OpenUCT :: Browsing by Subject "Taxation"

Browsing by Subject "Taxation"

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Open Access
A 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, Jennifer
The 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.
Open Access
A critical analysis of the legality of retroactive fiscal legislation and the remedies available to taxpayers
(2021) De Villiers, Christoff De Wet; Johnson, Tracy
‘Uncertain law also penalizes those anxious to obey it and eventually creates contempt for the law. Uncertain law will thus erode the confidence of taxpayers in the system and their willingness to support and comply with the system.' Retroactive fiscal legislation leaves taxpayers with little to no tax certainty, with only about two months of transactional certainty each tax year not subject to any potential retroactive draft fiscal legislation - from when the amendment act from the prior legislative amendment cycle is promulgated until the Budget Speech which sets in motion the new legislative amendment cycle. Arguably, economic activity and tax morality could increase should more certainty exist as to what types of retroactive fiscal legislation are permissible, in which circumstances it is permitted and the remedies available to taxpayers in cases where such legislation adversely affects their vested rights. This research aims to consider the legality of retroactive fiscal legislation to provide much-needed tax certainty. This will be done by analysing the rules under the common law, statute law (being the Interpretation Act) and the Constitution. The conclusion reached under the common law is that regarding fully completed transactions, the presumption against retroactivity will provide an effective remedy to taxpayers should the retroactive legislation not explicitly provide that it will apply to completed transactions. Under statute law, the treatment of statues which are subject to commencement provision are dealt with similarly under the Interpretation Act and the proposed Interpretation of Legislation Bill, in that neither contains an outright prohibition on retroactive legislation. Under the Constitution, a challenge based on either the rule of law or the doctrine of separation of powers will most likely not be successful. A challenge in terms of section 25 of the Constitution would be the constitutional remedy most likely to succeed. A challenge under section 25 of the Constitution requires a two-stage test: Firstly, it needs to be determined if the deprivation of property was arbitrary for purposes of section 25 of the Constitution. Secondly, it needs to be determined if section 25 of the Constitution's limitation is justifiable under section 36 of the Constitution. The deprivation of property will be arbitrary if sufficient reasons are not provided. If found to be arbitrary, then the judiciary must declare such legislation unconstitutional without the need to consider section 36 of the Constitution. Should an assessment under section 36 of the Constitution be required, the competing values need to be measured against each other and an assessment made based on proportionality. Section 36(1)(e) of the Constitution suggests that prospective legislation is preferred to retroactive legislation, and that means less restrictive than retroactive fiscal legislation should be relied on if they exist. Based on the analysis in this paper, it is respectfully submitted that the taxpayers in Pienaar Brothers should have had an effective remedy in terms of section 25 of the Constitution, read with section 36(1)(e) of the Constitution, as less restrictive means were available to the Commissioner in the form of the general anti-avoidance rules. The retroactive amendments were also not of general application and the taxpayers did not receive adequate warning. Irrespective of a successful constitutional challenge, the taxpayers in Pienaar Brothers also had a remedy available to them under the common law presumption against retroactivity (as applied to the completed transaction). The retroactive amendments negatively impacted their vested rights without specifically stating that it would apply to completed transactions. It is unfortunate that the matter was not taken on appeal, as judicial precedent is much needed on the topic of retroactive fiscal legislation and completed transactions.
Open Access
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.
Open Access
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.
Open Access
An analysis of South African Revenue Service powers to request relevant material as it pertains to the so-called ‘lifestyle questionnaire’.
