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How SA could collect more tax revenue

Thursday, 14 May 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

There is considerable scope to collect more revenue by addressing tax leakage due to transfer pricing.

Speaking at a forum event hosted by the Gordon Institute of Business Science (GIBS), Judge Dennis Davis, chair of the Tax Committee that was tasked with a comprehensive review of South Africa’s tax system in 2013, said it is unclear exactly how much money the fiscus loses as a result of these practices, but it is a significant amount.

Davis said during 2012 the South African Revenue Service (SARS) probed about 40 corporations on their transfer pricing practices and collected more than R1 billion in additional tax revenue.

Transfer pricing is a common practice used by multi-subsidiary groups to minimise profits in high tax jurisdictions by selling goods or services within the group.

Davis said it is important that this issue should be dealt with. However it would require a proper transfer pricing unit within SARS with an adequate staff complement.

He said the committee has recommended that more staff should be assigned to the department and that the matter should be dealt with properly.

He believes these measures could add more than R1 billion to the fiscus.

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