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‘Don’t over-complicate tax laws’

Tuesday, 24 February 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

Attempt to plug every gap makes the system unworkable – Norton Rose Fulbright.

A tax expert has warned against over-complicating tax legislation in an attempt to block every loophole or perceived underpayments of tax, as it makes the tax system "unworkable”.

Andrew Wellsted, director at Norton Rose Fulbright, says just adding to old principles and an old act often creates more loopholes and opportunities for tax avoidance.

His comments follow the international outcry against base erosion and profit shifting (Beps) over the last few years as governments both locally and abroad attempt to clamp down on multi-national corporations that are avoiding taxes or not "paying their fair share of taxes”.

Beps includes "tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid”, according to the Organisation for Economic Co-operation and Development (OECD) definition.

Wellsted says instead of analysing the legitimacy of the tax structure, a "gut feel” and political perspectives often inform the public uproar around base erosion.

Governments worldwide have been under pressure to collect more tax following the global financial crisis and tax revenues have increasingly come under the spotlight.

Against this background, the South Africa Revenue Service (Sars) will likely pay close attention to some of the recent developments and anti-avoidance proposals in the UK, says director Dale Cridlan.

This is particularly so as there is a perception amongst certain commentators that certain South African companies have been avoiding taxes.

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