Sat Oct 22 23:52:56 CAT 2016

South African Revenue Service will investigate business deals involving big companies

By unknown | Jan 12, 2007 | COMMENTS [ 0 ]

Thomas McLachlan

Thomas McLachlan

The South African Revenue Service (Sars) has warned that it will be investigating corporate reorganisations involving large South African companies, which have been on the increase recently, to ensure that these transactions are tax compliant.

Sars commissioner Pravin Gordhan said that though these deals served as an indication of growing investor confidence and provided substantial benefits for the economy in the form of capital inflows and positive sentiment, certain transactions were being structured in such a way that they showed reckless disregard for tax morality and South African tax law.

"Through elaborate structuring, these deals seek to deliberately avoid the tax consequences that should flow from the associated transactions, thereby robbing not only the fiscus of tax revenue, but all South Africans," he said.

Mark Badenhorst, tax partner at auditing firm PricewaterhouseCoopers, said: "I would be surprised if there is a problem of the scale that [Sars] speaks of."

He said that in his experience there was no "flagrant disregard" for the law in corporate reorganisations.

When asked if Sars would be targeting those companies involved in multinational takeover deals, Badenhorst said that it was unlikely because international companies were used to a more stringent tax environment and were thus less likely to take risks.

He said that if such activity was taking place it would probably be at a local level where there was heavier pressure to make strategic partnerships with other companies.

Gordhan called on corporate leaders to ensure the advice they pursued did not undermine the country's tax base.

"We once again urge institutions involved in designing aggressive tax schemes intended to abuse the law and deprive the fiscus of its fair share of revenue to desist from such schemes. These are the activities that lead to complexity in our tax law."

Sars spokesman Logan Wort said Sars was looking at both legal tax avoidance and illegal tax evasion, but he declined to name any companies or individuals suspected of either practice. - With Sapa, I-Net Bridge


Login OR Join up TO COMMENT