Browsing by Author "West, Craig"

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    A critical analysis of fiscal stability agreements as offered in the tenth schedule of the income tax act for energy companies in South Africa in light of recent oil and gas finds in South Africa
    (2021) Melapi, Babalwa Melapi; West, Craig; Futter, Alison
    South Africa remains reliant on a number of countries to sustain its energy requirements. The acute shortage and unreliable supply of electricity, requires that South Africa consider other energy sources, more specifically, that it considers the use of oil and gas as an alternative or complementary energy source to the main energy sources currently used in the country. The recent announcement of oil and gas discoveries in South Africa could see less reliance on other countries for the importation of crude oil and petroleum products. Despite newly discovered oil and gas resources in South Africa, the country will continue to remain reliant on the industry's international investors since South Africa does not have the requisite expertise, skill and capital to operate efficiently in this industry. The shortage of capital to further develop the industry means that the country will need to continue to compete with other emerging markets to secure international investment. One such way of being an attractive investment destination has been touted through the offering of a tax regime with incentives which, more importantly, provides certainty and stability (Mausling, 2017: iv). South Africa introduced the Tenth Schedule to the Income Tax Act No.58 of 1962 (“Income Tax Act”) which aims to provide incentives that stimulate industrial and economic growth in the oil and gas industry. Against the backdrop of recent oil and gas finds, the Minister of Finance announced in the 2019 Budget Speech that changes to the Tenth Schedule would be considered. This has brought about the need to consider the role of fiscal stability agreements (“FSA”). Under the Tenth Schedule, South Africa offers FSAs which allows for the “freezing” of the Income tax provisions when the FSA was signed i.e. even if there is a new tax regime, the investor may elect to continue to use the old tax regime. Firstly, this dissertation considers whether there is a need for FSAs. To achieve this aim, the dissertation considers the reasons for fiscal instability and considers these within the South African context. These reasons are used to substantiate whether there is a need for FSA's as a remedy for fiscal instability. The current incentives offered by the Tenth Schedules are examined in order to determine the reasons as to why oil and gas companies would find FSAs advantageous. Secondly, the dissertation examines the types of FSAs typically offered, including freezing clauses (currently used in the FSA offered by South Africa), economic balancing clauses and, finally, hybrid clauses. In critically reviewing these different clauses, the most preferred clause is suggested. A further review of this preferred clause is enhanced through the consideration of the types of FSAs offered by comparable countries. Ghana and Mozambique have been identified and selected for comparison for the purposes of this study. The paper further considers aspects of the FSA such as the legality and legal effectiveness of FSAs. Such issues are critical in light of the challenges that have been identified in the use of FSAs, particularly that such instruments limit the State's sovereignty. Furthermore, the costs associated with FSAs are considered. Lastly, the remedies available should the state elect not to adhere to a FSA once in force are considered. The findings of the study suggest that there remains a need for FSAs in South Africa. However, the findings indicate a need to change the current fiscal stability clause into an economic balancing clause, in particular a negotiated economic balancing clause.
