Value and size investment strategies: evidence from the cross-section of returns in the South African equity market
- Authors: Barnard, Kevin John
- Date: 2013
- Subjects: Financial risk -- South Africa , Saving and investment -- South Africa , Stock exchanges -- South Africa , Investments -- Psychological aspects , Investments -- Decision making , Value premium , Size effect , Rational finance , Behavioural finance , South African equity markets
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:874 , http://hdl.handle.net/10962/d1001606 , Financial risk -- South Africa , Saving and investment -- South Africa , Stock exchanges -- South Africa , Investments -- Psychological aspects , Investments -- Decision making
- Description: Value and size related equity investment strategies are supported by a large body of empirical research that shows a persistent premium, both longitudinally and crosssectionally. However, the competing rational and behavioural finance explanations for the success of these strategies are a subject of debate. The rational explanation is that the premium earned on value shares or shares of small companies can be attributed to higher risk. Behaviouralists argue that such shares are not riskier and attribute the premium to cognitive errors and biases in human decision making. The purpose of this study is to determine, firstly, whether the value and size premium exist in South Africa during the period July 2006 to June 2012, which includes one of the worst equity market crises in history. Secondly, this study sets out to determine whether the premium earned on value and size strategies are adequately explained by the principles of rational finance theory. To provide evidence regarding the existence of the value premium and size effect, returns are analysed, cross-sectionally, on portfolios of shares sorted by value and size. For evidence of a rational explanation, returns are regressed on value and size variables, and the relative riskiness of value and small companies is analysed. The results show evidence of a value premium in portfolios of small companies, but not big companies. The size effect is found not to be statistically significant. While regressions do show significant relationships between value and size variables and returns, these variables are found not to be associated with higher levels of risk. The conclusion is that the evidence does not support a rational, risk based explanation of the returns
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- Date Issued: 2013
Taxing recurrent services rendered by a foreign company to an associated enterprise in South Africa
- Authors: Costa, David Patrick Anthony
- Date: 2013
- Subjects: Vienna Convention on the Law of Treaties (1969) Tax administration and procedure -- South Africa Double taxation -- South Africa Income tax -- Law and legislation -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:906 , http://hdl.handle.net/10962/d1008269
- Description: The objective of the study was to investigate the right of the South African Government to tax the income earned by a foreign company when rendering services in South Africa to a South African associated enterprise on a recurrent basis, together with the right to tax the amounts paid to the employees of the permanent establishment for services rendered in South Africa. At the same time the research investigated whether the services rendered by a foreign company to an associated enterprise in South Africa on a recurrent basis would constitute a permanent establishment, as this is essential before South Africa may tax either the foreign company or the employees of the permanent establishment (where such employees are not resident in South Africa).The research was conducted by means of a critical analysis of documentary data and data from a limited number of interviews with academics and the authors of textbooks and articles. In order to limit the scope of the research, a number of assumptions were made. Conflicting viewpoints underlying certain of these assumptions were discussed. Some of the important conclusions reached are that the provisions of the Vienna Convention on the Law of Treaties should be taken into account when interpreting South African legislation (including Double Tax Agreements), and that the Organisation for Economic Cooperation and Development (OECD) Commentary may be relied upon when interpreting OECD based Double Tax Agreements in South Africa. No conclusion was reached on whether to apply an ambulatory or a static basis of interpreting the OECD Commentary, however. The final conclusion of the research is that the services rendered in South Africa on a recurrent basis would be geographically and commercially coherent and consequently meet the "location test'. It is clear that as the services are rendered regularly and recurrently, they would be regarded as having the necessary permanence and would meet the 'duration test'. The place of business would therefore be regarded as being fixed (having the necessary degree of permanence). As the services would be rendered at the place of business of the South African entity, they would be regarded as being rendered 'through' the place of business and the foreign entity would be regarded as having a permanent establishment in South Africa (as defined in Article 5(1) of the OECD Model Tax Convention}. The South African Government would therefore be entitled to tax the income attributable to the permanent establishment and the income earned by the non resident employees, who rendered services in South Africa for the permanent establishment. Once the entitlement to tax exists, South African legislative rules determine how South Africa proceeds to tax the income.
