Steps being taken to curb illicit financial flows

Wednesday, February 21, 2018

Finance Minister Malusi Gigaba said the National Treasury, in close cooperation with the Reserve Bank, the Financial Intelligence Centre and the South African Revenue Service, is taking several steps to detect, disrupt and deter illicit financial flows.

The Minister said this when he tabled the 2018 Budget Speech in the National Assembly on Wednesday.

Dealing with illicit financial flows has become a priority for government following concerns that those who are hell-bent on avoiding paying tax, an action which erodes the country’s tax base, have for a long time opted to shift profits to tax havens.

“These measures include increasing capacity, coordinating a national risk assessment and improving information sharing between various agencies.

“In line with G20 recommendations, policy measures to deal with transfer pricing and base erosion by multinational companies are been implemented and continue to be tightened,” he said.

The Minister said that having a sustainable tax base was important to ensuring that government has enough revenue to meet its spending needs.

“Companies can structure affairs to reduce their tax base in South Africa and shift their profits to low-tax countries.

“This threatens the sustainability of our tax base and is a challenge that most governments are struggling with.

“The implementation of country-by-country reporting will enable SARS to ensure that companies pay their fair share of tax in SA,” he said.

He said government was also investigating options to further curb the practice of excessive interest deductions by companies in order to reduce their tax liability.

The realisation of taxes from the off-shore wealth of taxpayers, as highlighted in the Panama and more recently the Paradise Papers, was evidenced in the over 2000 applications for disclosure by South African taxpayers under last year’s Special Voluntary Disclosure Programme (SVDP).

It is anticipated that by the end of March 2018 over R3 billion will have been collected in respect of the SVDP that have been processed, with work on remaining applications continuing into the new fiscal year.

Measures to approve material cross-border transactions involving state-owned entities will be put in place. – SAnews.gov.za

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