scholarly journals The Taxation of Company Distributions in Respect of Hybrid Instruments in South Africa: Lessons from Australia and Canada

2021 ◽  
Vol 24 ◽  
pp. 1-36
Author(s):  
Liezel G Tredoux ◽  
Kathleen Van der Linde
Keyword(s):  
South Africa ◽  
South African ◽  
Tax Avoidance ◽  
The South ◽  
Profit Shifting ◽  
Tax Base ◽  
Tax Legislation ◽  
Unlimited Time ◽  
Hybrid Instruments ◽  
Returns On Investment

Tax legislation traditionally distinguishes between returns on investment paid on equity and debt instruments. In the main, returns on debt instruments (interest payments) are deductible for the paying company, while distributions on equity instruments (dividends) are not. This difference in taxation can be exploited using hybrid instruments and often leads to a debt bias in investment patterns. South Africa, Australia and Canada have specific rules designed to prevent the circumvention of tax liability when company distributions are made in respect of hybrid instruments. In principle, Australia and Canada apply a more robust approach to prevent tax avoidance and also tend to include a wider range of transactions, as well as an unlimited time period in their regulation of the taxation of distributions on hybrid instruments. In addition to the anti-avoidance function, a strong incentive is created for taxpayers in Australia and Canada to invest in equity instruments as opposed to debt. This article suggests that South Africa should align certain principles in its specific rules regulating hybrid instruments with those in Australia and Canada to ensure optimal functionality of the South African tax legislation. The strengthening of domestic tax law will protect the South African tax base against base erosion and profit shifting through the use of hybrid instruments.

scholarly journals Multinational tax avoidance: An application of controlled foreign companies and royalty payments in South African legislation

2020 ◽  
Vol 11 (02) ◽  
pp. 109-117
Author(s):  
Nicholas Brown ◽  
◽  
Shaun Parsons ◽  
Riley Carpenter ◽  
◽  
...  
Keyword(s):  
At Risk ◽  
South African ◽  
Research Methodology ◽  
Multinational Enterprises ◽  
Tax Avoidance ◽  
The South ◽  
Tax Base ◽  
Foreign Companies ◽  
Tax Legislation

This paper seeks to determine whether South African tax legislation would limit the effectiveness of tax avoidance schemes used by multinational enterprises to avoid their tax liabilities. The paper reviews two commonly used multinational tax avoidance schemes, namely, disregarding controlled foreign companies (‘check box’ regulations) and royalty payments. Using a doctrinal research methodology, the paper considers the application of these schemes within the context of South African legislation. The findings indicate that the effectiveness of the schemes is somewhat curtailed. However, the South African tax base remains at risk, and efforts to combat base erosion are still necessary.

scholarly journals An evaluation of interest deduction limitations to counter base erosion in South Africa

2018 ◽  
Vol 21 (1) ◽  
Author(s):  
Pieter Van der Zwan ◽  
Daniel P. Schutte ◽  
Waldo Krugell
Keyword(s):  
South Africa ◽  
South African ◽  
Income Tax ◽  
The South ◽  
Profit Shifting ◽  
Present Evidence ◽  
Tax Legislation ◽  
Tax Returns ◽  
The Mean ◽  
Using Data

Background: The Organisation for Economic Cooperation and Development (OECD) made a number of recommendations in relation to interest deduction limitations as part of the Base Erosion and Profit Shifting (BEPS) project. In 2016 the South African National Treasury indicated that the interest deduction limitations contained in the Income Tax Act would be reviewed in the light of these recommendations. Aim: This paper aimed to describe funding structures of companies in South Africa liable for tax and how this relates to other characteristics, including ownership, of the companies. Setting: The research was performed using data from tax returns submitted by companies liable for income tax in South Africa. Methods: This paper reports on descriptive analyses of the research conducted. Results: The results showed that the mean interest-to-earnings before interest, taxes, depreciation, and amortisation (EBITDA) ratio for certain foreign-owned entities differed significantly from that of domestically owned entities. Conclusion: The results may present evidence of profit-shifting activities. They also highlight trends in interest-to-EBITDA ratios that may be of relevance for future legislative developments. Further related research is required if interest deduction limitations in the South African tax legislation are to be reviewed in light of the OECD proposals.

scholarly journals The Cohen and Kuttel stories: Is the place where I hang my hat still relevant to determine my residence for tax purposes?

