n Comparative and International Law Journal of Southern Africa - Analysis of misuse and abuse in terms of the South African general anti-avoidance rule : lessons from Canada

Volume 45, Issue 1
  • ISSN : 0010-4051



In terms of the South African general anti-avoidance rule, a transaction that misuses or abuses the provisions of the Income Tax Act may be disregarded for tax purposes. The misuse or abuse provision, along with the general anti-avoidance rule (GAAR), has not yet been judicially considered. It is argued that the provision brings further uncertainty and breadth to the general anti-avoidance rule. It calls for a purposive interpretation of tax legislation. This approach, however, creates uncertainty regarding the determination of purpose. In Canada, from which the provision was borrowed, the courts initially applied a policy approach in determining purpose but this disadvantaged the revenue authorities in a series of cases. The Minister of National Revenue was required to present a clear and unambiguous policy which in reality could not be found. The thrust of this article is to show that the misuse or abuse concept could turn out to be a lateral development in the South African GAAR because of the uncertainty it carries and if lessons on its application are not learned from the Canadian experience.

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