An analysis of what constitutes “intention” and the effect thereof in South African Tax Law

Abstract

The South African tax law places a duty upon all individuals who meet the minimum tax threshold to pay tax; and further places a similar duty on companies to pay taxes on taxable income, to the South African Revenue Services (“SARS”). Regarding SARS’ duty to collect taxes, an important concept called the taxpayer’s “intention” is often a critical consideration to determine whether a transaction is taxable or not. An important key element in certain tax law matters is that the taxpayer's intention must be established and examined because the taxpayer’s “intention” to a transaction plays a vital role in the determination of whether tax should be levied on a transaction.

Using examples from criminal law and the law of contracts, this study analyses and explores the significance of “intent” in South African law. This study seeks to establish the differences as well as similarities between “intention” in criminal law, law of contracts and tax law. The element of intention in tax law is vital because it sheds light on whether a transaction is taxable or not and in turn determine whether a transaction constitutes tax evasion or tax avoidance.

The study emphasizes the complexities of the South African law system which encompasses common law, legislation, regulations, and case law amongst other sources of law. The study makes recommendations to address the gap that exists between what constitutes “intention” in relation to tax law as opposed to other spheres of law, more especially criminal law because the law of contracts is not as clear either in terms of what constitutes intention. Such recommendations can be used as guidelines by our courts, tribunals and authors.