2019 ◽  
Vol 19 ◽  
pp. 1-24
Author(s):  
J Arendse ◽  
K Stark ◽  
C Renaud
Keyword(s):  
South African ◽  
Historical Background ◽  
Objective Test ◽  
Modern World ◽  
The South ◽  
Tax Base ◽  
Global Trends ◽  
Tax Legislation ◽  
Common Trend ◽  
Definition Of

1Determining the residence of a taxpayer is one of the most important aspects of modern tax systems. For an individual taxpayer who migrates, a common trend in the modern world, the questions are where the person is ordinarily resident and whether the place of ordinary residence can change. The two key cases in South African jurisprudence that are cited whenever the question of residence or ordinary residence is raised are Cohen v CIR and CIR v Kuttel. These cases form the foundation of this article as they examine the meaning of “resident” and “ordinary” resident” in the modern milieu. The article provides the historical background to these two seminal cases, extracts the key principles handed down in each of the judgments and evaluates these principles against definitions of “resident” used in other countries with a view to evaluating whether the definition of “resident” for South African tax purposes, premised on the fundamental principles from these two historic cases, is still relevant and appropriate. The article queries whether the concept of “ordinary resident”, with its connotation of permanence, should be updated to reflect the modern reality of transience and mobility. The conclusion reached is that the existing definition of “resident” may be in need of updating to accommodate global trends and to bring the South African tax legislation more in line with modern developments and the introduction of an objective test could provide more certainty to both taxpayers and the fiscus, but this benefit should be weighed against the possible cost of a loss to the tax base.

scholarly journals An analysis of the applicability of the OECD Model Tax Convention to non-OECD member countries: The South African case

2017 ◽  
Vol 10 (1) ◽  
pp. 83-93
Author(s):  
Lee-Ann Steenkamp
Keyword(s):  
South Africa ◽  
South African ◽  
Legal Status ◽  
Action Plan ◽  
Primary Objective ◽  
The South ◽  
Tax Treaties ◽  
Profit Shifting ◽  
Treaty Negotiations ◽  
Specific Position

Most tax treaties (including South Africa's) are based on the OECD Model Tax Convention on Income and Capital and the related Commentary (the 'OECD Model'). Notwithstanding the uncertainty surrounding its legal status, the courts in many countries use the OECD Model in the interpretation of their tax treaties. The OECD launched an action plan on Base Erosion and Profit Shifting ('BEPS') in 2013, which is aimed at improving international tax cooperation between governments. In South Africa, the importance of combating BEPS is highlighted by the fact that the Davis Tax Committee has appointed a sub-committee specifically to address concerns pertaining to BEPS. South Africa's participation in the BEPS project and its tax treaty negotiations with other countries, especially OECD member states, are of the utmost importance to South Africa's National Treasury. Consequently, it is the primary objective of this article to analyse the applicability of the OECD Model to non-OECD member countries, with particular emphasis on South Africa. It will be argued that, if the treaties of non-member countries are in conformity with the OECD Model and no specific position has been taken, the non-members also accept the provisions of the Model and the Commentary as an interpretative aid.

The intersection between taxation and insolvency — The South African Revenue Service’s preference

2021 ◽  
Vol 138 (4) ◽  
pp. 799-817
Author(s):  
Carika Fritz ◽  
Thabo Legwaila
Keyword(s):  
South Africa ◽  
United Kingdom ◽  
South African ◽  
Tax Administration ◽  
The South ◽  
Tax Legislation ◽  
The United Kingdom

When a debtor’s estate is sequestrated or an insolvent company is wound up, insolvency and taxation intersect whenever the debtor or company has an outstanding tax debt. This article considers whether the South African Revenue Service should, or could, be provided with a better standing in cases of insolvency. From a comparison of the situations in South Africa, Mauritius, Australia and the United Kingdom, it is clear that South Africa’s approach of determining the order of distribution in relation to tax claims based on the type of tax is in line with the approaches of Mauritius and the United Kingdom. However, s 179 of the Tax Administration Act and ss 114 and 147(1) of the Customs and Excise Act may have an impact on a claim by the South African Revenue Service in the event of insolvency. In this respect, we argue that, in instances where a taxpayer is sequestrated or wound up due to insolvency, the Insolvency Act and the Companies Act should take precedence. Since the Insolvency Act provides for a clear order of distribution both in respect of the insolvent estates of natural persons and when an insolvent company is wound up, tax legislation in South Africa should not be used to deviate from this order of distribution.

scholarly journals Customer Loyalty Programmes: The Loss To The Fiscus In South Africa

2013 ◽  
Vol 12 (12) ◽  
pp. 1521 ◽  
Author(s):  
Teresa Calvert Pidduck ◽  
Karen Odendaal
Keyword(s):  
South Africa ◽  
South African ◽  
Customer Loyalty ◽  
Tax Administration ◽  
The South ◽  
Tax Base ◽  
Revenue Administration

The 2013 Budget Speech presented by the South African Minister of Finance highlighted that the best way to generate resources is to grow the economy and increase the tax base. In investigating the possible broadening of the South African tax base, as well as improving revenue administration, there is evidence of a gap in the taxation of customer loyalty programmes. The complexity of identifying and administering the receipt of customer loyalty award credits for millions of individuals has led to the receipt of customer loyalty award credits not being taxed whilst the expenses related to these award credits are being deducted by businesses. In closing this gap, the South African Revenue Service may be able to increase the tax base and limit fiscal leakage. For this reason, any gaps in the taxation of receipts and accruals is of interest to any researcher, taxpayer and government interested in understanding where current administration of legislation may be failing. In this study, the authors consider the tax leakage from a legislative and administrative perspective as well as investigate possible solutions. The revenue authorities in South Africa are urged to make changes to the current tax administration in order to prevent inconsistencies in treatment and tax leakage without negatively impacting the essence of the customer loyalty programmes.

