Editorial

• Author: Des Kruger Kruger,
• Date: 01 December 2020
• DOI: 10.10520/ejc-btclq-v11-n4-a1
• Pages: v-vi
• Published date: 01 December 2020

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© Siber ink

Editorial

DES KRUGER

What a strange year this has been. South Africa and the world have been

buffeted by COVID-19, and there seems little light at the end of the tunnel

at this time. While there were several tax responses to the pandemic,

the local tax scene has continued in many respects as if there were no

pandemic. The tax laws continue to be applied and interpreted, and this

edition provides some very needed debate in relation to several conten-

tious and important issues.

The f‌irst article is by Milton Seligson SC and provides, as usual, an

erudite analysis of section 19 of the Income Tax Act (the Act) and para-

graph 12A of the Eighth Schedule to the Act that govern the tax conse-

quences of a concession or compromise in relation to a debt. The crisp issue

addressed in this article is: do the provisions of section 19 and paragraph

12A apply where there is a disputed claim and a settlement is entered into

between the parties resolving the dispute or litigation that is pending?

Milton concludes that a genuinely disputed claim does not constitute

a debt owed as required by the provisions of section 19 and paragraph 12A,

and that those provisions would accordingly not apply where there is a

settlement that results in a compromise of the claim.

The second article by Michael Rudnicki considers the very many multi-

faceted issues that arise when carrying out a tax due diligence. The article

notes that a tax due diligence is a complex investigation into the tax affairs

of a legal entity or entities within an organisation and is undertaken for

the particular needs of interested parties, such as buyers, sellers, f‌inanciers

and public offerings.

Michael notes the following —

• Scoping is an important feature in the due-diligence process and often

insuff‌icient attention is given to this aspect.

• Tax risk management and governance are important to address in a

due-diligence investigation.

• The completeness and accuracy of information and responses to ques-

tions in tax returns plays an important feature in terms of addressing

permeating tax risk.

• Accounting standards and information within annual f‌inancial state-

ments are important sources for identifying tax risk.

• The tax due-diligence report is not a tax opinion.

The f‌inal article by Joon Chong considers the very controversial issue of

where tax debts rank in a business rescue implemented under the Compa-

nies Act. Joon notes that the courts have ranked debts in general in accord-