Tax havens under attack
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Judge Dennis Davis, chairperson of the Davis Tax Committee, which is assessing South Africa’s tax policy framework, said a blacklist is something South Africa could consider when it has more detailed information in hand.
“If we think our companies are using Ireland in this way, we could also abolish the double tax treaty,” he said.
There is evidence, though, that the international tax landscape is changing.
The G20 and some other nations have agreed to new rules, including the exchange of information between tax authorities.
The new rules are already in place and have started being phased this year.
Pascal Saint-Amans, the director of the Organisation of Economic Co-operation and Development’s (OECD) centre for tax policy and administration, said that once countries implement minimum standards in reforming the global tax system, as required by the organisation’s base erosion and profit shifting (Beps) project, to which South Africa is a signatory, arrangements such as those between Ireland and Apple will no longer be possible.
Crawford Spence, a professor of accounting at the Warwick Business School in the UK, said countries have been spurred on by transnational initiatives such as Beps and are quickly developing the confidence to tackle these issues.
The new rules require country-bycountry reporting on what tax multinationals pay in each country.
But some serious issues remain because the G20/OECD reforms do not require multinationals to disclose this information publicly.
It will be made available only to the tax authorities in the respective countries.
Liz Confalone, policy counsel at Global Financial Integrity, said top of the organisation’s agenda is to ensure the country-by-country reporting is made public.
“It’s a fair criticism and those asking for transparency have good arguments,” said Saint-Amans. “That said, we start from a situation where there is nothing.
“The big guys who have the information … they don’t feel like going public. Countries are sovereign and do what they want. They said they will give it up if it is only shared with tax authorities.”
The reasons not to release the information i nclude a concern about sensitive information being revealed to competitors. The OECD sought to secure a compromise instead of pushing for more and possibly losing it all, Saint-Amans said.
Another criticism is the reforms do not go far enough to curb the abuse of transfer pricing, which allows corporates to shift profits to subsidiaries in jurisdictions where they can pay little or no tax.
Saint-Amans said, although some economists are suggesting the taxing corporates as a single entity, the view is not shared by many.
“Nobody has pushed for this. There is almost consensus that nobody is ready,” he said.
Instead, the organisation has made realistic attempts to start fixing the system.
He was also not convinced that such taxation would be the best solution. “When you look at it, you will find a number of flaws, not the least being that the benefits of it have never been tested.
“When you start reflecting on it, you will see serious issues arising.”
The project appears to be creating some ructions already as countries prepare to implement reforms, with some multinationals issuing profit warnings as a result of the incoming Beps requirements.
Referring to the current initiative, Saint-Amans said: “I’m not saying it’s great. I’m saying it’s much better.”