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    A critical analysis of whether BEPS Action 1 resolves issues of source taxation
    (2022) van Der Westhuizen, Werner; West, Craig
    The digital economy and the challenges it poses to the international tax arena is a swiftly developing area. This dissertation considers the suggestions released by the OECD Pillar 1 dated January 2020 and the UN Article 12B released in August 2020. The digital economy has evolved significantly over the last years and has changed how business operates. Digital enterprises can conduct business across borders without creating a physical presence using information and communication technology. As a result of the increased use of technology in business processes, it has been opined that the digital economy is becoming the economy.1 The challenges posed by the digital economy relate to the ease with which enterprises can conduct business in a jurisdiction without any presence. International tax rules currently require a level of presence in a country before taxes on the business profits can be levied in that jurisdiction. There has been a significant international focus by governments and media on digital enterprises. This is due to the perception that digital companies are under-taxed and that there is a misalignment between where the value is created and where the digital enterprise is subject to tax.2 The OECD/G20 Base Erosion and Profit Shifting project (BEPS) is looking at restoring confidence in the international tax system by taxing profits where value is created. Value creation will therefore be an essential part of the BEPS initiative.3 There are different views regarding the changes to be implemented that are suggested by the OECD Task Force on the Digital Economy (TFDE). One aspect is clear, the changes will have a significant impact on the international tax system for digital enterprises. The dissertation will explore the theories that justify taxation at source. For a tax-compliant culture to exist, it is vital that taxes raised are just.4 It will be shown that the theories that justify taxation at source are relevant to the digital economy and will ensure just taxation at source. To get a clear understanding of source, the concept of source and the current concept under the international tax law, will be discussed. The characteristics of the digital economy and its ability to conclude business in a state without creating a physical presence will be discussed. It will be shown that the characteristics are not new but merely exacerbated by the digital economy. Since the current source concept under international tax law requires a physical presence, the proposals by the OECD Pillar 1 and the UN article 12B will be evaluated. It will be essential to establish whether these proposals address the issues raised by source taxation and the requirement of a physical presence under the Permanent establishment threshold. It is found that the proposals do not address the source issues and are also not based on sound tax policy. The proposal will be at odds with various tax policy principles such as neutrality, equity, and simplicity. The proposals are overly complicated, and valid concerns were raised that countries might receive little or no tax.5 The changes made by BEPS action 1 pillar 2, action 3 (strengthening the CFC rule), 7 (preventing the artificial avoidance of permanent establishment), 8 to 10 (transfer pricing in line with value creation), and 13 (Country by Country Reporting) would largely address the double non-taxation of the digital economy. However; it is also recommended that the changes suggested by the TFDE should not be implemented at this stage, as not enough time has passed since the implementation of BEPS to evaluate the impact clearly.
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    A critical analysis of whether the current legislated exit tax provisions of South Africa are proportional to the legitimate purpose of those provisions
    (2018) Botha, Leandi; West, Craig
    When a South African taxpayer transfers his/her residence to another tax jurisdiction, exit tax is levied on certain accrued gains on the basis that a termination of residency results in a deemed disposal. This creates a fiction that the taxpayer disposes of his/her assets even though there was no change in ownership. It is likely that the levying of exit will create a cash flow disadvantage for the taxpayer, because there is a cash outflow, but no cash inflow. Moreover, the South African exit tax provisions require that exit tax is paid immediately upon emigration. The “immediate recovery” method of exit tax has raised a number of questions regarding the proportionality vis-à-vis the legitimate purpose of exit tax. Derived from Adam Smith’s first maxim, a tax is considered to be proportional to its purpose if the content and form of the tax does not go beyond what is required to attain the purpose of the tax. This principle is commonly known as the principle of proportionality. Proportionality is also one of the fundamental principles in the European Union ('EU’) and has featured in a number of European court cases concerning exit tax. This minor dissertation seeks to analyse the current legislated exit tax provisions for South Africa and evaluates whether these provisions are proportional to the purpose of exit tax or goes beyond what is necessary to achieve its purpose. The key findings arising from the research presented in this minor dissertation is that an exit tax regime which require an emigrating individual to immediately pay exit tax upon departure may restrict the mobility of that individual and prevent him/her from relocating to another tax jurisdiction. This dissertation found that such a restriction is not proportional to the purpose of exit tax. The mere imposition of exit tax may be justifiable and that it is not so much the principle of levying exit tax that cause concern, but more the timing and method of the application of exit tax. In South Africa, exit tax is due immediately upon departure. In line with the key findings in this dissertation, the current legislated exit tax provisions for South Africa is not proportional to the purpose of such provisions. Other countries have already addressed this issue by implementing alternative measures to levy and collect exit tax which is less burdensome for the taxpayer and therefore considered to be proportional to the purpose of exit tax. One such method is the deferral of exit tax until the point of actual realisation of the accrued gains. Following the analysis as described above, this dissertation finally evaluates the effectiveness of the current legal framework for information exchange and assistance in tax collection in a South African context in order to determine whether the adoption of a method whereby exit tax is deferred and collected upon actual disposal of the asset, is viable in South Africa. This evaluation found that South Africa already have the appropriate legal mechanisms in place in order to collect exit tax debt from a former resident.
