n South African Law Journal - The holy grail : the search for the optimal GAAR

Volume 126, Issue 4
  • ISSN : 0258-2503
  • E-ISSN: 1996-2177



The sustainability of a taxation system relies in part in reducing effective tax avoidance as far as is possible. Tax avoidance impacts on the economy both because it results in revenue loss and because it diverts people into devising, marketing and implementing avoidance arrangements, rather than engaging in economically productive activities. Revenue losses in turn weaken the government's ability to formulate and implement fiscal policies. Moreover, the very integrity of a tax system, necessary for its long-term sustainability, is attacked by tax avoidance. The goal of equity is undermined by tax avoidance as typically these schemes are accessed by the wealthy. Thus, tax avoidance results in an unfair shift in the tax burden to the less wealthy in society. As one commentator recently noted, combating 'tax avoidance ... will serve to lessen the overall burden on all taxpayers'. Further, legislative responses to tax avoidance increase the complexity of a taxation scheme. Tax avoidance schemes also undermine the neutrality of a taxation system by distorting trade and investment decisions. Thus, tax avoidance attacks every aspect of a fair, and hence, sustainable, taxation system.

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