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Sars: Tax evasion a risk

Cape Town - South Africa remains at risk when it comes to illicit financial outflows, SA Revenue Service (Sars) commissioner Oupa Magashula says.

He told Parliament's standing committee on finance on Tuesday that Sars would be strengthening its systems to prevent tax evasion by large, multinational companies.

Global economic instability was causing problems for Sars and its counterparts around the world to meet their fiscal demands.

Magashula said: "These economic conditions of subdued growth are further exacerbated from a revenue collection perspective by the proliferation of sophisticated tax avoidance and evasion schemes which rob countries of their rightful share of tax."

The phenomenon, which affected countries' self-sufficiency, was widely discussed at the G20 summit last month.

"Just last week here in Cape Town at the World Economic Forum on Africa...Oxfam International estimated that illicit financial outflows from Africa in the form of tax evasion and trade mispricing by extractive industries were estimated at about R1.8 trillion each year," said Magashula.

While many expected countries with less advanced tax systems to be the hardest hit, this was not the case.

"In part because of our world-class financial systems, along with the large extractive industry of mining and resources, the presence of large multinational corporations, and our open economy and tradable currency, South Africa is at very high risk of this," he said.

Sars was talking to multinational companies after incurring a revenue loss of over R3bn as a result of these practices.

"And this is just the tip of the iceberg," said Magashula.

Steps were being taken globally to address the profit shifting dilemma.

"The upcoming ministerial meeting of the OECD [Organisation for Economic Co-operation and Development] taking place at the end of the month is expected to endorse a declaration specifically on this issue and supporting the OECD’s development and implementation of an action plan to address base erosion and profit shifting."

In the meantime, revenue collection would remain under pressure due to "aggressive tax avoidance and evasion" by both big companies and individuals.

Magashula said strides had been made in increasing tax compliance through the issuing of administrative fines to those who failed to submit tax returns.

"During last year’s tax season alone, an additional 1.4 million outstanding returns were received, which is 25% higher than outstanding returns submitted by the 2011 deadline."

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