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    A lifeline for Small Business in South Africa: An evaluation of section 12J, Venture Capital Incentives
    (2020) Mynhardt, Tertius Mader; Tickle, Deborah; West, Craig
    This dissertation seeks to answer two questions. In the main it aims to answer does the section 12J venture capital incentive advance government's original stated intention of incentivizing the provision of equity funds to the SME sector. Based on the outcome of the primary research question the secondary question seeks to answer whether section 12J should be extended beyond 2021. In seeking to answer these questions the dissertation critically evaluates the section 12J legislation, researches the venture capital industry in South Africa including section 12J venture capital companies and investigates the role and success of targeted tax incentives in South Africa. The VCC incentive targeted start-ups and SME's generally considered high growth and high-tech, or junior mining and exploration companies. SME's, especially entrepreneurial businesses, have the potential to be a catalyst for economic growth and job creation. Inter alia, access to finance is stunting the development of the SME sector with up to 70% of SME's failing due to a lack of funding. Venture capitalists can provide equity finance, management and technical support that could reduce some of the high risks associated with SME's. The advantage of equity finance is that it allows the SME's to better weather economic downturns and reinvest cash surpluses instead of servicing debt. In the main, whether the section 12J tax incentive is successfully advancing government's original intention still remains to be seen. Although there has been significant uptake of the regime and evidence to suggest that jobs are being created and meaningful investments are occurring, it still needs to be assessed to what extent the jobs and investments would have occurred even without the incentive. There also remain some short-comings to the design of the incentive and uncertainty to the regime which affects the sustainability of VCC's and the type of investments being made. The VCC industry has evolved to be more conservative, investing into asset-backed businesses and generally providing more growth capital, meaning that start-ups and other industries such as high growth technological companies are benefitting to a lesser extent. As such, government's intention to provide equity finance to start-ups and high growth industries appears to not be being addressed. Due to the late uptake of the regime, it is further unlikely that sufficient data would be available to analyze the incentive before 30 June 2021, the current sunset date. For these reasons, it is the writer's view that Treasury should appoint an external research organisation to prepare a thorough analysis of the incentive and whether it should be extended, but in any event, as a minimum the incentive should be extended for at least another six years (to make up for the years from its introduction to the year it began to show significant uptake, i.e. 2009 to 2015). Alternatively, the section 12J incentive should not be extended but rather replaced with a similar incentive taking into account the recommendations made in this dissertation.
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    Africa and the taxation of permanent establishments: Is the definition of "permanent establishment" as used in the double tax agreements of selected 'fishing rich' African countries sufficient to protect the taxing rights on those diminishing natural resources?
    (2011) Strandvik, Ulrik Bernhard; West, Craig
    This thesis tests the sufficiency of the definition of permanent establishments (PE), as contained in the Double Tax Agreements (DTAs) of selected "fishing rich" African countries, in protecting their taxing rights over profits made by non-residents from fishing in the waters of their states. The concept and meaning of "fixed place of residence" and "any other place of extraction” of natural resources is analysed in the context of establishing a PE in the Source State, taking various rules of interpretation, commentaries, judicial and academic views into account. It is concluded that although there are strong arguments in support of the view that a fishing vessel can be considered a fixed place of business, a prudent approach should be adopted. A fishing vessel is not a PE, unless specifically included in the specific DTA of Contracting States.
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    Analysis of "commencement of trade" and "cessation of trade" as applied in the context of income tax in South Africa
    (2014) Coutsoudis, Basil; West, Craig
    In income tax legislation, it is of crucial importance to be able to determine a precise time at which an entity can be said to have commenced and ceased trading. This is due to the fact that in so far as tax on income is concerned, by its very nature, it is a tax that mainly depends on trade, and the tax events that become relevant in terms of deductions and allowances in particular, need to take place within the context of trade.1 In essence, in order for a tax event or an expense to have any application for the purposes of income tax (as opposed to capital gains, or other non-revenue taxes) it must take place between the times after an entity has commenced trading, and before it has ceased trading.2 As will be shown, this is so stringently applied, that it can lead to unfairness with regards to certain pre-trade revenue expenses, so much so, that in 2003, the Income Tax Act was amended to include an exception for such expenses in the form of section 11A. An assessment of when a business commenced and ceased can also be relevant in many other areas other than in relation to deductions and allowances, such as in the provisions relating to value added tax, in determining an appropriate tax period for an entity, and in many other instances. It is also relevant in many areas outside of the field of tax. However, despite the relevance of this issue, and despite the fact that one would have expected the issue to have received judicial attention, there is in fact a paucity of jurisprudence both locally and internationally on the issue of commencement of trade.
