Discussion Paper on Tax Avoidance and Section 103 of the (South African) Income Tax Act, 1962 - South African Revenue Service

The South African Revenue Service ("SARS") has recently posted on its website, a "Discussion Paper on Tax Avoidance and Section 103 of the Income Tax Act, 1962 (Act No 58 of 1962)". The Background to, and the Purpose of, the Discussion Paper are best described in the following extract from the Introduction to the Paper :

"Section 103 of the Income Tax Act, 1962 (Act No. 58 of 1962), contains the Act's General Anti-Avoidance Rule (GAAR). In its current form, the GAAR has proven to be an inconsistent and, at times, ineffective deterrent to the increasingly complex and sophisticated tax "products" that are being marketed by banks, "boutique" structured finance firms, multinational accounting firms and law firms. ..... The pernicious effects of aggressive tax avoidance are manifold. They include not only the obvious short-term revenue loss, but longer term damage to the tax system and economy as well. These other effects include a corrosive effect upon the taxpayer compliance, the uneconomic allocation of resources, upward pressure on marginal tax rates, an unfair redistribution of the tax burden, and a weakening of the ability of Parliament and National Treasury to set and implement economic policy. Both SARS and National Treasury firmly believe that the vast majority of South Africans are honest, hard working and willing to pay their fair share of tax. ..... Unfortunately, those who engage in impermissible tax avoidance pose a problem for everyone else. It is the purpose of this Paper to start a discussion of these issues and of how best to address them on behalf of all South African taxpayers ..... ."

(emphasis supplied)

2. The Discussion Paper is a veritable treasure-trove of resources and materials on Tax Avoidance and has annexed to it, inter alia, the Australian GAAR, the Canadian GAAR, the New Zealand GAAR and the Spanish Anti-Avoidance Rule.