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Cape Town - South Africa has struck agreements with authorities in Ireland and Sweden to clamp down on local companies dodging their tax responsibilities by transferring profits to offshore affiliates.
The South African Revenue Services urged parliament on Wednesday to approve the agreements it has struck with these countries.
Appearing before parliament's finance committee, Sars' Ron van der Merwe agreed with committee members who criticised Ireland in particular for its progressive bid to attract foreign companies with tax incentives.
"Sars takes transfer pricing very seriously and it is spending a lot of time building up teams to combat this arbitrage," said Van der Merwe.
Sars' statistics highlighted the discrepancy between what Irish companies were investing in South Africa and what local companies were investing in Ireland.
For example, in 2005 Irish companies invested R1.5bn in South Africa, R1.9bn in 2006, R2.4bn in 2007 and R1.9bn in 2008. In stark contrast, South African companies invested R33bn in Ireland in 2005, R45.4bn in 2006, R51.4bn in 2007 and R44.6bn in 2008.
South African companies represented in Ireland include, AECI [JSE:AFE], Alexkore, Anglo Platinum [JSE:AMS], Coronation Fund Managers [JSE:CML], Dimension Data Holdings [JSE:DDT], Datatec [JSE:DTC], Investec [JSE:INL], Old Mutual [JSE:OML], SABMiller [JSE:SAB] and Sappi [JSE:SAP].
"If you look at the money being invested by South African companies it is clear that the Irish's aggressive pricing is an attack on our own tax base. Are we doing enough to make sure that we are plugging holes?" asked DA MP Dion George.
Treasury responded by saying it was amending "an arsenal" of clauses in legislation to align the law with these agreements and to give Sars more teeth when it comes to enforcing these laws.
However, treasury officials pointed out that as long as different countries have different legal systems and as long as tax havens were allowed to operate, arbitrage would always be a problem.
- Fin24.com
The South African Revenue Services urged parliament on Wednesday to approve the agreements it has struck with these countries.
Appearing before parliament's finance committee, Sars' Ron van der Merwe agreed with committee members who criticised Ireland in particular for its progressive bid to attract foreign companies with tax incentives.
"Sars takes transfer pricing very seriously and it is spending a lot of time building up teams to combat this arbitrage," said Van der Merwe.
Sars' statistics highlighted the discrepancy between what Irish companies were investing in South Africa and what local companies were investing in Ireland.
For example, in 2005 Irish companies invested R1.5bn in South Africa, R1.9bn in 2006, R2.4bn in 2007 and R1.9bn in 2008. In stark contrast, South African companies invested R33bn in Ireland in 2005, R45.4bn in 2006, R51.4bn in 2007 and R44.6bn in 2008.
South African companies represented in Ireland include, AECI [JSE:AFE], Alexkore, Anglo Platinum [JSE:AMS], Coronation Fund Managers [JSE:CML], Dimension Data Holdings [JSE:DDT], Datatec [JSE:DTC], Investec [JSE:INL], Old Mutual [JSE:OML], SABMiller [JSE:SAB] and Sappi [JSE:SAP].
"If you look at the money being invested by South African companies it is clear that the Irish's aggressive pricing is an attack on our own tax base. Are we doing enough to make sure that we are plugging holes?" asked DA MP Dion George.
Treasury responded by saying it was amending "an arsenal" of clauses in legislation to align the law with these agreements and to give Sars more teeth when it comes to enforcing these laws.
However, treasury officials pointed out that as long as different countries have different legal systems and as long as tax havens were allowed to operate, arbitrage would always be a problem.
- Fin24.com
