The tax debate, internationally and in South Africa, is progressively focusing on closing perceived tax loopholes (in order to boost collections) and increasing self-assessment through vigorous auditing by the tax authorities. In pursuing this goal, Finance Minister Pravin Gordhan has appointed Judge Dennis Davis as the chairman of the Davis Tax Committee. Davis has been quoted as saying that the challenge for the committee is to design a tax system that, among other things, achieves “the spending needs of the government and its distributional ambitions”. The collection of taxes is important but addresses only one part of the equation.
Month: February 2014
Ethical taxpaying: how does a company ascertain the “right amount of tax”?
Author: Matthew Hodkin – Norton Rose Fulbright LLP Tax has been much in the news recently. This is not the first time that tax has risen to the top of the political agenda but now public mood has shifted towards the idea that people should be paying more tax. Historically, tax has caused all manner of protests, uprisings and even wars but there has also previously been sustained public outcry that people just aren’t paying as much tax as they ought. This developing perception of tax as a moral or ethical obligation creates difficulty with which existing corporate processes are not always well-equipped to cope.
Bikini model says SARS ruined her life
Author: NASHIRA DAVIDS and PHILANI NOMBEMBE MODEL CITIZEN: International swimwear model Candice van der Merwe arrives at the Cape Town High Court with SARS aiming to haul her and her father before an inquiry for tax fraud Picture: Swimwear model Candice van der Merwe’s life has been “devastated” by the “draconian” South African taxman. Yesterday the Cape Town High Court ordered that she could be hauled before a SARS tax inquiry. Her father, Cape Town businessman Gary van der Merwe, has been involved in tax fraud litigation amounting to millions of rands for almost a decade. The 21-year-old model claimed late last year that an unknown Arab admirer gave $15.3-million (about R168.3-million) after she caught his eye at a private Seychelles resort.
High court sequestrates Agliotti estate over R77m tax debt
Author: ERNEST MABUZA Convicted drug dealer Glenn Agliotti’s estate has been sequestrated over a R77-million tax debt. File photo Convicted drug dealer Glenn Agliotti’s estate has been sequestrated over a R77-million tax debt. Yesterday, the Pretoria High Court confirmed a provisional order it made in November, after Agliotti, 57, failed to show why it should not be made permanent. Agliotti, who was not present in court, did not oppose the matter. The application was made by the South African Revenue Service, which accused Agliotti of failing to pay more than R77-million in income tax and VAT.
Surbonation agreements: The Section 8F trap on debt instrument
Author: David Warneke (BDO SA) Section 8F of the Income Tax Act, dealing with hybrid debt instruments was substituted by the Taxation Laws Amendment Act of 2013. In its substituted form the provision is considerably broader in scope than its predecessor. In particular it appears that certain subordination agreements may render the subordinated debt subject to reclassification as hybrid debt with potentially costly consequences. The new treatment applies to amounts incurred on or after 1 April 2014. In terms of section 8F if a debt instrument falls into classification as a hybrid then the effect is that interest incurred in respect of the hybrid debt instrument:
Ruling on the definition of 'listed shares' for purposes of the foreign dividend exemption
Author: Heinrich Louw (Cliff Dekker Hofmeyer) The South African Revenue Service (SARS) released Binding Class Ruling No 42 on 7 February 2014. The factual circumstances in respect of which the ruling was made are as follow: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is also a wholly-owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Its business is investment in foreign debt instruments, on which it will receive interest returns.
Employee share ownership plan ruling
Author: Andrew Lewis (Senior Associate at Cliff Dekker Hofmeyer) The tax implications for the various participants of a share incentive scheme are complex and the legislation is not necessarily clear. In recent years, share incentive schemes have been a particular focus of the South African Revenue Service (SARS) and National Treasury with regular amendments to the tax legislation. It is no wonder that we see a number of binding private and binding class rulings being issued by SARS that relate to share incentive schemes. Binding Private Ruling No 161 (BPR 161) is one such recent ruling, released on 5 February 2014, which deals with the income tax and employees’ tax consequences for the employer company and the trust used to facilitate an employee share ownership plan (ESOP).
VAT – where to lodge objection – Tax Court or High Court?
The Pretoria Tax Court made an interesting ruling in ITC No 1866 [2013] 75 SATC 268. Section 32(1) of the Value-Added Tax Act No. 89 of 1991 (the VAT Act) states that the following decisions of the South African Revenue Service (SARS) are subject to objection and appeal, namely: In terms of section 23(7) of the VAT Act notifying that person of SARS’s refusal to register that person in terms of the VAT Act. In terms of section 24(6) or (7) of the VAT Act notifying a person of SARS’s decision to cancel, or refusal to cancel his registration in terms of the VAT Act.
Tax Administration Act – Criminal investigation in relation to a serious tax offence
The Tax Administration Act, No. 28 of 2011 (the TAA) took effect on 1 October 2012. In light of SARS’s strong emphasis on compliance, this article considers the procedures SARS should follow where it believes that a serious tax offence might have been committed. A “serious tax offence” is defined as “a tax offence for which a person may be liable on conviction to imprisonment for a period exceeding two years without the option of a fine or to a fine exceeding the equivalent amount of a fine under the Adjustment of Fines Act, 1991 (Act No. 101 of 1991).”
Taxation risk on Lost or stolen cheques
The principles to be applied in cases where cheques have been intercepted in the post and misappropriated by thieves have been summarised in previous case law, where it has been established that when a debtor tenders payment by cheque and the creditor accepts it, the payment remains conditional and is only finalised once the cheque is honoured. Accordingly, where the cheque is misappropriated and someone other than the payee, by fraudulent means, converts the cheque into cash, the risk will lie with the debtor since it is the debtor’s duty to seek out his creditor. However, where the creditor stipulates a particular method of payment and the debtor complies with it, any risk inherent in the stipulated method of payment is for the creditor’s account.