(2019) Mayezana, Mbuyiseli; Tickle, Deborah
This study focuses on the South African Revenue Service’s (SARS) powers to request “relevant material” as it pertains to the so called ‘lifestyle questionnaire”. It also deals with taxpayer’s rights in terms of the Tax Administration Act No. 28 of 2011 (TAA) and the Constitution of the Republic of South Africa, 1996 (the Constitution). Furthermore, the definition of “relevant material’ was discussed in order to establish whether or not a “lifestyle questionnaire” falls within the broad definition of “relevant material” as defined in the TAA and whether or not it infringes upon the taxpayer’s fundamental rights contained in the Bill of Rights. The taxpayer’s remedies were also examined. The South African Revenue Act No. 34 of 1997 (SARS Act) provides that SARS must ensure efficiency and effectiveness of collection of all revenue. SARS must perform this function in the most cost efficient manner and in accordance with the values and principles mentioned in section 195 of the Constitution. SARS administers various pieces of legislation including the (TAA). The TAA was promulgated on 4th July 2012, came into effect on 1 October 2012 and incorporated into once piece of legislation certain administrative sections generic to all tax Acts excluding the Customs and Excise Act. Both SARS and taxpayers must adhere to the Constitution of the Republic which is the supreme law of the country. Any law or conduct inconsistent with the Constitution is invalid. The Constitution consists of the Bill of Rights, a cornerstone of the South African democracy. SARS is an organ of state and therefore must respect, protect and promote the rights contained in the Bill of Rights. Since the introduction of the TAA, taxpayers feel that SARS’ powers have been enhanced. Section 46 of the TAA empowers SARS to request relevant material in various ways for the purpose of administration of a Tax Act, one of which could be by way of issuing a “lifestyle questionnaire” to taxpayers. A Lifestyle questionnaire requires details of the taxpayer’s assets and liabilities, income and expenses for the current and future tax years. Taxpayers often feel that this document is not specific but wide, because they are obliged to reveal everything to the SARS officials. This study reveals that the information requested though the “lifestyle questionnaire” is “in the opinion of SARS foreseeably relevant” for the administration of a tax Act. It therefore, falls within the definition of relevant material. Taxpayers may not without just cause refuse to complete and file the lifestyle questionnaire when requested to do so. It was further established that the Constitutional rights in the Bill of Rights are not absolute. Taxpayers who wish to challenge SARS’ decision to issue a lifestyle questionnaire need to be aware of their rights and the limitations thereof. In addition, this dissertation has revealed that a decision taken by SARS to issue a lifestyle questionnaire is an initial stage, the responses to which could trigger an investigation or audit and that the taxpayer’s Constitutional rights are not adversely affected by such a request. Therefore, taxpayers might encounter difficulty in successfully challenging SARS on judicial review by The High Court. The most suitable, cost effective and expeditious remedy that may be explored by any aggrieved taxpayer is that of the office of the Tax Ombudsman. The mandate of the Tax Ombud is to review and address any complaint by a taxpayer regarding a service or a procedural or administrative matter arising from the application of a tax Act
Open Access
An analysis of the anti-avoidance provision S.103 of the South African Income Tax act
(1993) Saggau, Andreas; Blackman, M S
The South African Income Tax Act contains a number of specific anti-avoidance sections, as well as a general anti-avoidance section. This dissertation will focus on the general anti-avoidance section 103 of the Income Tax Act No. 58 of 1962 and highlight the individual requirements and their interpretation by the courts. Special consideration will be given to the difficulties of the normality requirement. The amendments made to the section and a brief consideration· of similar general anti-avoidance provisions in other countries shall also be evaluated. Where tax cases are analysed, it must be kept in mind that the burden of tax is imposed by Parliament in the form of the Income Tax Act or other laws while it is the Courts that apply these laws. The 'task' of the Courts has accordingly been described by Lord Templeman in the recent case of Ensign Tankers (Leasing) Ltd v Stokes: 1 'The task of the courts is to construe documents and analyse facts and to ensure the taxpayer does not pay too little tax or too, much tax but the amount of tax which is consistent with the true effect in law of the taxpayer's activities. Neither the taxpayer nor the Crown should be deprived of the fiscal consequences of the taxpayer's activities properly analysed. ' Having this '_task' in mind we will see how the general anti-avoidance provision has been enforced by the Courts. We will see if section 103 is the powerful sword in the hands of the Commissioner of Revenue or just another 'paper tiger'. Lastly I will deal with the general provision against the utilization o( assessed losses s 103(2) and dividend and interest swaps sl03 (5).
