News › Weekly Alert Article
SARS to fight for its fair share of the tax pie
Earlier this year Minister Pravin Gordhan announced the members of the Tax Review Committee as well as the Committee’s terms of reference. The Committee will inquire into the role of the South African tax system in the promotion of inclusive economic growth, employment creation, development and fiscal sustainability. Taxand South Africa investigates how the Committee will take into account both domestic and global tax developments.
The committee's mandate includes the evaluation of the South African tax system against international tax trends, principles and practices, as well as recent international initiatives to improve tax compliance and deal with tax base erosion.
Aspects that will receive specific attention have also been set out and includes reviewing the corporate tax system with reference to tax avoidance (eg base erosion, income splitting and profit shifting, including the tax bias in favour of debt financing).
The Committee will further consider issues such as whether the current South African mining tax regime is appropriate, taking into account the agreement between Government, Labour and Business to ensure that the mining sector contributes to growth and job creation, remains a competitive investment proposition, and all role players contribute to better working and living conditions. The challenges facing the mining sector, including low commodity prices, rising costs, falling outputs and declining margins as well as the mining sector’s current contribution to tax revenues should also be taken into account.
Tax authorities and Governments worldwide (especially G20-countries) will be hoping that the actions suggested by the OECD will lead to a tax system in which profits are taxed “where economic activities deriving the profits are performed and where value is created”, as opposed to being taxed in the lowest tax jurisdiction. Therefore there is also a need to address concerns about base erosion and profit shifting (BEPS), especially in the context of corporate income tax, as identified by the OECD and the G20-countries.
Also published in Thomson Reuters' Taxnet Pro, 7 November 2013
In carrying out this review the Committee will take into account the objectives of the South African tax system, bearing in mind that the South African tax system has changed since the recommendations of the last tax commission and these changes have contributed to the development of a relatively robust and competitive tax system. However, given the pace of globalisation, relative modest economic growth after the 2008/09 economic recession and the significant social challenges such as persistent unemployment, poverty and inequality, there is a need to review what role the tax system can play as part of a coherent and effective fiscal policy framework in addressing these challenges.