South Africa's Anti-Avoidance Law Seen As 'Too Draconian'

by Robert Lee, Tax-News.com, London

28 March 2006

South African tax experts have warned that a tough new general anti-avoidance law which could be introduced by the government later in the year would be too draconian in its current form.

Jackie Arendse, project director of tax at the South African Institute of Chartered Accountants (Saica), was quoted by Business Day as stating that the scope of the new law is too wide-ranging and would affect normal everyday business transactions.

While accepting the need for an overhaul of South Africa's anti-avoidance laws, Mr Arendse stated that: “If the new general anti- avoidance rule is introduced this year, there is the danger that the authority of Parliament will be undermined and greater taxing powers will be conferred on SARS."

Facing what it considers to be a growing problem with increasingly complex and sophisticated forms of tax evasion, SARS wants to clamp down on "impermissible tax avoidance" by corporate taxpayers.

"Trends in tax avoidance have been driven by several factors including globalisation, deregulation in the financial markets, rapid advances in computer and telecommunications technology, and a new emphasis by many professional firms on the development and marketing of so-called 'tax products,'" SARS noted upon the launch of a consultation paper in November last year.

The deadline for submissions to the consultation passed on February 28, and Finance Minister Trevor Manuel has indicated that amendments to Section 103 of the Income Tax Act could be passed later this year.

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