Open Access
Analysis of cryptocurrency verification challenges faced by the South African Revenue Service and tax authorities in other BRICS countries and whether SARS’ powers to gather information relating to cryptocurrency transactions are on par with those of other BRICS countries
(2019) Scheepers, Jill; Johnson, Tracy
The main objective of this study was to identify the potential difficulties that the verification of cryptocurrencies presents to SARS and determining whether these problems will also be encountered by tax authorities in Brazil, Russia, India and China (members of the BRICS group of countries). The study examined how the BRICS’ countries were addressing cryptocurrency data challenges and determining whether South Africa could learn from the solutions implemented by these countries. The information gathering powers of SARS were also examined in order to determine whether those powers are on par with those of the BRICS’ countries. The findings suggest that it is vital that tax authorities link the taxpayer’s real identity to the taxpayer’s digital identity in order to trace the taxpayer’s tax profile and verify compliance with tax legislation. The findings also suggest that certain BRICS countries did not experience significant verification difficulties. China has, however, banned the use of cryptocurrencies. Russia is in the process of passing tax legislation pertaining to cryptocurrencies and therefore, the Russian tax authorities have not yet undertaken to verify cryptocurrency transactions. India has addressed the verification challenges presented by cryptocurrencies by introducing legislation that compels clients of cryptocurrency exchanges to register with the exchange before transacting. Brazil is in the process of passing legislation which will require cryptocurrency exchanges to supply the Brazilian tax authorities with taxpayers’ identities, transaction amounts and transaction history on a monthly basis. Private altcoins, face-to-face transactions, cryptocurrency mixers and online peer-to-peer markets (which require no registration) present the largest verification challenges due to the difficulty in tracking these transactions. It was also found that the information gathering powers of SARS are on par with those of the BRICS’ countries and therefore, SARS is also able to request information from cryptocurrency exchanges as a means of collecting data for verification purposes. The study concluded with recommendations for SARS to consider in addressing the verification challenges posed by cryptocurrency transactions.
Open Access
An analysis of the appropriateness of the four funds approach for the taxation of life insurers in South Africa including a qualitative comparison to the recently enacted approach adopted in New Zealand and recommendations for improvement to the approach
(2011) Donaldson, Peter Allen; West, Darron
Section 29A of the Income Tax Act No. 58 of 1962 contains a special set of rules for the taxation of life insurers. These rules were originally enacted in 1993 and are commonly referred to as the four funds approach. The rules have remained largely unchanged since their original enactment despite ongoing changes in the life insurance industry in particular with regards to new product offerings.
Open Access
An 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, Jennifer
Internationally, 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.
Open Access
An analysis of the income tax treatment of South African collective investment schemes in securities
(2013) Salmon, Catherine Anne; Warneke, David
This dissertation analyses the legal nature of the relationship between a South African collective investment scheme in securities and the investors in such a scheme and on the basis of these findings identifies how the income tax treatment of such schemes differs, in law and in practice, from the tax treatment which would apply in the absence of any specific provisions in the Income Tax Act relating to these parties.
Open Access
Capital Gains Tax-Capita Selecta on capital losses
(2001) Broekmann, Trudie; Davis, Dennis
The taxation of capital gains was introduced into the South African taxation law with the promulgation of the Taxation Laws Amendment Act, No. 5 of 2001
Open Access
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.
Open Access
A comparative analysis of the Employment Tax Incentive Act, no.26 of 2013
(2016) Odendaal, Petrus Johannes Loock; Surtees, Peter
Despite being internationally recognised as an economic powerhouse of the African continent, South Africa struggles to overcome certain socio-economic problems, which predominantly stem from the inequalities within its society. One of the most important areas of prevailing concern is high unemployment, particularly amongst the youth segment of the population. Approximately 42% of South Africans under the age of 30 are unemployed, a fate shared by less than 17% of those above 30 years of age. The South African government appropriately sought to ensure a better future for all its citizens by 'creating', or facilitating the creation, of more jobs. As part of its 'program of action', one of the initial steps was to enact the Employment Tax Incentive Act, No. 26 of 2013 ('ETIA'). The following extract is from the Explanatory Memorandum on the Employment Tax Incentive Bill, 2013: "High youth unemployment means young people are not gaining the skills or experience needed to drive the economy forward. (…) In response to the high rate of youth unemployment, government wishes to implement an incentive mainly aimed at encouraging employers to hire young and less experienced work seekers, as stated in the National Development Plan. The incentive is one among many that will fall under the umbrella of government's youth employment strategy, the National Youth Accord, which outlines a program of action to address youth unemployment." The primary aim of this study is to conduct a detailed analysis of the ETIA in order to ultimately evaluate its merits, i.e. by expressing an opinion on whether or not it is assisting in combatting youth unemployment. The analysis compares similar types of legislation that have been implemented, both successfully and unsuccessfully, in other countries in attempts to address similar unemployment issues. This paper reflects events, legislation and published literature as at 1 December 2015.
