Tax authorities seek global solutions to tax evasion

CUSTOMS COMMISSIONER Pravin Gordhan appealed for a greater sense of corporate social responsibility with regard to tax compliance by corporates and small businesses when he addressed a business breakfast co-hosted by Safmarine in Johannesburg last week. South Africa has made major strides in its tax collection regime over the past 14 years, he said, but there’s still considerable ground to be covered. “In 1994 the deficit was 7%. Today it’s sitting between a surplus and maybe a deficit of less than 1% at the end of this year. “This means that government has a lot more money to spend on the services it offers South Africans – and despite the wobbles in the global environment and the challenges in the SA environment, we are still better off than we were 14 years ago.” While the level of compliance in South Africa continues to be a challenge and Sars is still concerned about the number of people not registered, Gordhan believes the authority is beginning to make progress, particularly with SMMEs. “The SA tax base has grown at a rate of 8-10% over the past seven years – and the method of interaction with the authority has also changed dramatically since the introduction of e-filing. “In 2006 around 33 000 people used e-filing. In 2007 over a million people filed their returns electronically – and we hope to increase that figure to 1.5 million this year.” The bottom line, says Gordhan, is that governments without resources cannot deliver – and in South Africa more than 95% of expenditure comes from taxes rather than borrowings. In an international context, tax authorities worldwide face a number of worrying trends. “There’s big tax competition on a global basis,” says Gordhan, “which is highly detrimental for governments because effectively it means that corporates can call the shots in terms of what they pay, to whom and where. “Capital flight is another worrying trend – and important questions are being raised globally around corporate responsibility, loyalty to one’s country and one’s contribution to the tax base. On the one hand citizens demand services from government, but on the other they are taking resources away.” At the same time tax administrations like Sars have an immense challenge in terms of understanding and responding to what Gordhan describes as “corporate creativity”. He believes that tax authorities around the world are responding, with a greater recognition today that we require a global tax relationship to ensure that nations can “share the spoils”. Sars has clearly made great strides but there’s plenty of room for improvement. The simple message from Gordhan – Pay your taxes!