Abstract:
A number of commentators in South Africa have been critical of a key aspect of the relatively new General Anti-Avoidance Rule ("GAAR") (Part IIA of Chapter III of the Income Tax Act 58 of 1962) suggesting that section 80A(c)(ii), in particular, is not necessary in light of existing common-law approaches to statutory interpretation. The role of section 80A(a)(ii) is equally uncertain in light of these commentators' arguments. The broader question examined in this article is: "What can these provisions achieve that is not already adequately facilitated by the existing common law?" In turn the article considers whether these common-law principles are sufficient to combat tax avoidance and whether these provisions seek to achieve a goal that is beyond that provided by these common-law principles? In answering the first question the analysis highlights the comparatively limited scope of these common-law principles. It is concluded that because of, inter alia, the limited scope of these common-law principles they are not sufficient to combat tax avoidance. Further, in the taxation context the role of these common-law principles has been significantly impacted upon by the Duke of Westminster principle. In regard to the second research question, from the analysis it becomes clear that the statutory provisions have a wider operation than the common-law principles. Notably the statutory provisions are not premised on the prerequisites that are required to enliven the application of the subject common-law principles. Specifically, it is contended that legislative direction to have regard to the existence or absence of commercial substance (section 80A(a)(ii)) that includes a focus on individual steps that are part of a broader arrangement that lack commercial substance (section 80C(2) (a) and (b)(iii)) will make a positive contribution combating tax avoidance in South Africa.