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    Analysis of the changes introduced by the tax administration act to the dispute resolution process and the effects thereof on the constitutional rights of taxpayers
    (2014) Johannes, Ruben Stanley; West, Craig
    This dissertation evaluates the changes introduced by the Tax Administration Act, 28 of 2011 ('the TAA') to the extent that such changes have an impact on the constitutional rights of taxpayers during the dispute resolution process. Through comparison of the TAA provisions with the provisions that this Act replaces, this dissertation seeks to establish whether the legislature has achieved its objective of aligning the administrative provisions of the various tax Acts with the constitutional rights of taxpayers. A comparison with the Australian dispute resolution process was also undertaken with a view to identify any further areas of improvement insofar as the dispute resolution process is concerned.
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    An analysis of treaties for the exchange of information for tax purposes impacting a South African retail sector taxpayer and financial institutions trading in the Southern African development community region
    (2015) Van Schalkwyk, Johannes Murray; West, Craig
    Based on recent international tax developments, global revenue authorities have identified a need for the exchange of taxpayer information (EOI) to identify both tax evasion and tax avoidance. This will impact the South African Development Community (SADC) tax payers and financial institutions by increasing the need for additional administrative capacity to identify and report such information, and for revenue authorities to share such information in appropriate circumstances. A number of bilateral and multilateral treaties are currently applicable to SADC taxpayers that regulate the exchange of information by revenue authorities. An analytical comparison between these treaties was performed to identify deviations from the Model Tax Convention (MTC) of the Organisation for Economic Cooperation and Development (OECD). Treaties included in the analysis are those relevant for the South African retail sector trading in various African countries. The comparison of the recent SADC peer reviews of exchange of information revealed significant deficiencies in certain treaties and domestic laws regarding the identification of beneficial owners, bank secrecy, confidentiality rules and underlying document retention, and insufficient EOI agreements are in place. Significant work in amending domestic legislation and administrative capacity building is therefore still required for countries in the SADC region before they can be admitted as parties to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Additional investment in IT systems for revenue authorities will be crucial to handle and keep up with this increased information demand. Information will need to be collected, retained and reported using the agreed XML data standards. Conversely, financial institutions and taxpayers will also need to adjust their own tax systems in order to identify reportable information, and be prepared to comply with ad hoc or periodic requests from revenue authorities, even if it involves the tax affairs and information of third parties. EOI increases the risk for the infringements of a South African retail taxpayer's rights to privacy, confidentiality, just administrative action, access to information and access to courts.
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    Are the South African source rules fit for purpose to facilitate taxation of profits from the digital economy?
    (2023) Ndinisa, Andile; West, Craig
    This dissertation evaluates whether the South African source rules, contemplated in the Income Tax Act 58 of 19581 (the ITA), can still be relied upon in facilitating the taxation of profits from the growing digital economy. Economic activity and ways of doing business have evolved over time, however as in many countries, the South African source rules have not changed. The area of source and digital tax have provided applicability challenges. One of the major challenges identified was that the current source rules were mainly dependant on residency and physical presence. Furthermore, they would only take into account supply-side factors in determining the source of an income. The Organisation for Economic Co-operation and Development (OECD) has workable solutions to address tax challenges arising from digitalisation. Some of the proposed solution take into account both supply-side and demand-side factors when allocating profits to market jurisdictions. The study was motivated by the challenges faced by governments and policy makers in allocating taxing rights over profits from the digital economy using the existing tax laws. Arthur J. Cockfield points to arguments suggesting that the digital economy will result in inability to cumulate taxes adequately using the traditional principles.2 The research contributes to previous literature by comprehensively evaluating the South African source rules and the major technologies. The dissertation however does explore current writings on the tax challenges of the digital economy.
