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Analysis of tax avoidance legislation in South Africa : developments over a five year period.

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This study was undertaken to analyse the developments in the anti avoidance legislation over a five year period from 1 March 2006 to 28 February 2011. Emphasis were placed on describing the road from the old section 103 provisions leading to the new general anti avoidance rules (GAAR) as contained in sections 80A to 80L of the Income Tax Act 58 of 1962. The study began with a detailed analysis of the differences between tax evasion and tax avoidance based on definitions and interpretations by various courts. It then went further in chapter two to formulate an acceptable distinction between Tax evasion, Tax planning and impermissible tax avoidance as currently used by the South African Revenue Services (SARS). It appeared from the study that firstly, courts have historically reviewed the circumstances surrounding an arrangement when determining whether tax evasion has occurred. The new GAAR requires the individual steps of an arrangement to be reviewed in isolation. Secondly, the courts have historically held that the purpose test, when determining the taxpayer‘s purpose, was subjective. The wording of the new GAAR indicates that this test is now objective. Thirdly, the courts have historically viewed the abnormality of an arrangement based of the surrounding circumstances. The wording of the new GAAR requires an objective view of the arrangement. A comparison was made between countries that have adopted statutory GAAR with a view of understanding how they have applied these general anti avoidance provisions successfully to tax avoidance cases. This comparison revealed that there is an inconsistent application of these general anti avoidance provisions by different countries. Courts and administrators apply them differently, based on circumstances and the nature of avoidance. Lastly, it has been acknowledged that most avoidance schemes are very complex and their perpetrators are always on the look for gaps in tax systems, hence any avoidance legislation to effectively curb tax evasion will need to be revised on a regular basis. Therefore, the Commissioner would be expected to issue regular updates on anti avoidance provisions and latest developments in the form of interpretation and or practice notes.


Thesis (MBA)-University of KwaZulu-Natal, Westville, 2011.


Taxation--Law and legislation--South Africa., Tax evasion--South Africa., Tax planning--South Africa., Theses--Business administration.