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Tax in a digitised global economy

For any tax system to be fair, effective and efficient, it has to be flexible. Current international tax rules have created certainty by facilitating the implementation of arm’s length principles and attempting to eliminate double taxation. However, increased digitalisation of various economic sectors has emphasised that the current international tax rules are not adequately designed to accommodate business models that do not require physical presence in an enterprise’s target markets and where value creation is driven mainly by intangible assets.


Of late, it appears as if the courts are increasingly leaning towards the interpretation of tax law in a manner that is in accordance with constitutionally compliant precepts. This emphasises that the interpretation of tax law is evolving on a continuous basis and that now, more than ever, the outcome depends on the facts and circumstances of each case. This interpretative evolution has even resulted in a court disregarding a SARS Interpretation Note in making its ruling.