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- Date Issued: 2013
The tax treatment of receipts and accruals arising from equity option contracts
- Authors: Doidge, Stephen
- Date: 2013
- Subjects: Derivative securities Options (Finance) Swaps (Finance) Income tax -- Law and legislation -- South Africa Taxation -- South Africa Futures
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:903 , http://hdl.handle.net/10962/d1007921
- Description: In this thesis the tax treatment of equity option contracts is examined. The writer gives an overview of the derivatives market in general and discusses the nature and effect of equity options in detail. Limited amendments have been made to the South African Income Tax Act No 58 of 1962 ('the Act') since the emergence of derivative instruments and at present only three types of derivative instruments are recognised: forward exchange and option contracts relating to forward exchange, interest rate swaps based on notional capital amounts and option contracts. Other than section 241 of the Act which deems all receipts and accruals from foreign exchange contracts to be income, the other sections dealing with derivatives do not concern themselves with capital or revenue classification. Accordingly, the classification of receipts and accruals arising from an equity option transaction is generally governed by the ordinary principles of South African tax law with the added problem of there being limited South African case law applying these general prinCiples to such transactions. The research undertaken in this thesis results in the establishment of a framework designed to determine the classification as revenue or capital the receipts and accruals arising from equity option contracts. Speculating, trading and investing in equity options is examined with regard to the general principles of South African tax and available case law. Hedging transactions are analysed with specific reference to their exact nature as well as general tax principles and available case law. The analogy of Krugerrands is used to draw parallels with the tax treatment of receipts and accruals arising from equity options used for hedging purposes. Once the theoretical framework has been established for revenue or capital classification, the actual tax treatment of both revenue and capital receipts is examined with reference to the Act and issues such as the gross income definition, the general deduction formula, trading stock and timing provisions are analysed and applied to receipts and accruals arising from equity option transactions. The thesis concludes with a summary of the findings and recommendations are made based on the research conducted.
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- Date Issued: 2013
An evaluation of the use of testamentary and Inter vivos trusts as estate-planning vehicles and the development of holistic estate-planning models involving the use of these trusts
- Authors: Naidoo, Loganathan
- Date: 2013
- Subjects: Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa Income tax -- Law and legislation -- South Africa Taxation -- Law and legislation -- South Africa Trusts and trustees -- South Africa Trusts and trustees -- Taxations -- South Africa Estate planning -- South Africa Estates (Law) -- South Africa Administration of estates -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:904 , http://hdl.handle.net/10962/d1008100
- Description: Trusts are subject to multiple forms of legislative regulation dealing with taxation and governance. Trusts were widely used by planners as tax avoidance shelters. Tax legislation was amended to subject trusts, other than special trusts as defined, to the highest income tax rate of forty percent, in terms of section 5(2) of the Income Tax Act, 58 of 1962. The inter vivos trust is also subject to a wide range of anti-avoidance measures, including those contained in sub-sections (3) to (8) of section 7 of the Income Tax Act and Part X of the Eighth Schedule to the Act, as well as the general anti -avoidance measures in section 103. These measures impact negatively on the use of trusts for estate-planning purposes. The research objective was to evaluate the use of testamentary and inter vivos trusts for estate-planning purposes and to develop a holistic estate-planning model incorporating these planning instruments. Both the testamentary trust and the inter vivos trust were evaluated against broad principles of effective estate planning and the taxes and duties applicable to them. The research also reviewed the writings of financial planners on various techniques and models used for estate planning, as wells as case studies documented in the literature. The research developed and evaluated holistic estate-planning models incorporating testamentary trusts and inter vivos trusts, respectively. By neutralizing the effects of various taxes and duties, it was demonstrated that it is possible to develop an estate plan that satisfies most of the requirements of effective estate planning.
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- Date Issued: 2013
The impact of estate planning on the effectiveness of estate duty as a wealth tax in South Africa
- Authors: Ostler, Luise Marie
- Date: 2013
- Subjects: Wealth tax -- Law and legislation -- South Africa Estates (Law) -- South Africa Inheritance and transfer tax -- Law and legislation -- South Africa Estate planning -- South Africa Tax planning -- South Africa Capital gains tax -- Law and legislation -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:894 , http://hdl.handle.net/10962/d1003741
- Description: The thesis examined the current system of the taxation of wealth in South Africa with an emphasis on the taxes that apply upon the death of the taxpayer. The focus of the research was on the problems associated with estate duty, namely the issue of double taxation; the alleged cumbersome administration of the tax and the limited revenue that it brings in; it’s questionable efficacy due to extensive estate planning on the part of taxpayers while they are still alive and its lack of uniformity with other wealth taxes. An interpretative research approach was followed which involved analysing documentary data. The conclusions that were reached were that estate duty as a wealth tax in South Africa has been rendered ineffective due to the inherent problems associated with its application, namely the fact that double taxation exists, not only in the context of capital gains tax, but also in that taxpayers resent being taxed upon death after having paid income tax during their lives. The perceived unfairness that is associated with estate duty has caused the creation of a secondary industry of estate planning, with the aim of minimising estate duty, which industry has resulted in the ineffectiveness of estate duty and its limited revenue. No evidence could be found regarding the Treasury’s assertion that estate duty is a cumbersome tax to administer. The final conclusion reached was that the current estate duty regime needs to be overhauled preferably by extending the current system of capital gains tax and abolishing estate duty, with due consideration being given to the consequences associated therewith.
