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TAX TALK: Tracking Those Who Shift Profits

19 August 2013   (0 Comments)
Posted by: Author: Matthew Lester
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Author: Matthew Lester (BusinessDay)

Tax is full of acronyms. Try the latest one: Beps — base erosion and profit-shifting.

Beps is a worldwide campaign against shifting profits away from high tax jurisdictions to locations where there is little or no real activity, but the taxes are low — resulting in little or no overall corporate tax being paid.

The Organisation for Economic Cooperation and Development (OECD) is driving the campaign against Beps.

It claims that Beps distorts competition, leads to an inefficient allocation of resources by distorting investment decisions and is an issue of fairness in that, if taxpayers see multinational corporations legally avoiding income tax, it undermines their voluntary compliance.

As governments struggle to deliver and contain national deficits in the post-2009 world, it is great to attach blame to large corporations and their tax nerds. So Beps has now reached the highest political levels.

We have recently seen much in the press about the (low levels of) tax paid by companies such as Apple, Google, Facebook and Starbucks. Is it a coincidence that they are all US multinationals?

Business cannot be faulted for using the rules of government. Perhaps it is a government’s responsibility to revise the rules or introduce new laws.

It would be most interesting to debate whether the ideals of corporate governance and the "triple bottom line” approach extend to the parameters of tax planning.

The OECD has developed an action plan concentrating on examining the substance of Beps transactions and improving transparency.

Will the assault on Beps have any effect on South African tax collection? Surely all the new legislation over the past 10 years is enough to contain the South African appetite for Beps? And if there are only 459 companies with taxable income exceeding R100m, the South African Revenue Service is surely in a position to detect abuse?

My gut feel is that Beps in this country is not so much about South African resident companies; it is probably more about multinationals doing business here and how one measures the true taxes applicable to their local income.

Either way, South Africa will need the cooperation of foreign tax authorities if we are ever going to get to the bottom of the story. No country, acting alone, can fully address Beps.

The law is one thing. Accurate information flow is completely another.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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