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South Africa Aims To Lead In Closing Tax Loopholes

Tuesday, 12 November 2013   (0 Comments)
Posted by: Author: Nicholas Kotch
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Author: Nicholas Kotch (Business Day)

The South African Revenue Service (SARS) aims to ensure companies and wealthy individuals pay their fair share of taxes, Finance Minister Pravin Gordhan said on Monday, in remarks underlining South Africa’s front-row position in global tax reforms.

International pressure to close loopholes and globalise accounting standards is growing sharply, and South Africa is clearly determined to lead the way in boosting the tax take across Africa.

"Think of how much African governments could do with this extra tax revenue. Africa could be a fundamentally better place with more schools, more infrastructure and more economic activity," Mr Gordhan, a former SARS commissioner, told a conference in Johannesburg. "Without the tax that should be coming from corporates, governments are forced to raise tax rates on individuals or cut spending," he said.

One of the consequences of the near-global recession that began in 2007-08 was a decline in tax revenues, and reviews in many countries of how tax is raised and from whom.

The Organisation for Economic Co-operation and Development (OECD) and the Group of 20 (G-20) leading economies have been setting the pace, and are seeking to build a consensus on Common Global Reporting Standards which will be wider than the OECD and G-20 memberships.

South Africa is the only African country in the G-20, reflecting the size and sophistication of Africa’s biggest economy. It also chairs the Global Forum on Tax Transparency and Exchange of Information.

Mr Gordhan told the "G-20 and Africa" conference that SA and Africa as a whole were negatively affected by what is called base erosion and profit shifting (BEPS) — the process of transferring profits to a low-tax regime in order to pay less tax.

"We already have, according to SARS, several cases of BEPS which impact on billions of rand of tax which is payable to SA authorities," he said, after referring to the well-known case of Starbucks in the UK.

Mr Gordhan said SARS had also picked up a number of cases "of high net worth individuals who are not paying their fare share".

He did not identify the companies or people concerned.

Ugandan policy analyst Godber Tumushabe said he was pleased that African tax authorities are included in the drive for international co-operation.

"The idea is good, to increase revenue and set some principles and rules, particularly for multi-national corporations, because most African countries don’t have the in-house expertise to do the job alone."

Formal rules on how G-20 and other countries share tax information are being debated and drawn up, creating what some call "Tax inspectors without borders". "That really is the nightmare of any offender," Judith MacGregor, Britain’s new high commissioner to South Africa, told the conference organised by the South African Institute of International Affairs and the University of Pretoria.

The G-20 and Africa are strengthening ties. Apart from South Africa as a member, the G-20 also invites the countries chairing the New Partnership for Africa’s Development and the African Union to its annual summits. The African Development Bank takes part in some working groups.

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