Mixed views on SA taxing global internet giants

2016-03-18 15:36
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Fin24 users have issued mixed responses on whether or not South Africa should do more to tax global internet giants such as Google and Facebook.

Earlier this week, Fin24 reported that global accounting firm, PricewaterhouseCoopers (PwC) said that South Africa’s Finance Minister Pravin Gordhan, in his 2016 budget speech, could have expanded the tax base by looking more carefully at foreign suppliers of electronic services.

READ: SA 'misses opportunity' to tax foreign e-service - PwC

“While the Minister did make a positive attempt to expand the tax base by introducing a sugar tax and tyre tax, these are unlikely to be large scale revenue earners and more could have been done to broaden South Africa’s tax base and to protect and foster local South African industry in the face of rising competition from global companies,” said PwC in a statement earlier this week.

“Examples of opportunities that were missed include levying corporate income tax on foreign suppliers of electronic services which currently do not pay South African income tax, unlike local entities,” said PwC in its statement.

PwC further said that another missed opportunity involves introducing value added tax (VAT) on electronic advertising services supplied from offshore.

This market is forecast to reach R4.4bn by 2018, according to PwC’s Entertainment and Media Outlook Report, 2014–2018.  

Companies such as Google and Facebook are already under the spotlight in countries such as the UK regarding the amount of tax they pay.

However, Fin24 users have mixed views on whether the same should happen in South Africa.

Fin24 user Suzanne wrote:

“E tax is simply another way we will be ripped off. I work for a university library (in the Eastern Cape as a consortium that makes resources and library material accessible for research) and by forcing an educational institution to pay tax for e resources means that students will have even less material available. E-resources and library management software systems must not be taxed. Neither should ebooks. How illiterate does the government want us to become? With the collapse of the rand it has become very difficult to run libraries, with fees must fall we are running on 50% staff and even smaller budgets. Taxing educational non-profit university/educational institutions will ensure that services come to a dead stop. How much more punishment are universities supposed to take?”

Fin24 user Patrick said the following regarding the need to tax e-services in South Africa: “I don't think it's relevant at all”

Fin24 user Nuala, though, said, “Yes, for sure we should tax e service companies.”

And Fin24 user Bggl also expressed support for taxing foreign e-services:

“Yes ! Yes! As an example I buy electronic books from Amazon and pay no VAT and they pay no corporate tax here. SA is losing a lot of potential tax on electronic transactions. But yet when I received some family tree documents sent to me together with a memory stick with the same data I had to pay tax on the device? Why?”

Fin24 user Kgoloko also said that foreign e-service companies should be paying more tax in South Africa:

“In response to the topic at hand: should international companies selling e-services in SA be taxed? YES!

SA tax is source based and according to the definition of Gross Income in the Income Tax Act, foreigners should be taxed on the income generated "from a source within" the country. If anyone earns income in SA, tax should be paid on that income. This is not a subject of deliberation but a matter of enforcing the law. Clearly SARS needs to do more in enforcing what has already been provided for in the Act.”

Fin24 user Valentine wrote:

“Editor, I advertise my business on google adwords and Facebook . I really feel that we ought to have these services pay tax in South Africa. They can’t be operating from Ireland all the time because of tax benefits. The last time I checked Google was making about R1bn per annum here in SA. Just imagine what a fair taxation would bring to the economy. Facebook also makes a lot of money from South African businesses. Surely we love these companies because they have lowered the cost of online advertising and increased its efficiency but that doesn't mean they shouldn't pay tax in our country?”

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