Abstract:
South Africa, Australia and New Zealand have sought to tackle the problem of tax avoidance through General Anti-Avoidance Rules (“GAAR”), rather than relying solely on measures that tackle very specific examples of tax avoidance. This article compares and contrasts the approaches taken in South Africa, Australia and New Zealand. The legislative goals of the Australian and South African provisions are very similar but the strategies underpinning each piece of legislation differ. The specific prerequisites in the Australian legislation lead ultimately to the question of whether or not the taxpayer or other participants intended to obtain a tax benefit through the scheme. By contrast, the South African legislation begins with broad terms that cast a wide net, but then hones in on the application of Part IIA by focusing on the common attributes of tax avoidance arrangements. The New Zealand provisions take yet another tack with Parliament leaving it to the courts to develop judicial interpretive techniques to determine if arrangements amount to tax avoidance. The New Zealand GAAR thus echoes the South African approach to some extent, as its application revolves around quite broad terms. Unlike the South African provisions however, there is no legislative directive as to what may be called the “badges of taxavoidance”; namely, indicia of tax avoidance arrangements with these being left to the judiciary to formulate. It is ultimately suggested that this approach is too uncertain and legislative clarification is warranted. Such reform should entail the enactment of “badges of taxavoidance” that will not only give legislative direction to the courts but also provide taxpayers and their advisors with guidelines when determining if the subject arrangement crosses the line between legitimate structuring and a tax avoidance arrangement.