SA signs up against giant tax dodgers
SOUTH Africa is one of 31 countries that this week signed an agreement that could make it harder for rich multinational companies to avoid paying tax.
The agreement is designed to ensure companies pay tax in the country where profits are made. It is aimed at recouping some of the $100-billion (about R1.6-trillion) to $240-billion lost annually to tax authorities across the globe by companies shifting profits to low-tax jurisdictions. The US and China have not signed the agreement, although all the major European economies have.
The agreement was drawn up amid growing public anger at tax arrangements that allow the world’s richest companies to minimise their tax bills.
Earlier this month Anheuser-Busch InBev, the largest beer group in the world, joined the likes of Google, Amazon and Facebook when it was told by the European Commission it faced back-tax demands to the Belgian authorities. AB InBev, which is Brusselsbased and is involved in a $108billion deal to buy SABMiller, is one of about 35 multinationals facing a combined tax bill of $764.5-million. Last week the European Commission said a Belgian tax-discount plan available only to certain multinationals “represents a very serious distortion of competition within the EU’s single market”. It ordered Belgium to recover the unpaid taxes.
ActionAid, a UK-based nongovernmental organisation, has already raised concerns about AB InBev’s aggressive tax management policy. The beer group’s current overall tax rate is about 18%. SABMiller, the subject of a highprofile attack on its tax policies in Africa a few years ago, has a tax rate of 26%.
This week a representative of AB InBev said although the company was disappointed by the European Commission’s decision, “We remain confident that our tax rulings are in full compliance with the EU jurisprudence on state aid and that we have always complied with Belgian and international tax provisions.”
Last year, after AB InBev announced its bid for SABMiller, ActionAid called on the company to develop a new tax code of conduct to show how it intended to apply sustainable development principles to its tax affairs. Savior Mwambwa, campaign manager at ActionAid, said such a code would provide transparency and assist tax authorities in African countries where the merged entity would be operating.
The growing political sensitivity regarding corporate tax was evident in this week’s response to the UK government’s description of its £130-million (about R2.97-billion) tax deal with Google as a victory. The Scottish National Party and members of the European parliament called for an investigation into the deal.
In a statement issued this week the Organisation of Economic Co-operation and Development said the new multilateral agreement allowed for the automatic exchange of the DEMAND: Amazon is one of several giant corporations, including Anheuser-Busch InBev, Google and Facebook, which have been told by the European Commission they face back-tax obligations in Belgium country-by-country reports produced by companies. “Country-by-country reporting will have an immediate impact on boosting international cooperation on tax issues by enhancing the transparency of multinational enterprises’ operations,” said OECD secretary-general Angel Gurria. The agreement allows for information on individual companies’ global operations to be exchanged with tax authorities.
Frans Tomasek of the South African Revenue Service said the agreement would allow tax administrators to examine more closely the risk profile of corporate taxpayers.
Mwambwa welcomed the agreement, which he said would help in the campaign to ensure companies paid their fair share of tax. But he cautioned that although it was called a multilateral agreement, in practice it was a bi- lateral agreement.
“It requires each country to actively decide which other countries it would like to exchange information with. Already some countries indicated they will only exchange information with those countries with which they have an economic or political reason to, and developing countries will most likely not be on that list.” Developing countries, which have limited tax-collecting ca- pacity, are thought to be major victims of tax avoidance by multinationals.
Logan Woort, executive director of the African Tax Administration Forum, was more upbeat. He said the agreement would more easily enable African countries to take remedial action against multinationals. “Although many are not signatories, African countries have become increasingly aware of tax leakages.”