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Recommended future changes to SA’s tax systems on the mining industry is still on the cards,Deloitte

Saturday, 22 February 2014   (0 Comments)
Posted by: Author: Deloitte
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Author: Deloitte

Minister Pravin Gordhan could use the National Budget to once again touch on the topic of base erosion and profit shifting - a matter that has been an ongoing subject of discussion between nations, says professional services firm Deloitte.

"At the heart of the debate is the undertaking by the Organisation of Economic Cooperation and Development (OECD) and G20 to automatically exchange information between jurisdictions regarding the worldwide allocation and distribution of profits accrued by many multinational companies,” says Louise Vosloo, Director at Deloitte.

"Multinational companies are understandably nervous about the implications of this move that will increase transparency and ensure that a broad view is held of the allocation of worldwide profits by multinationals operating in several countries or across several continents.”

"The automatic exchange of information between tax jurisdictions will identify the undisclosed profits and accounts located in offshore jurisdictions that have tax benefits for the owner. These undisclosed offshore profits effectively erodes the tax base of the jurisdiction that has the right to tax such profits. Previously, information was exchanged between jurisdictions for tax purposes only on request. This inevitably resulted in gaps for large multinationals to misuse and thereby optimise their tax positions.”

"South Africa, as member of the G20, has recognised that the automatic exchange of information will support the aim for tax transparency,” says Vosloo.

This had been alluded to by Minister Gordhan, in 2013, when he said that information sharing would contribute to the development of a more efficient and effective international tax system. 

Poor countries would benefit significantly through the move as these territories were often the victims of organised efforts to undermine their tax bases. 

South Africa, from its side, is collaborating with many African jurisdictions through the African Tax Administration Forum (ATAF) to improve the efficiency of African jurisdictions’ tax legislation and administrations.

"The OECD has indicated that it will be working with the G20 to implement the new standard of automatic exchange of information, which could commence by the end of 2015. It is envisioned that the multilateral convention that has been signed by numerous jurisdictions will ensure that the implementation of automatic exchange of information will apply to a large number of jurisdictions. There are already a number of exchange of information agreements between South Africa and other jurisdictions that are set to come into effect within the next year or two.”

"It appears that there is a still clarification needed regarding the implementation of the automatic exchange of information, specifically the practicalities and possible problems that may arise with implementation,” says Vosloo.

"It seems that for now at least, multinational companies will be able to breathe easily for a while. ‘However, companies should expect that the Minister will use the opportunity provided by the Budget to remind business that automatic information sharing is still formally on the international tax agenda,” says Vosloo. 

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