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    Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements
    (2020) Vanlierde, Angela; West, Craig
    Equity securities lending arrangements are contracts whereby a shareholder lends his shares to a borrower for a period of time. If dividends are declared during that period, these accrue to the borrower, and the borrower pays a manufactured dividend to the lender as compensation. The applicable income tax legislation deems manufactured dividends to be dividends for purposes of dividends tax. However, unless manufactured dividends are governed by Article 10 of a double tax treaty, South Africa may not have the right to tax manufactured dividends received by non-resident lenders. This would result in a loss of revenue for the South African fiscus. This paper examined the qualification or characterisation for treaty purposes of manufactured dividend income earned by lenders in terms of securities lending arrangements. This examination was done through an analysis of the ‘dividends' definition in Article 10 of the 2017 OECD model convention. It was found that manufactured dividends are not ‘dividends' for treaty purposes, and are instead business income in terms of Article 7. South African domestic tax legislation was analysed, together with publications by the South African Revenue Service and National Treasury, and demonstrated that there is a risk of taxation not in accordance with the provisions of a convention, as well as a risk of revenue losses to the South African fiscus where a non-resident lender has no permanent establishment in South Africa.
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    The commonalities or divergence of the meaning of beneficial owner in a treaty (International) and domestic context by Tasneem Koorowlay.
    (2013) Koorowlay, Tasneem; West, Craig
    The aim of this dissertation is to establish the relevance of the international interpretation of beneficial owner to SA’s interpretation of the concept. The phrase “beneficial owner” was introduced into the South African Income Tax Act in April 2012 following an intention to align South African tax as regards dividends with international norms. The concept is applied in a domestic context by various countries and in numerous bilateral tax treaties and has been a subject of debate across numerous foreign courts.
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    The concept of social enterprise: an analysis of the current tax environment and proposed enabling tax incentives to aid the social enterprise
    (2014) Ker, Lauren; West, Craig
    A social enterprise is a revenue-generating business with primarily social objectives whose surpluses are reinvested for that purpose in the business or in the community, rather than being driven by the need to deliver profit to shareholders and owners (BC Centre for Social Enterprise 2012). These entities are currently not recognised in the South African legislation but instead may adopt any of the legal structures within the Companies Act of South Africa, 2008. Social enterprises have been identified for their potential to solve society's critical issues of poverty, unemployment and inequality, to name but a few. Many countries around the world are recognising the contribution these entities have to make and governments are taking steps to support social enterprise including through regulatory changes. South Africa in comparison to many other countries is lagging behind, however, the South African government is considering the development of a policy framework for social enterprise.
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    The creation of a permanent establishment in South Africa as a result of the activities or presence of a partner or partners in South Africa
    (2017) Van Schalkwyk, Esther Maria; Warneke, David; West, Craig
    This dissertation seeks to establish whether the presence or activities of a partner or partners in South Africa creates (or is at risk of creating) a permanent establishment for that partner, the partnership or the co-partners in South Africa. At the outset, the major legal and fiscal consequences of a partnership under South African law are investigated. The unique legal and fiscal treatment of a partnership as a mere aggregate of persons that is treated as fiscally transparent under South African law is relevant to determine the potential application of double taxation agreements to partnerships or their partners. Once the terms of a double taxation agreement are found to apply in the circumstances, the creation of a permanent establishment in terms thereof becomes relevant. The different types of partnerships and partners under South African partnership law are set out and their differentiating characteristics analysed in an effort to identify whether the activities or presence of certain partners are more at risk of giving rise to a permanent establishment than others. In a commercial context, the important distinction is drawn between ordinary and extraordinary partners as very different commercial consequences attach to these partners. In particular, whereas ordinary partners automatically derive an implied authority or mutual mandate to manage the business of the partnership as agents of their co-partners by virtue of the partnership agreement, extraordinary partners are excluded from the mutual mandate. The implied authority amongst partners becomes particularly relevant when considering one of the alternative tests for creating a permanent establishment that appear in the prevalent model tax conventions commonly used in the South African context, in terms of which the existence of authority is one of the required elements for the creation of a permanent establishment. The special rules surrounding the source of partnership income is investigated as a means of establishing jurisdiction to tax under South African domestic source rules. The impact of legislation on the South African source rules pertaining to partnerships as developed under the common law is critically analysed and the relevance of source rules in the permanent establishment context is evaluated. It is submitted that it is premature to consider the rules surrounding the creation of a permanent establishment under the terms of a double taxation agreement before it is established that the relevant contracting state has the requisite jurisdiction to tax and furthermore that the terms of that double taxation agreement apply to the matter at hand. Finally, the relevant articles of the model tax conventions commonly used in the South African context are discussed with specific focus on the unique attributes of a partnership that may impact on the creation of a permanent establishment for the partner or partners by virtue of the presence or activities of a partner or the partners in South Africa. The risk of creating a permanent establishment by virtue of the presence or activities of an ordinary partner in South Africa is contrasted with that of an extraordinary partner. It is concluded that the activities or presence of ordinary partners (as opposed to extraordinary partners) are particularly at risk of creating a permanent establishment in South Africa, although it is acknowledged that certain requirements will have to be met on the facts of each case before a permanent establishment will be found to exist.
