Tax Research Primer. April 2016 Professor Keith Engel (CEO)

Transcription

1 Tax Research Primer April 2016 Professor Keith Engel (CEO)

2 Importance of Research Bullets in Gun /mining for legal support The value of an associate is the research brought to the table Most top clients know the Acts, they pay for research to find more detailed information The key for clients is risk, how can one assess risk without all the information Goal is to know the whole story

3 Types of Authorities Tax Legislation Core legislation Legislative history Related legislation Judicial Decisions Domestic Relevant international jurisprudence Enforcement Interpretation Academic articles Domestic Global norms and similarities Tax treaties and international cross-border concepts

4 Key Website #1: SARS

5 Key Website #2: National Treasury Website

6 Legislation Acts and Development

7 Tax Acts Income Tax Act, which includes: The normal tax (tax on net profit) In lieu of normal taxes, such as cross-border withholding tax, the Dividends Tax and the Turnover Tax Donations Tax Value-added Tax Payroll taxes: Unemployment, skills development levy and employment incentive Smaller indirect taxes: Transfer Duty, Securities Transfer Tax Estate Duty Customs Excise: Environmental taxes, ad valorem taxes Mining: Mineral Royalty and Diamond Export Levy Tax Administration

8 Statutory Reading Actual wording Definitions Act-wide definitions are contained in section 1 Section-wide definitions are contained in the opening and closing subparagraphs Interpretation Act (can apply to any act) Note on terms of art receipt and accrual, expenditure supply Act construct Main act versus schedules / appendices Main act Breakdown: sections, subsections, paragraphs and subparagraphs, items and sub-items The general rule typically is covered in subsection (2) Schedules (e.g. 8 th schedule for capital gains tax or appendices) Breakdown: paragraphs, subparagraphs, items and sub-items Integration with the main act (e.g. section 26A)

9 Annual / Semi-Annual Legislative Releases Tax legislation is issued at least twice per annum Tax legislation Comes in the form of amendment acts New taxes come in the form of stand-alone legislation Legislation is only official when released via Government Gazette Lack of consolidation The Government generally does not consolidate annual tax changes (so one should literally read the initial act plus each amendment Occasional consolidations exist (e.g. Income Tax Act of 1962) However, publishers (e.g. Juta and Lexis/Nexis) regularly: Consolidate the tax acts List the history of sections since inception (see prelex (expiring): and pendlex (pending into operation) by Juta) Use of old annual tax acts (per annum consolidations)

10 Tax Changes: Experience Tax legislation is produced at least annually Typically, there is a taxation laws amendment bill, which contains substantives amendment Typically, there is a monetary amounts bill, which contains rate and other monetary amount changes Deviations Occasionally a stand-alone bill is released with a new tax instrument (e.g. Carbon Tax), which is often preceded by initiating public discussion documents In the early 200s, two sets of substantive tax bills were released a taxation laws amendment bill (during the first half of the year), and a revenue laws amendment bill (during the second half of the year)

11 Bill Split The Constitution breaks bills into money bills (section 75) and other bills (section 77) Unique process of money bills The only cabinet member that may introduce money bills is the Minister of Finance Parliament can only amend a money bill via a unique process Parliament only began technically amending money bills in the last two years (with National Treasury performing the bulk of the work) Tax administration is not viewed as a money bill; therefore, every tax bill has a money bill and a tax administration bill

12 Typical Tax Legislative Amendment Process (informal) Stage 1 National Treasury releases a draft money bill and a draft tax administration bill (with SARS driving the tax administration bill) The money bill is accompanied by a draft explanatory memorandum and the draft tax administration bill is accompanied by a draft memorandum of objects Stage 2 (informal finance committee review) National Treasury / SARS provides an informal briefing, followed by taxpayer hearings National Treasury / SARS provides a response document in respect of taxpayer comments ( accepted, not accepted, partially accepted and comment misplaced )

13 Typical Tax Legislative Amendment Process (formal) Formal National Assembly Bill formally introduced in Parliament Standing Finance Committee review Historically contains a brief Treasury / SARS explanation with adoption Chair of Committee recently added a brief taxpayer reply process National Assembly adoption and debate Formal National Council of Provinces Select Committee Finance review National Council of Provinces adoption Finalisation Presidential signature Government Gazettes

14 Summary of Legislative History Documents Bills and acts Bills Initial Treasury versions Bill for formal introduction Parliamentary Bill amendments Final Act Back-up documents National Treasury discussion documents Draft and final explanatory memoranda Response documents Treasury Budget review Parliamentary briefings and debates

