The Sasol Oil case – Would the present South African GAAR stand up to the rigours of the court?

Abstract

South Africa finds itself vulnerable to exploitation by the measures taken by multinational enterprises (MNEs) who seek to enter into tax avoidance schemes that artificially shift profits to low- or no-tax jurisdictions. While common law, specific and general anti-avoidance measures may be used as a defence against these schemes, there has been no judicial consideration of the current South African general anti-avoidance rule (GAAR) since its replacement in 2006. In this context this paper makes two contributions. First, the paper applies the current GAAR to a recent case where the predecessor to the current GAAR was applied to a scheme entered into by an MNE. This is done in order to determine if the current GAAR (unlike its predecessor) is able to stand up to the rigours of court when presented with similar facts. In doing so it demonstrates how the untested GAAR may be interpreted and applied. Second, the paper makes suggestions for amendment to the current GAAR in order to improve its efficacy in an international context.

Keywords:

• tax
• avoidance
• GAAR
• case law
• multinational enterprise
• cross border

Acknowledgements

Some of the sections of this work are based on my thesis, which was submitted in accordance with the requirements for the degree of Doctor of Philosophy in Accounting at Rhodes University in 2018.