madut; Titus, Afton
This research will explore the tax disputes resolution mechanisms by the Tax Appeals Board and High Court under the Taxation Act, 2009 in the Republic of South Sudan. Additionally, it will examine legislative gaps affecting the independence and competence of Tax Appeals Board in its mandate of resolving tax disputes within the tax administration system. In addition, the study will explore the review process of Tax Appeals Board's decisions by the High Court of South Sudan. By contrast, however, this research will further examine the tax disputes resolution mechanisms in Uganda and South Africa with the focus on the legislative guarantees on the independence and competence of the statutory bodies tasked with tax disputes resolution. This research is segmented into six chapters: Chapter One looks at the introductory background of the research while Chapter Two deals with functional framework of Directorate of Taxation, Tax Appeals Board, rights and duties of a taxpayer. Chapter Three which is the crux of this research deals with issues of independence and competence of the Tax Appeals Board as well as appeals to High Court. Chapters Four and Five look at tax dispute resolution mechanisms in Uganda and South Africa respectively. Finally, Chapter Six wraps up this research with findings and recommendations.
Open Access
Was the Su[p]reme Court of Appeal correct in its judgement of the Stellenbosch Farmer's Winery case?
(2014) Mogano, Barley; Titus, Afton
A contract requires two or more people to come to an agreement with regards to the requirements of such a contract with the intention of following the practice of whatever is set out in the contract, the main intention being to deliver a performance by both parties. When two parties sign a contract they are thus agreeing to stick to the terms of the contract that they are signing, as it becomes effective upon signature. The contract is then rendered to be in place and binding from that moment thereon. This implies that any condition that is not complied with in the contract that might take place after signing the contract will have penalty imputed on the guilty party as per stipulated in the contract. The contract must also provide the detailed measures that will be taken in the case of either party failing to honour the necessary conditions that were stated at the inception of the contract. Failure to adhere to the conditions in the contract is called breaching the terms of the contract and thus the company found guilty of breaching the contract will be liable to pay the penalties agreed to by the parties that have entered into that contract. If a company or individual signs a contract that will provide that particular company or individual with benefits for a certain period, but for whatever reasons the contract gets cancelled, it makes sense that the company or individual should receive compensation for the damages of the loss of the income that it would have received had the contract run its full course as intended without any party repudiating the specific contract in question. This brings me to the concept of damages and compensation.
Open Access
Was the Supreme Court of Appeal’s judgment in CSARS v Founders Hill correct?
(2014) Jama, Asanda; Titus, Afton
This research will be focused on the tax effect of realizing capital assets by the use of a realization company and evaluating the nature of a receipt or accrual in the hands of a taxpayer. This objective will be achieved by analyzing the judgment of the Founders Hill case and by looking at previously established cases. Articles from various authors will also be considered.

Browsing by Author "Titus, Afton"

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