The effect of anti-avoidance tax legislation on the protection of a legal interest in wealth creation and preservation

Abstract

Two interests, regulated by two separate areas of the law: the one, a yet to be recognised legally protectable interest in wealth creation and preservation; and the other, firmly positioned statutory provisions of the General Anti-Avoidance Rules (hererinafter "GAAR"), standing opposite each other. One may only consider these two interests to be in a balancing act, if both were equally recognised, receiving equal protection – both from external influences and from each other. This research sets out to answer the question, what the effect of anti-avoidance tax legislation is on the protection of a legal interest in wealth creation and preservation. It is a well-known principle in our South African common law that an individual is free to order his or her affairs in whatever manner brings about the most beneficial tax treatment.1 This research challenges this statement in the sense that the limitations imposed by the GAAR, through its various requirements2 may have the effect that an individual’s apparent freedom to structure his affairs as he pleases to enjoy tax benefits, is continuously infringed on. This results in the limitation of an individual’s right to enjoy the legal entitlements3 of his or her interest in his or her wealth creation and preservation. The first item to determine, in chapter 2, was whether an individual’s interest in the creation and preservation of his or her wealth is an interest possible of enjoying legal recognition and protection. Only once that has been determined, could the criteria and the working of the GAAR be researched in chapter 3, as it pertains to the interests identified in chapter 2. Finally, chapter 4 puts the findings of chapter 2 and 3 to the test in the form of two case studies.