Does capital gains tax add to or detract from the fairness of the South African tax system?

Warren Maroun, Magda Turner, Kurt Sartorius

Abstract


This research seeks to add to the existing body of knowledge on the perceived impact of Capital Gains Tax (CGT) on the fairness of the South Africa Tax System. Building on the largely qualitative work done by Vivian (2006) and Smith (1776), this research makes use of an extensive literature review followed by a correspondence analysis to complement the existing body of research into this area. The literature review discuss the fairness criteria advanced by Smith (1776) (Smith’s tax canon) and identify ‘unfairness characteristics’ of CGT.  The correspondence analysis only tests the theories advanced in the literature review and revealed that there are potential sources of unfairness inherent in the Eighth Schedule to the Income Tax Act No. 58 of 1962 (the Eighth Schedule). These include the possibility that that CGT gives rise to double tax and imposes a high burden on taxpayer’s ability to bear the tax load.

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DOI: http://dx.doi.org/10.4102/sajems.v14i4.131

Submitted: 02 November 2010
Published: 06 December 2011


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South African Journal of Economic and Management Sciences    |    ISSN: 1015-8812 (PRINT)    |    ISSN: 2222-3436 (ONLINE)