A Critical Analysis of Tax Avoidance in theSouth African Income Tax Act 58 of 1962, as Amended

ATL-Editor 6 January 2020

Paper by: Jean Chrysostome Kanamugire

“Tax avoidanceTax avoidance refers to the practice of legally structuring financial activities to minimise tax liability, reducing the amount of tax owed without violating laws. Unlike tax evasion, which is illegal and involves concealing income or misreporting, tax avoidance operates within the framework of the law. Multinational enterprises (MNEs) and individuals often engage in tax planning strategies that reduce tax liabilities... connotes stratagems which are prima facie lawful, i.e. which are lawful unless expressly proscribed by

the Act.”1 Many taxpayers seek ways of arranging their affairs so as to escape tax, or reduce or postpone their liability.

Persons are free to structure their affairs in order to minimise income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable.... In IRC v Duke of Westminster,2 Lord Tomlin

said that “every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less

than it otherwise would be.” Furthermore, in CIR v Sunnyside Centre (Pty) Ltd,3 the court held that “a taxpayer is entitled

to order his affairs so as to pay the minimum of tax.” In CIR v Conhage (Pty) (Ltd),4 the Supreme Court of Appeals (SCA)

said that “within the bounds of any anti-avoidance provisions in the relevant legislation, a taxpayer may minimise his tax

liability by arranging his affairs in a suitable manner.”

However, courts have expressed their disagreement with regard to tax avoidanceTax avoidance refers to the practice of legally structuring financial activities to minimise tax liability, reducing the amount of tax owed without violating laws. Unlike tax evasion, which is illegal and involves concealing income or misreporting, tax avoidance operates within the framework of the law. Multinational enterprises (MNEs) and individuals often engage in tax planning strategies that reduce tax liabilities.... In Lord Vestey’s Executors and

Another v IRC,5 Lord Normand said that “tax avoidanceTax avoidance refers to the practice of legally structuring financial activities to minimise tax liability, reducing the amount of tax owed without violating laws. Unlike tax evasion, which is illegal and involves concealing income or misreporting, tax avoidance operates within the framework of the law. Multinational enterprises (MNEs) and individuals often engage in tax planning strategies that reduce tax liabilities... is an evil, but it would be the beginning of much greater evil if the

courts were to overstretch the language of the statute in order to subject to taxation people of whom they disapproved.”

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Categories: Africa, SADC, South Africa

Tags: tax avoidance

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