Customs

The South African Revenue Service (Sars) Commissioner on 3 June said that the service would be appointing 24 additional tax specialists in its transfer pricing (TP) unit to deal with base erosion and profit shifting (BEPS). The question being raised is why is the capacity not being increased for the customs valuation (CV) unit?

What is astounding in Sars is that specialisation in CV – if there is indeed such a thing – is not subject to any economic qualification. How then is it possible to determine value if the laws of demand and supply are not even known? Somehow the origin and linkages between customs and economics are not appreciated or even understood.

Another issue of concern is that the extent of South Africa’s merchandise trade between related parties is unknown, considering that internationally it is accepted to be in excess of 60%. It is quite possible that in South Africa’s case it may well be significantly more. So this does not afford the opportunity for (Base Erosion and Profit Shifting (BEPS).

Is the assumption that only TP is responsible for BEPS in international merchandise trade? Ignoring CV at Sars’ peril.