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    A critical analysis of the fiscal incentives available in the renewable energy - a comparison between South Africa, India, China and Brazil
    (2017) Hassim, Bilal; West, Craig
    South Africa relies significantly on the use of non-renewable resources to generate its electricity requirements. The release of carbon dioxide and other harmful gasses during the process of electricity generation has a negative impact on the quality of human and animal health and wellbeing. The South African renewable energy sector is currently in its infancy in comparison to the global renewable energy sector. A brief analysis and comparison of the renewable energy sectors of the other countries selected in this dissertation (i.e. Brazil, China and India) will be performed to highlight the common challenges in these countries in an effort to demonstrate the relevance and importance of the tax and limited related incentives to assist in reducing these challenges and increase the use of renewable energy resources in electricity power plants. Once the relevance and importance of tax and related incentives are highlighted, this dissertation analyses and examines the specific tax incentives available to enterprises operating in the renewable energy sector in South Africa, India, China and Brazil. Based on the analysis, recommendations and/or enhancements to the current corporate tax incentives available in South Africa will be discussed in detail. This dissertation will also discuss whether any of the recommendations and/or enhancements could be incorporated into the existing South African Special Economic Zones Act. As there are 108 solar and wind energy power plant being constructed in Brazil, but no significant corporate tax incentives currently available to qualifying taxpayers, the regulatory policy setting out the renewable energy targets and how it will be achieved is an important consideration. It was found that if there were periodic updates to the regulatory policy and it was mandatory for electricity utility companies (such as Eskom) to ensure that there is a mix between renewable energy and non-renewable energy sources based on the regulatory policy, it would ensure that the delays currently being experienced in the expansion of the renewable energy sector would be significantly reduced. This dissertation found further that the accelerated capital allowances available to qualifying taxpayers in South Africa are considerably more favourable than similar accelerated capital allowances available in the other countries selected in this dissertation.
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    A critical evaluation of the 1964 preferencial agreement (Labour agreement) for Mozambique mineworkers in the light of the South Africa - Mozambique DTC and the SADC treaty
    (2016) Bugan, Noel Arnold; West, Craig
    In 1964, a labour agreement was signed between the governments of South Africa and Portugal on behalf of its colony, Mozambique, to regulate the migration of Mozambican mineworkers to South African mines. In terms of this agreement the Mozambican mineworkers who received income on the South African mines were exempt from any taxes on their South African source income. Although outdated, the agreement is still in force today and is used by the South African mines to enter into employment contracts with Mozambican mineworkers. Many countries in the SADC region enter into double taxation agreements for the avoidance of double taxation. The 1964 labour agreement is quite unique as the income received by the Mozambican mineworkers is exempt from tax in South Africa for the duration of the contract (usually up to 18 months) entered into by the Mozambican mineworkers and their South African employers although the source of income is in South Africa. The challenge is whether this agreement should continue as an international agreement and whether it is discriminatory to exempt these mineworkers when compared to other mineworkers in the same position working in South Africa. The purpose of this study is to examine the application of this labour agreement with reference to the South African Income Tax Act and the double tax agreement with Mozambique. It further questions whether this agreement causes a revenue loss and whether or not such loss is justifiable. It further tests whether this agreement is a tax incentive and whether or not it leads to harmful tax competition in violation of the SADC agreement. Finally, the agreement is assessed in light of the discrimination article in the double tax agreement and based on section 9 of the Constitution of the Republic of South Africa. The main conclusion is whether the 1964 labour agreement should continue as an international agreement in the present circumstances as the agreement is fairly outdated and subject to various interpretations which will have an effect on revenue loss to the South African fiscus.
