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An exploration of whether the valuation of amounts for gross income should adopt a subjective or objective approach.

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The goal of this dissertation is to offer an investigative comparison between the subjective and objective approaches that are adopted by the courts in evaluating an amount for inclusion in the gross income of a taxpayer. There is much scholarly debate which questions the approach that is both favourable and practical for the taxpayer, so as to aid the Commissioner for the South African Revenue Service (CSARS) to make provisions for its regulation. For purposes of this dissertation the discussion shall be centred on amounts whether in money or other non-monetary property, and not receipts distinctly. Conducting an analytical comparison between the two approaches is pivotal as it seeks to address a historically grey area in which the courts have struggled to answer the question as to which approach is concrete enough to be applied by both the courts and the revenue services. A subjective approach takes cognisance of the taxpayer’s state of mind and intentions leading to contracts and business transactions. SARS will look into the taxpayer’s motive when making an assessment on the receipt or accrual of an amount for gross income purposes. The subjective approach maintains that the taxpayer’s intention during the business transaction is a reflection of the true characteristic of the operation. Should the matter come before the courts, a presiding officer will scrutinize the chain of events that reveal the state of mind of the taxpayer during alienation of an asset. Where a court employs the objective approach the norm is that set rules must be complied with by the court and the taxpayer’s state of mind during the economic transaction will be irrelevant. Surrounding factors such as the how as well as when a commodity was purchased and the actions of both contracting parties during the contract will be determinants in the quantification of the amount. If the business transactions satisfy all or some of the rules in the court’s rubric then the amount will be deemed taxable. Ensuing chapters will highlight the benefits and shortcomings of each approach, and will display which approach is favourable within democratic countries. Recommendations offered in this dissertation are that the status quo be maintained to promote a consistent tax system. Currently income is levied according to the strict objective approach where all taxpayers’ amounts will be assessed according to the surrounding circumstances that occurred prior, during and after transactions. This will be discussed in detail in the ensuing chapters.


Master of Laws in Taxation - University of KwaZulu-Natal, Durban, 2018.


Theses - Law.