Abstract
Abstract : The world has moved to a business environment of automated production driven by electronics and information technology. This in turn has led to automated processes which serve the daily business and service needs of billions of consumers. This process takes place through a web of inter-connected global multinational service providers with very little connection to borders, space, territorial jurisdiction or the economic wellbeing of fellow sovereign countries. The resultant weakness in the international tax system, because of this alternate digitally based economic activity, created opportunities for multinational and domestic companies to exploit uncertainties in local taxation systems through well-structured tax avoidance schemes. The result on tax collection was an erosion of the local tax base and the movement or shifting of profits to low tax jurisdictions. The Organisation for Economic Development and Co-operation (OECD), at the request of the G20, investigated and then published the Base Erosion and Profiting Shifting (BEPS) report in July 2013. The BEPS report consists of 15 Action Points, with Action 1 titled “Addressing the tax challenges of the global economy”. This dissertation explores and seeks to offer proposals to address the tax challenges of a digital economy in South Africa. The Income Tax Act 58 of 1962 is the pivotal statute governing income tax legislation in South Africa and this act, together with precedent set by judgments and common law, are critically analysed and contrasted. In particular, primary definitions in the income tax legislation are assessed and analysed in order to establish their application in a uniform tax system encompassing the traditional, as well as the digital, economy. The South African Revenue Services protocols and interpretation notes, the BEPS recommendations from the Davis Tax Commission and reports, opinions and the final BEPS reports from the OECD as well as the limited international experience in Malaysia and India, serve as critical inputs to the theoretical review. An analysis of various income tax tests from legal precedent are measured against the definitions of residency, permanent establishment and source to determine whether a withholding tax, equalisation levy or refined new nexus tax model, can best accommodate the needs of e-commerce in South Africa...
LL.M. (Banking Law)