The Economic Freedom Fighters (EFF) said it would like to see prison sentences imposed on business executives who moved cash to tax havens — where the rate of taxation is lower than in South Africa — “to deal decisively with transfer pricing and illicit financial flows”.

This is one of the proposals the EFF said it was making to the Davis Tax Committee.

More than 77% of illicit financial flows were facilitated through transfer pricing — the shifting of profits by companies to low tax jurisdictions — the party said in a statement.

The EFF‚ citing a Global Financial Integrity report‚ said South Africa had lost more than R237-billion in 2011. It also quoted the African Union Panel on Illicit Financial Flows‚ led by former president Thabo Mbeki‚ which stated that Africa loses more than R650-billion annually.

The party said it would recommend “anti-tax avoidance legislation‚ which prohibits tax avoidance in its entirety‚ with (a) stronger penalty regime including jail sentences for directors and executives found guilty of tax avoidance”.

The party said the committee should also consider a prohibition on intra-company trades‚ especially with a subsidiary based in a tax haven jurisdiction‚ “on the basis that such (an) act is not a bona-fide transaction therefore gives criminals a legal tool to loot freely”.