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- Date Issued: 2013
The use of tax incentive measure in conjunction with carbon taxes to reduce greenhouse gas emissions and achieve economic growth: a comparative study with lessons for South Africa
- Authors: Poole, Richard
- Date: 2013
- Subjects: Elasticity (Economics) , Substitution (Economics) , Carbon taxes , Carbon taxes -- South Africa , Greenhouse gas mitigation , Greenhouse gas mitigation--South Africa , United Nations Framework Convention on Climate Change -- (1992). Protocols, etc. -- 1997 Dec. 11 , Kyoto Protocol , Substitution elasticity
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:875 , http://hdl.handle.net/10962/d1001607 , Elasticity (Economics) , Substitution (Economics) , Carbon taxes , Carbon taxes -- South Africa , Greenhouse gas mitigation , Greenhouse gas mitigation--South Africa , United Nations Framework Convention on Climate Change -- (1992). Protocols, etc. -- 1997 Dec. 11
- Description: In 1997 industrialized nations, the Third Conference of the Parties to the United Nations Framework Convention on Climate Change, met in Kyoto, Japan to sign a treaty (the “Kyoto Protocol”) in terms of which industrialized nations would be required to reduce their greenhouse gas emission by at least five percent below 1990 levels by the end of the “first commitment period” 2008-2012. South Africa is not regarded as an industrialized nation, but nonetheless acceded to the Kyoto Protocol in 2002. The literature reviewed in the present research reveals that, although idealistic, the Kyoto Protocol has been problematic. Fourteen meetings of the Conference of Parties to the Kyoto Protocol between 1997 and 2011 have achieved little more than to repeatedly defer and redefine Kyoto obligations. This research was undertaken to document the existing environmental taxation policies employed in selected international jurisdictions with a view to providing a framework for environmental tax policy formation in South Africa to assist this country in meeting its “greenhouse gas” emission targets, while at the same time promoting economic growth. A doctrinal research methodology was adopted in this study as it mainly analysed and interpreted legislation and policy documents and therefore the approach was qualitative in nature. An extensive literature survey was performed to document the various environmental policies that have been legislated in the selected jurisdictions. Comparisons were drawn with proposed tax policy measures for South Africa. The literature indicates that in the selected international jurisdictions carbon taxes achieved less-than-optimal results, largely due to political and industry-competitive agendas. With South Africa planning to introduce a carbon tax, it is submitted that the implementation of a carbon tax regime in isolation will be counter-productive, given South Africa’s economic profile. On the basis of the literature reviewed, it was concluded that South Africa should consider “recycling” carbon tax revenues within the economy to fund a broad-based tax incentive regime that will stimulate the change to non-carbon energy whilst promoting growth through sustainable development
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- Date Issued: 2013
The effect of global e-commerce on taxation legislation and the permanent establishment concept in South Africa
- Authors: Young, Nikita Jade
- Date: 2013
- Subjects: Electronic commerce , Electronic commerce -- Taxation , Electronic commerce -- South Africa , Taxation -- Law and legislation -- South Africa , South African taxation , E-commerce , Permanent establishment , Foreign business entity
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:876 , http://hdl.handle.net/10962/d1001608 , Electronic commerce , Electronic commerce -- Taxation , Electronic commerce -- South Africa , Taxation -- Law and legislation -- South Africa
- Description: The objective of this thesis was to analyse the effect of the increasing popularity of global e-commerce on the South African legislative framework in respect of the taxation of non-resident enterprises, and to propose a possible solution for the taxation of e-commerce, taking into account previous theories. The methodology utilised comprised of a critical analysis of the legal rules relating to the taxation of a foreign entity's business profits by virtue of the application of the permanent establishment principle, its definition and evolution as a conceptual basis for taxation. Furthermore, an in depth evaluation of the various solutions that have already been proposed and, in some cases, implemented was undertaken. It was concluded that the application of the permanent establishment principle is wholly ineffective as a means to levy tax on the e-commerce business profits of a foreign entity as the principle relies too heavily upon a physical intermediary in the source state, whereas e-commerce transactions are conducted on the intangible trading platform of the Internet. In light of the numerous policy proposals advanced over the years, it was concluded that the most feasible and practical solution for the taxation of foreign e-commerce would be the imposition on a foreign entity in South Africa of a low withholding tax on the active business profits in excess of a pre-determined threshold. Key words: South African taxation; e-commerce; foreign business entity; permanent establishment; withholding tax
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- Date Issued: 2013