Open Access
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.
Open Access
A critical analysis of the fiscal incentives offered to a particular South African Special Economic Zones
(2015) Saggers, Graeme Donald; Warneke, David
Special Economic Zones ("SEZs") have proved an effective tool to encourage and incentivise foreign direct investment in developing countries over the past 50 years. South Africa has been a relatively late adopter of an SEZ regime and only formally incorporated SEZs via the Industrial Development Zone ("IDZ") programme in late 2000. The ID programme has been largely unsuccessful with limited and slow investment. This has resulted in an overhaul of the programme resulting in the launch of the SEZ programme in2012 which included the promulgation of the Special Economic Zones Act and a suite of new tax incentives which were announced in the 2013 Taxation Laws Amendment Act. This study was performed in order to analyse the fiscal incentives available to South African SEZs against the backdrop of successes and failures experienced by other developing nations with more mature SEZ regimes. By firstly reviewing the history of SEZs internationally, context was provided which indicated the need for a successful SEZ programme in South Africa. As globalisation has developed in the modern era, so too has competition for foreign direct investment amongst developing nations. It is thus of paramount importance for South Africa, as late adopters, to ensure that their SEZ programme is designed appropriately. A detailed analysis of each tax incentive was performed which illustrated where opportunities can be found by foreign investors and additionally highlighted some disincentives in the South African regime. A review of the main incentives offered by the more developed and successful developing nations (Brazil, Russia, India and China) identified certain opportunities where South Africa could learn from the successes and failures of these countries. Further, some specific case studies were analysed in order to glean risks to the sustainability of South Africa's SEZ programme. From these reviews and comparisons it was found that whilst it may not be possible to predict whether or not South Africa's SEZ programme will be successful, there are some areas where it is suggested that the current fiscal incentives can be enhanced to encourage quicker investment by foreign companies and the creation of investment which has a sustainable benefit to the local economy.
Open Access
A critical analysis of the reportable arrangements provisions of the Income Tax Act, focusing on section 80M(1)(d)
(2011) Steenkamp, Lee-Ann
The objective of this study is therefore to conduct a critical analysis of the language of section 80M(1)(d) in order to determine its nature and scope.
Open Access
A critical assessment of the capital gains tax as a fiscal policy tool for South Africa
(2006) Marcus, Matthew; Fitschen, Amanda
This dissertation attempts to critically analyse the tax on capital gains as an addition to South Africa's fiscal framework. The method of the analysis involves the collation of international research on the effects of capital gains tax on the economies, financial markets, labour markets and revenue authorities of various countries. The focus is on the economic and fiscal areas directly relating to the long-term economic and fiscal policy goals of the South African government. These goals, as well as the justification given by the South African Department of Finance and the South African Revenue Service for the introduction of the capital gains tax are presented in the literature review section of this study. Research of international tax practices indicates that the taxing of capital gains has a depressive effect on capital formation, labour productivity, foreign and domestic direct investment, business creation, entrepreneurship and taxpayer equity. In addition, the introduction of such a tax has no proven growth effects on governmental revenue, and does not significantly dissuade tax avoidance schemes using arbitrage measures. By applying the globally observed effects of the capital gains tax to the long-term policy goals mentioned above, I conclude that the capital gains tax does not assist in the achievement of the economic and fiscal policy goals of the South African government, neither in the short- nor the long-term. Conversely, the capital gains tax acts as a countermeasure to the achievement of the said goals.
Open Access
A 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, Jennifer
Solutions 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.
Open Access
The cross border supply of services and the need to harmonise the VAT rules that apply
(2016) Brown, Christopher; Roeleveld, Jennifer
Services 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.
Open Access
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.