The current economic downturn and the resulting declining revenue collection, resulted in revenue agencies across the globe to relook at tax havens as a threat to the tax gap. In addition, some organisations such as Action Aid recently, partly blamed tax havens for the financial crisis. The latter allegation was subsequently rejected by Jeffrey Owens, director of the OECD's Centre on Tax Policy and Administration, so no further discussion is required here.

Threat to the tax gap?

If the problem is the tax gap, then the question to be asked is: Is there a problem with a country exercising its sovereign right to elect a low national tax rate? The answer is no. The issue only arises when tax havens refuse to co-operate with other countries seeking information about companies or individuals in which they have an interest from a tax perspective. In order to be competitive, some tax havens have given the assurance to foreign investors that they will not exchange or provide information to other states, which is the real concern.

What is the South African perspective?

It is not possible for a South African resident company to divert income to a tax haven and avoid paying any South African tax. The South African tax laws has a multitude of provisions which will effectively result in South Africa taxing such offshore tax haven income. In the rare circumstances where the profits which have been diverted to a tax haven are not subject to South African tax, this is due to properly considered tax exemptions which are contained in and form part of South African tax law.