Exposing the Secrecy of Offshore Tax Shelters: The Tools and the Enablers: A Call for Vigirance in South Africa

By Annet W. Oguttu.

Published by The Global Studies Journal

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Article: Print $US10.00
Article: Electronic $US5.00

In order to minimise global tax exposure, taxpayers involved in international trade often exploit variations across international borders and international tax systems. These variations include differences between countries’ tax rates, legal concepts, standards of administration, reporting and enforcement, and governments’ attitudes towards the liberty and privacy of taxpayers and the confidentiality of financial and business transactions. Taxpayers will for instance invest in low tax or offshore tax-haven jurisdictions which promote banking secrecy provisions and lack transparency and exchange of tax information with other countries. These factors make it almost impossible for national governments to implement their tax laws and the resultant loss of revenue can be tremendous.

This paper attempts to expose the intricacies of secret offshore tax shelters, its enablers and some of the sophisticated schemes they get involved in. The paper sets off on the premise that secret offshore tax shelters are encouraged by low-tax and tax-haven jurisdictions that develop tax policies aimed primarily at diverting finances and other geographically mobile capital from high tax countries. The paper sets forth some of the efforts taken by international organisations and national governments to curb offshore secrecy. The paper makes it clear that although countries may have legislation to curb offshore tax abuse by their residents; offshore secrecy makes it impossible to enforce this anti-tax abuse legislation as taxpayers will ensure that their transactions are kept from the knowledge of tax officials. The paper then zeros down to exposing offshore secrecy from a South African perspective and how the problem has been dealt with so far. From the success story of international and national initiatives in this regard, recommendations are offered as to how South Africa can enhance the effectiveness of its policies that deal with offshore secrecy and the ensuing tax abuse.

Keywords: Offshore Secrecy, Tax Havens, Tax-Abuse, Banking Secrecy, Exchange of Information on Tax Matters, Harmful Tax Competition

Global Studies Journal, Volume 3, Issue 1, pp.153-170. Article: Print (Spiral Bound). Article: Electronic (PDF File; 690.706KB).

Prof. Annet W. Oguttu

Associate Professor, Department of Mercantile Law, University of South Africa, Pretoria, Gauteng Province, South Africa

Professor Annet Oguttu holds an LLB (Makerere University - Uganda), LLM with Specialisation in Tax Law (University of South Africa), LLD in International Tax Law (University of South Africa) and HDip International Tax Law (University of Johannesburg). She holds the position of Professor in the Department of Mercantile Law at the University of South Africa, where she lectures Income Tax Law at both undergraduate and post graduate levels. She has presented papers at various South African and International conferences and has also published various papers in a number of South African and International journals on subjects such as: transfer pricing, treaty shopping, taxation of permanent establishments, curbing offshore tax avoidance, taxation of hybrid entities, the tax aspects of e-commerce, the meaning of “place of effective management” and more.

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