Foreigners' Rights to Work and Fair Labour Practices in South Africa: A Review of the South African Labour Legislation and Jurisprudence

2020 ◽  
Vol 35 (1) ◽  
Author(s):  
Andre Mangu
Keyword(s):  
South Africa ◽  
Human Rights ◽  
South African ◽  
Bill Of Rights ◽  
The South ◽  
Legislation And Jurisprudence ◽  
Foreign Nationals ◽  
Lay Persons ◽  
Democratic State ◽  
Labour Legislation

After several decades of apartheid rule, which denied human rights to the majority of the population on the ground of race and came to be regarded as a crime against humanity, South Africa adopted its first democratic Constitution in the early 1990s. The 1996 Constitution, which succeeded the 1993 interim Constitution, is considered one of the most progressive in the world. In its founding provisions, it states that South Africa is a democratic state founded on human dignity, the achievement of equality, the advancement of human rights and freedoms. The Constitution enshrines fundamental human rights in a justiciable Bill of Rights as a cornerstone of democracy. Unfortunately, in the eyes of a number of politicians, officials and lay-persons, the rights in the Bill of Rights accrue to South African citizens only. Xenophobia, which has been rampant since the end of apartheid, seems to support the idea that foreigners should not enjoy these rights. Foreign nationals have often been accused of posing a threat to South African citizens with regard to employment opportunities. In light of the South African legislation and jurisprudence, this article affirms the position of the South African labour law that foreign nationals are indeed protected by the Constitution and entitled to rights in the Bill of Rights, including the rights to work and fair labour practices.

The Engagement of Beneficiaries in Farm Governance of Restituted Land through the Communal Property Association Model: The Ideal Versus the Reality of Beneficiary Farms in South Africa

2019 ◽  
Vol 16 (2) ◽  
Author(s):  
Mokoko Piet Sebola ◽  
Malemela Angelinah Mamabolo
Keyword(s):  
South Africa ◽  
South African ◽  
Land Reform ◽  
Farm Management ◽  
The South ◽  
African Government ◽  
Communal Property ◽  
Farm Ownership ◽  
Land Restitution ◽  
Communal Property Associations

The purpose of this article is to evaluate the engagement of farm beneficiaries in South Africa in the governance of restituted farms through communal property associations. The South African government has already spent millions of rands on land restitution to correct the imbalance of the past with regard to farm ownership by the African communities. Various methods of farm management to benefit the African society have been proposed, however, with little recorded success. This article argues that the South African post-apartheid government was so overwhelmed by political victory in 1994 that they introduced ambitious land reform policies that were based on ideal thinking rather than on a pragmatic approach to the South African situation. We used qualitative research methods to argue that the engagement of farm beneficiaries in farm management and governance through communal property associations is failing dismally. We conclude that a revisit of the communal property associations model is required in order to strengthen the position of beneficiaries and promote access to land by African communities for future benefit.

Exploring the South African Government Communication on Land Expropriation without Compensation

2020 ◽  
Vol 72 (1-3) ◽  
Author(s):  
Lungisani Moyo
Keyword(s):  
South Africa ◽  
Food Security ◽  
South African ◽  
Small Scale ◽  
South African Government ◽  
Eastern Cape ◽  
The South ◽  
Land Expropriation ◽  
African Government ◽  
Government Communication

ABSTRACT This paper used qualitative methodology to explore the South African government communication and land expropriation without compensation and its effects on food security using Alice town located in the Eastern Cape Province South Africa as its case study. This was done to allow the participants to give their perceptions on the role of government communication on land expropriation without compensation and its effects on South African food security. In this paper, a total population of 30 comprising of 26 small scale farmers in rural Alice and 4 employees from the Department of Agriculture (Alice), Eastern Cape, South Africa were interviewed to get their perception and views on government communications and land expropriation without compensation and its effects on South African food security. The findings of this paper revealed that the agricultural sector plays a vital role in the South African economy hence there is a great need to speed up transformation in the sector.

Book review: Jansen, J. 2017. As by Fire: The End of the South African University. Cape Town: Tafelberg.

2017 ◽  
Vol 1 (1) ◽  
pp. 117
Author(s):  
Jared McDonald
Keyword(s):  
South Africa ◽  
South African ◽  
Teaching And Learning ◽  
Cape Town ◽  
The South ◽  
Scholarship Of Teaching ◽  
Creative Commons ◽  
Vice Chancellor ◽  
The University

Dr Jared McDonald, of the Department of History at the University of the Free State (UFS) in South Africa, reviews As by fire: the end of the South African university, written by former UFS vice-chancellor Jonathan Jansen.    How to cite this book review: MCDONALD, Jared. Book review: Jansen, J. 2017. As by Fire: The End of the South African University. Cape Town: Tafelberg.. Scholarship of Teaching and Learning in the South, [S.l.], v. 1, n. 1, p. 117-119, Sep. 2017. Available at: <http://sotl-south-journal.net/?journal=sotls&page=article&op=view&path%5B%5D=18>. Date accessed: 12 Sep. 2017.   This work is licensed under the Creative Commons Attribution 4.0 International License.To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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