Cape Town - Treasury's suspension of section 45 of the
Income Tax Act is not meant to harm legitimate
commercial transactions but to protect the fiscus, Finance Minister Pravin Gordhan said on Thursday.
"In recent weeks it became clear to both Sars and the
Treasury that what we have is a phenomenon described as raiding the fiscus...
under the guise of a commercial transaction, what we have are all sorts of
complexities that have been developed... which in fact amounts to potentially
billions of rand being lost by the fiscus," he told reporters.
Treasury suspended section 45 for 18 months, effectively
from June 3 2011. The move was aimed at clamping down on tax avoidance schemes
used by many companies in intra-group transactions.
Section 45 allowed the tax-free transfer of assets within a
group of companies. It offered companies rollover relief and facilitated
transfers among entities that operated as a single group.
Parliament's finance committee was warned on Wednesday
during public hearings on the proposals that the suspensions would spell the
death knell of black economic empowerment, Business Day reported.
Business Unity SA, the Banking Association of SA, the South
African Institute of Chartered Accountants, the South African Institute of Tax
Practitioners, South African Venture Capital, the Private Equity Association
and financial services company Bravura made presentations to the committee.
They argued the Treasury needed to adopt a far more targeted
approach to the abuses it wanted to prevent
A study by Bravura showed the suspension of section 45 could
jeopardise certain previously announced or already existing empowerment
transactions, including those by Aveng [JSE:AEG], African Bank Investments [JSE:ABL], MTN Group [JSE:MTN], Allied Technologies [JSE:ATL], Palabora
Mining Company [JSE:PAM] and Sasol [JSE:SOL].
At Thursday's media briefing Gordhan said while the
suspension appeared to be an "unprecedented action", he wanted to
assure business that neither the Treasury, the South African Revenue Service nor the ministry wanted to harm or delay legitimate commercial dealings.
He said businesses able to "quickly" persuade
authorities their transactions were legitimate would be able to go ahead with
them sooner rather than later.
The ministry would listen "very carefully" to
people who had views to express, and Treasury would not necessarily stick
to the 18-month suspension if it could be persuaded otherwise.
"You want faster responses from us, you want 18 months
to come down to three months... then you cooperate and put the facts on the
table. That will allow our tax experts to establish what the facts are, to look
at the schemes, ideas and packages that the people are preparing as quickly as
Gordhan said the ministry would insist on nothing but
complete transparency regarding each transaction.
"We are guardians of the fiscus. If we allow our big
fish to disappear from the net, we are not doing our job. Create the conditions
for us to work in a collaborative way so that businesses that have legitimate
transactions can get on with them and those that have crossed the line can
correct and readjust."
He dismissed as "plainly nonsense" rumours the
Treasury was creating an anti-investment climate. He said moves to protect the
fiscus were an international phenomenon.