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    Defining a royalty from a South African perspective for the purposes of the South African Income Tax Act and the South African application of its Double Tax Treaty network
    (2012) Buckley, Ryan; West, Craig
    The word "royalty" is used in South Africa's Income Tax Act No. 58 of 1962 ("TA") at various points. Although there is a general understanding on the meaning of a royalty, there is no official definition for this term which can be used throughout the ITA. Section 35 of the ITA provides the strongest guidance of what a royalty is. However, this section applies to royalties and similar payments.
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    Designing an optimum shipping tax regime by applying an updated multi-analytical framework
    (2022) Hitchens, Barry Grant; West, Craig; Roeleveld, Jennifer
    The 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.
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    Developing a foundation for a globally coordinated approach to the taxation of crypto-asset transactions
    (2022) Parsons, Shaun; West, Craig; Roeleveld, Jennifer
    Crypto-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.
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    Does the Permanent Establishment article give Namibia adequate taxing rights?An analysis of tax convention models in the mining and fishing industries
    (2018) Swartz, Rikotoka Punaje; West, Craig
    Namibia is a country rich in natural resources and heavily dependent on foreign investment to effectively make use of those resources. It has a national policy of encouraging investment from other countries and has set up incentives for that purpose. When there is a great deal of involvement of foreign companies in a country, international tax issues of judicial double taxation are discouraging to foreign investors. In an effort to address this risk, Namibia has entered into various double tax agreements with countries to ensure equitable taxing rights and encourage foreign direct investment. Double tax agreements are usually based on model tax agreements published by large international organisations, the most popular being the Organisation for Economic Cooperation and Development (“OECD”) and United Nations (“UN”). The African Tax Administration Forum (“ATAF”) has also recently formulated such a model for African countries. As Namibia has a source based taxation system, giving up any taxing rights are of great concern and it must consider if these double tax agreements is in its best interest. Subsequently, Namibia has begun the process of renegotiating its tax treaties with other countries in hope of sacrificing fewer source taxing rights. This dissertation analyses Namibia’s current double tax agreements to determine whether the permanent establishment article offers sufficient protection for Namibia’s source taxing rights with reference to Namibia’s largest and most important industries of fishing and mining. The permanent establishment article is of particular importance as it usually provides an unrestricted taxing right to the income in the source country in which the permanent establishment is based. This study considers the permanent establishment article as it applies to the fishing and mining industries in Namibia. This includes a discussion of the mining and fishing industries in Namibia and a brief look at the applicable taxation regime. It also compares the permanent establishment article found in the OECD, UN and ATAF models to discuss which represents the most appropriate for Namibia to use as the basis for its renegotiations. The agreements analysed do show some areas for concern to Namibia namely: • The treaty with the United Kingdom is very out dated and may not give Namibia full territorial rights. • Many of the treaties with developed countries have permanent establishment article that are based more on the OECD model than the UN model which is specifically designed to give developing countries more taxing rights. • The permanent establishment article in the ATAF model gives the most taxing rights to the host/source country and has specific provisions negating the risk of abuse by foreign companies. However, there is a concern that such provisions may have too wide a scope and discourage foreign investment. • Most of the provisions of potential benefit to Namibia have been inserted in Article 5(2) and are arguably ineffective or less effective protections. • Namibia’s current DTAs contain no provisions directly related to fishing vessels which is of concern as fishing vessels are at risk of not being classified as permanent establishments. There are, however, arguments to be made for a fishing vessel as a mobile place of business forming a permanent establishment without such special provision. • A specific deeming provision regarding the permanent establishment in the exploration phase of the mining process would be advisable if Namibia wished to create one in the mining industry as soon as possible.
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    Open Access
    Does the proposed dividends tax overcome the international tax flaws that secondary tax on companies may have, namely exclusion from the scope of some double tax agreements and violation of the anti-discrimination provisions embodied in the OECD mode
    (2011) Lovely, Graham; West, Craig
    Secondary tax on companies (STC) and the new dividends tax and its exemptions therefrom could be in contravention of the non-discrimination provisions of Article 24(5) of the OECD MTC. This question has not been decided in a South African court. This dissertation proposes the resolution to this question. The outcome of this research may be particularly relevant in the context of the proposed new dividends tax and value extraction tax (“VET”) and the exemptions therefrom, which are, again, based on residency.