15 Electronic Locations National Treasury ( Recent documents (opening page) Annual budget reviews (budget information (left side)) Final legislation (act - left side) Draft legislation (draft bills left side) SARS ( Final acts (Legal & Policy: Primary Legislation) Full set of back-up documents (Legal & Policy: Preparation of Legislation) Parliamentary Monitoring Group ( Hearings (Committees: Finance Standing Committee and NCOP Finance) (payment may be required) Question s and replies (occasional tax query) Government Printing Works ( Final legislation (national government gazettes) Publishers Lexis/Nexis and Juta (scant)

16 Davis Tax Committee Davis Tax Committee ( Prepares potential recommendations for Treasury Check Library for progress and reports Older Commissions Katz Commission reports (mid-1990s)( Older Commissions (e.g. Margo)

17 Secondary Legislation Parliament sometimes delegates its authority to the executive (e.g. the Minister of Finance). These documents are fully binding. Some of these are substantive while others are procedural. List of more notable secondary authorities: Regulations Proclamations Public notices Income Tax Notices VAT Notices Electronic location SARS website (Legal Policy: Secondary Legislation) Government Printing Works (national government gazettes)

18 SARS Interpretation Administrative Pronouncements

19 Interpretation Notes SARS issues general interpretative guidance Currently interpretation notes Previously practice notes (some still exist but will be phased ot over time) Usually covers basics plus some comments on topic areas (e.g. current, section 10B, 12E) Authoritative weight This document may be cited by SARS or the taxpayer in court (section 82(4) of the Tax Adminisation Act like a binding general ruling (section 89)). Research locations SARS website (Legal & Policy: Interpretation & Rulings) Lexis/Nexis Practice Manual (several months behind) Juta (has as part of its compendium)

20 Advanced Tax Rulings SARS may issue Binding General Rulings The ruling may be cited by all taxpayers in terms of certain legal matters of general principle (like an interpretation note (section 89)) This type of ruling is not fact specific Fact specific rulings Binding Private Rulings The ruling has a general binding effect on the taxpayer making the request and is fact specific SARS must follow the ruling in respect of the taxpayer making the request Binding Class Rulings The ruling has a general binding effect on all taxpayers in terms of certain legal matters of general principle and is fact specific SARS must follow the ruling in respect of a class of taxpayers Research locations SARS website (Legal & Policy: Interpretation & Rulings) Lexis/Nexis Income Tax Practice Manual (several months behind) Juta Tax Law Review

21 Other SARS Documents Non-binding rulings Can be requested by taxpayers Has no binding effect and is not published Guides SARS Guides have no binding effect The documents can be found under Legal & Policy: Legal and Legal Policy Publications: Find a Guide There are a few notable guides such as the capital gains guide SARS Forms SARS Guides have no binding effect The documents can be found under Legal & Policy: Legal and Legal Policy Publications: Find a Form

22 Practice Generally Prevailing A practice generally prevailing Is an official publication, meaning a binding ruling, interpretation / practice note or public notice Is not any other SARS publication (e.g. SARS Guide and Forms) nor SARS informal practices Impact: SARS may not issue an additional assessment if the initial assessment was based on a practice generally prevailing (but for fraud, non-disclosure and intentional / negligent misrepresentation). Section 99 of the Tax Administration Act The Tax Ombud may not review a practice generally prevailing (amongst other more formal rules)

23 Judicial Decisions The Various Local Courts and Persuasive International Law

24 Levels of Court Involvement Administrative Options Tax Court: Published Tax Board: Involves smaller amounts and only available at the local court Note: Prior to the above there is also alternative dispute resolution (unpublished) Court levels First level: High Court (previously called supreme courts ) Second Level: Supreme Court of Appeal (final but for Constitutional issues) Third Level: Constitutional Court

25 Court Research Sources Free Services SARS Legal & Policy: Dispute Resolution & Judgements Tax Court, High Court, Supreme Court of Appeal and Constitutional Court since 2000 SAFLII South African Courts Tribunals and Journals High Court, Supreme Court of Appeal and Constitutional Court with varying dates in the late 1900s Payment Services Lexis/Nexis Juta

26 Miscellaneous Other Sources for Doctrinal Research

27 South African Books / Journals (must pay) LEXIS/NEXIS Silke Income tax reporter Taxgram Tax planning corporate and personal Specialised tax and estate/trust books etc JUTA Juta Income Tax and VAT(section-based research) Specialised tax books and estate/trust books etc Siber Inc (books) The Taxpayer (limited books and journal) Stand-alone Magazines Without Prejudice, Business Brief and Business Day Tax and Law Review newspaper) FSP Business (Practical income tax and VAT) BSP Seminars

