SA business ‘unlikely’ to look abroad for lower taxes

BUSINESS is reluctant to move its headquarters in search of lower corporate tax rates, but it wants the state to ease the tax burden, research by global advisory firm Grant Thornton has found.

Grant Thornton’s International Business Report, a survey of corporate tax issues considering input from more than 3,400 businesses in 44 economies, was released yesterday.

The report shows 80% of South African business owners would not relocate their head- quarters to another country for a lower corporate tax rate.

More than 75% of these businesses urged the state to do more to ease the tax burden to relieve economic pressures.

“Headline rates are not the only deciding factor for relocation of global headquarters,” director and head of tax at Grant Thornton Johannesburg AJ Jansen van Nieuwenhuizen said.

“Of priority to most companies that operate internationally is how they can effectively manage their tax rates worldwide — a single improvement in one area isn’t always enough of a draw card.

“However, a combination of factors does result in change, such as reduced corporate tax rates and other tax incentives,” he said.

Two-thirds of all business owners surveyed would not move to another country for corporate tax rate reductions. Executives in Brics economies — excluding SA — were most inclined to relocate for a lesser corporate tax rates. More than 40% of businesses in the Brics regions were in favour of moving to another country for lesser corporate taxes.

Business executives in Botswana were most likely to consider relocating their headquarters to another country if a lower corporate tax rate was on offer.

About 62% of executives said that they would relocate, while about 20% said they would do so for a reduction in the corporate tax rate of as little as 1%.

“SA would not be considered as a relocation destination for Botswana executives though, because Botswana’s current corporate tax rate is 25% compared to our 28%,” Mr Jansen van Nieuwenhuizen said.

But he said any company which moved its headquarters would also have to consider how close the destination was to its existing operational base.

He said that companies were not trying to avoid paying tax, but that they were seeking a predictable taxation system.

“You want to go to a settled tax system where the tax laws are followed through. Most companies will avoid … complicated tax schemes,” he said.

After the national budget was released in February, the South African Chamber of Commerce and Industry noted that SA’s corporate tax rate had been left unchanged.