A comparative analysis of the concept of fiscal jurisdiction in income tax law
The purpose of this dissertation is to analyse the definitional rules of fiscal jurisdiction as well as the tax consequences resulting from the application of these rules, as implemented in the national tax law of the chosen jurisdictions. In essence, there are two main rules, which give content to the chosen theory of fiscal jurisdiction, mainly source and residence. It is trite that globalisation of the world's economies poses certain problems for international tax policy. Companies and individuals are becoming more mobile and therefore are able to exploit tax differences between states. In consideration of the natural concern of governments that they should get an acceptable share of the profits generated by international businesses, this research study analyses the bases through which a country could claim the right to tax. The plasticity of these two key concepts (source and residence) may well subvert a country's ultimate tax objective because of the potential for exploitation of ambiguity in the search for effective avoidance. The residence tax system and its implications have been analysed mainly from the South African perspective, and where necessary, the analysis has sought reference in other jurisdictions such as the United Kingdom and the United States. The source principle of taxation and its effects have also been studied from the South African context, with a comparative approach from Hong Kong. It has been found that the countries considered in this research have, in various ways, adopted different combinations of subjective factors for tax liability in their domestic tax laws. At the same time, the relentless search of additional tax revenue, has led countries to implement in their tax laws, stringent anti-avoidance measures designed to prevent the deferral of tax, for instance on foreign source income. Factors such as the increasing complexity of modem business and the greater sophistication of tax planning techniques have contributed to this state of affairs. Thus, this dissertation highlights that competition between governments, in the face of international economic integrity, may lead countries to adopt tax rules, which though they follow the usual international standards, are nevertheless very complex in application and administration. This can maintain the problem of international double taxation and lead to excessive or unpredictable compliance burdens. It is shown how countries in the exercise of their fiscal jurisdiction can move towards harmonisation of rules and common interpretation of the tax base in the application of their national tax legislation.
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