Abstract
Most developing countries depend on tax revenue to fund government programmes. Thus, it is imperative for tax authorities to collect maximum tax revenue. South Africa has been affected by impermissible tax avoidance which has deprived the tax authority of the opportunity to collect maximum taxes. Tax avoidance schemes come in many forms and different individuals participate in them. This study focus is on tax avoidance by multinational corporations. Multinational corporations are identified as major vehicles for tax avoidance, and it has been estimated that South Africa loses billions of rands in a year from multinational corporations’ tax avoidance schemes.
In curbing impermissible tax avoidance schemes, South Africa has three measures in place, namely, the special anti-avoidance rules, common law, and the general anti-avoidance rules. The general anti-avoidance rules in its current form is the only measure that has not been tested in court. The commissioner will elect to invoke the general anti-avoidance rules only if the common law and the special anti-avoidance rules are not effective in that case. Therefore, the general anti-avoidance rules is set aside as an alternative measure. Subsequently, as the general anti-avoidance rules is untested, it is unknown whether they are capable of curbing tax avoidance by multinational corporations. This presents a need to test the application of the general anti-avoidance rules on multinational corporations and identify flaws to be fixed. Thus, the purpose of this research is to identify principles that can be integrated into the South African general anti-avoidance rules to curb tax avoidance by multinational corporations.
The study compares the South African general anti-avoidance rules with the United Kingdom and the Australian general anti-avoidance rules to establish the foreign principles that can be integrated into the South African general anti-avoidance rules to assist in addressing the weaknesses identified in the latter. The study found that there are principles in the United Kingdom, and Australian general anti-avoidance rules that South Africa can draw lessons from in order to improve the general anti-avoidance rules in curbing tax avoidance by multinational corporations.
Keywords: Multinational corporations, General anti-avoidance rules, Special anti-avoidance rules, Tax avoidance, Australia, United Kingdom