28 South African Books / Journals (free) Professional membership magazines Tax Talk (SAIT) and Integritax (SAICA), etc De Rebus Professional membership Magazines: Tax Talk (SAIT) and Integritax (SAICA), etc Submissions on tax issues Law firm website articles ENS Cliffe Dekker Webber Wentzel Other big firms (e.g. Bowman and Shepstone) Accounting firm articles PWC Tax Synopsis Miscellaneous articles found on the Deloitte website and a few other accounting firms University thesis mainly from University of Pretoria and Cape Town on google

29 International Judicial Precedent The judicial decisions of certain countries are more dispositive than others, depending on the line of law Income Tax VAT United Kingdom (especially pre-1970 cases) Australia (especially older cases) Canada (especially older cases) Southern Africa Botswana, Zimbabwe, Zambia (pre-independence cases) Namibia New Zealand

30 Related Domestic Law Commercial law Rules relating to ownership / title Condition suspensive / resolutive Property law Company law Law of trusts Law of partnerships Other specialised laws: Collective investment schemes, insurance, mining laws, etc Note: IFRS also may have value in specified instances

31 Tax Treaties and International Concepts Treaties and Supporting Frequent Concepts Treaties On point and related OECD and UN Conventions Supporting Treaty commentaries Vogelman plus other treatises Foreign court cases on the same issue Effective management Permanent establishment Beneficial owner Meaning of dividend, interest, royalties and services Note: Vienna Convention (international treaty standards; never adopted by South Africa)

32 International Books / Journals IBFD Country surveys Various international tax journals with a cross-border emphasis Various international books with a cross-border emphasis International Tax Review Kluwar Law Vogel Treatise on tax treaties Tax Treaty History website ( SSRN journals (free articles including tax articles from various countries with a U.S. emphasis) Hein Online (paid articles mainly from the U.S.) Google and Google Scholar

33 Search Notes Computer research Basic screens Advanced screens (automatic Bolean) Bolean (started in 1980s and 1990s) Google variations (per country, news and google scholar) Note: Rise in Apps (e.g. EY and PWC) Some options (etc ) Quotes (and s/or s) Remove a word (e.g. -South) Related words (~) Time ranges ( )

34 Legal Writing Types Different Objectives

35 Basic Types Policy Writing Tax policy (e.g. Treasury) Academic writing (professor and student): Journal and books Non-profit / think tank Controversy Court Litigation SARS /Law Firms & Advocates Administrative Dispute SARS / Law and accounting firms Risk Assessment Firms (and in-house counsel) SARS pre-litigation Political Policy Debate Taxpayer submissions to government and Government discussion documents News Articles

36 Policy Writing: Some Factors Purist Theory (e.g. Haig- Simmons model for income tax) Neutrality of profit Consistency of construct Previous policy construct Previous legal framework Economic theory Vertical/horizontal equity Behavioural outcome (e.g. Excise duty and Carbon Tax) Business Incentives Business paradigm (tracking actual commercial practice) Anti-avoidance Operations Simplicity of compliance and enforcement Efficacy

37 Policy: Deep Academic Quantitative (etc ) Surveys Previous studies Social experiment testing Qualitative Heavily used for South African tax academic papers General policy studies based on literary research General policy studies based on surveys Legal doctrinal

38 Controversy Basics Focus on words/case precedent and ancillary precedent Focus on legal construct in situations of ambiguity Focus on legislative history in situations of ambiguity (small but growing support) Massaging the facts (versus arranging the facts in the case of planning) Emphasizing strengths (ordering and arguing) Minimizing weaknesses (fall-back arguments and counterpoints) Role of policy in the case of ambiguity? (SA versus US)

39 Risk Assessment: Opinion Writing (Mainly) Assessing Risk Will opinion Should opinion More likely then not opinion Substantial likelihood of success Frivolous Accounting Must one provision/risk reserve? Focus Technical Wording Ambiguity resolution in favour of legal construct Framework of tax system Comparing and contrasting of words Ambiguity wording in favour of policy Explicit policy (e.g. legislative history) Implicit policy (expressed various sources) Role of planning arranging the facts)

40 Political Policy Debate Emphasis on emotions Taxpayers - Business is being crushed, foreign investment deterred etc SARS Taxpayer is cheating (e.g. evading, avoiding and avoision) Sector is good or bad / fairness / good versus bad activity Can one convince government of the problem Economics Growth Fairness Scholarly Within or outside the current system paradigm Statements of experts / international comparisons