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Simply obeying tax rules is not enough when it comes to so-called aggressive tax planning, in the view of Tinna Snenjongo Nteleza, a tax consultant at KPMG.
Aggressive tax planning means that you look at all legal options available to the taxpayer to reduce their taxable liability.
Fin24 reported earlier that the International Ethics Standards Board for Accountants is looking into whether aggressive tax planning is ethical, even if it is legal.
"The primary objective of a business is the realisation of a profit. This, of course, includes the limitation of expenses, and taxes are an expense," says Nteleza.
"From a societal perspective, taxes are a means of paying for the employment of a country's resources, a country's labour force, natural resources and other resources through a contribution towards the country's national revenue fund."
In terms of the so-called fiscal contract between government and its citizens, taxpayers contribute towards the development of the broader economic and political communities through taxes, while the government, in turn, provides services to the taxpayers, such as healthcare, infrastructure and education.
When there is a divergence in this contract, symptoms such as aggressive tax planning arise, resulting in corporate and individual taxpayers, investing in methods or structures designed to yield minimal tax liability.
The balancing of this fiscal contract with the financial objectives of the company is the beginning of the ethical dilemma facing corporate taxpayers, and to a significant extent, depends on the tax morality of the directors of the company, in the view of Nteleza.
Taxpayers also reserve the right to employ the provisions of the tax legislation to their benefit or to structure their businesses and transactions in such a way that the best economic benefits accrue to them.
However, the Income Tax Act allows for tax planning within the provisions of anti-avoidance rules which speaks to the acceptable level of tax planning.
"The fair amount of tax is paid where the legislation is applied without malicious intent, to honestly enjoy the benefits of tax legislation," explains Nteleza.
"The global attitude towards tax planning has changed dramatically with the changing times. While taxpayers may arrange their affairs in a manner most beneficial to them, it has become increasingly important to balance that business objective with good corporate governance and responsible business practice."
The employment of aggressive tax planning methods, even if undetected or unsuccessfully challenged in the court of law by SARS, have as their primary intention, the purposeful deprivation of tax revenue of the fiscus, and that, in Nteleza's view, is not ethical behaviour.
"In this day and age, with state corruption at the top of South African society's mind and a declining confidence in the state's ability to provide even basic services, businesses cannot be led by individuals who simply follow the rules without reconciling their actions with the real impact to society," says Nteleza.
"In order for any taxpayer to pay the morally correct amount of tax even if it is more than what is legally required you must be assured (in speech and action) that the government will do their utmost to stamp out corruption and provide the basic services to the most vulnerable in the society."
