A critical analysis of the capital gains tax system for South Africa

Schwarze, Corrinna Lina (2002-12)

Thesis (MAcc)--Stellenbosch University, 2002.

Thesis

ENGLISH ABSTRACT: Capital gains tax has been introduced into the South African tax system for the first time, on all capital gains arising on or after 1 October 2001. The issue of whether a capital gains tax will be a suitable tax for South Africa has already been addressed in the form of Commission Reports. In these reports, the idea of adopting this tax system was not recommended for the South African tax system or only a limited capital gains tax was recommended. This study, however, investigates whether the legislation passed by government is in line with the basic principles of an efficient and effective tax system. Firstly, the principles of an efficient and effective tax system are set out as those originally proposed by Adam Smith as well as those that have been adapted to modern tax theory. The factors that impact on capital gains tax are identified and specific criteria are formulated against which the legislated capital gains tax is evaluated. The mechanics of the capital gains tax is discussed, classified into the factors that impact a capital gains tax and evaluated against the abovementioned criteria. lt has been held that the introduction of this new form of tax to the South African tax system addresses many inefficiencies and deficiencies in the current tax system. lt is the writer's opinion that an investigation as to the degree to which this tax system adheres to the principles of an effective and efficient tax system, was thus necessary. For the purposes of this investigation, the legislated capital gains tax was evaluated against the principles of neutrality, certainty and simplicity, administrative efficiency, flexibility, invisibility and equity (fairness, horizontal and vertical equity). lt was found that the principles of flexibility, fairness and horizontal equity are achieved. To a lesser extent, the principles of neutrality, certainty and simplicity, and administrative efficiency are achieved, and the principles of invisibility and vertical equity have not been achieved.

AFRIKAANSE OPSOMMING: Kapitaalwinsbelasting is nou vir die eerste keer deel van die Suid Afrikaanse belastingstelsel. Dit affekteer alle kapitale winste wat op of na 1 Oktober 2001 realiseer. Die vraagstuk oar die geskiktheid van kapitaalwinsbelasting vir Suid-Afrika is alreeds voorheen in die vorm van Kommissieverslae aangespreek. Geen, of slegs 'n beperkte kapitaalwinsbelasting is in hierdie verslae aanbeveel vir die Suid-Afrikaanse belastingstelsel. Die studie wat volg, ondersoek die mate waarin die wetgewing ten opsigte van kapitaalwinsbelasting aan die basiese beginsels van 'n effektiewe en doeltreffende belastingstelsel voldoen. Eerstens word die beginsels van 'n doeltreffende en effektiewe belastingstelsel uiteengesit as die soos oorspronklik voorgestel deur Adam Smith, asook die wat deur moderne belastingteorie aangepas is. Tweedens word die faktore wat kapitaalwins be·invloed ge·identifiseer en laastens word spesifieke kriteria geformuleer waarteen die kapitaalwinsbelasting geevalueer sal word. Die werking van die kapitaalwinsbelasting word bespreek, geklassifiseer in faktore wat 'n kapitaalwinsbelasting be·invloed en teen die bogenoemde kriteria geevalueer. Daar is beslis dat die toevoeging van hierdie vorm van belasting tot die Suid Afrikaanse belastingstelsel die ondoeltreffendheid en ander gebreke in die huidige belastingstelsel aanspreek. Dit is die skrywer se mening dat 'n ondersoek ten opsigte van die mate waartoe hierdie belastingstelsel die beginsels van 'n effektiewe en doeltreffende belastingstelsel nakom, dus nodig was. Vir die doeleindes van hierdie ondersoek, is kapitaalwinsbelasting geevalueer teen die beginsels van neutraliteit, sekerheid en eenvoudigheid, administratiewe doeltreffendheid, aanpasbaarheid, onsigbaarheid en billikheid (regverdigheid, horisontale en vertikale billikheid). Daar word tot die gevolgtrekking gekom dat daar aan die beginsels van aanpasbaarheid, regverdigheid en horisontale billikheid voldoen word. Tot 'n minder mate, word daar aan die beginsels van neutraliteit, sekerheid en eenvoudigheid, en administratiewe doeltreffendheid voldoen. Daar word nie aan die beginsels van onsigbaarheid en vertikale billikheid voldoen nie.

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