South African Finance Minister Pravin Gordhan (front) delivers his 2017 Budget Speech in Parliament in Cape Town, South Africa, on Feb. 22, 2017. Multinational corporations continue to use inconsistencies in global tax rules to their advantage and to avoid tax liabilities, South African Finance Minister Pravin Gordhan said on Wednesday. (Xinhua/GCIS/Kopano Tlape)
CAPE TOWN, Feb. 22 (Xinhua) -- Multinational corporations continue to use inconsistencies in global tax rules to their advantage and to avoid tax liabilities, South African Finance Minister Pravin Gordhan said on Wednesday.
South Africa intends to sign a multilateral instrument this year which will assist in the updating of treaties and will reduce the scope for aggressive tax avoidance activities, Gordhan said while delivering his 2017 Budget Speech in Parliament.
The automatic exchange of information between tax authorities will come into operation in September this year, he said.
Multinational companies will be required to file further information with the South African Revenue Service (SARS) on cross-border activities from the end of the year, according to Gordhan.
"We will continue to work actively with the international tax community and within government to modernize customs administration and combat cross-border revenue leakages, money laundering and harmful tax practices," the minister said.
Applications to the Special Voluntary Disclosure Program have begun. The SARS has already received disclosures of 3.8 billion rand (about 290 million dollars) in foreign assets, which will yield revenue of about 600 million rand (about 45 million dollars), according to Gordhan.
The program will be open until the end of August this year, he said.
The SARS must continue to develop the skills and capacity needed to enforce legislation and strengthen its efforts to curb tax avoidance and evasion, and address transfer pricing - a component of illicit financial flows, Gordhan stressed.
The key features of the framework for the 2017 Budget includes an additional 28 billion rand (about 2.13 billion U.S. dollars) to be raised in taxes.
"For many years we have enjoyed the benefit of tax revenue collections outstripping economic growth. This contributed to our capacity to expand public service delivery," Gordhan said.
This year, revenue has lagged behind the economy, leading to a 30-billion-rand (2.3-billion-dollar) shortfall by comparison with the budget estimate a year ago, according to Gordhan.
The revenue shortfall is mainly in personal income tax, value-added tax and customs duties, he said.
This reflects slower growth in wages, employment and bonus pay-outs last year, amongst other factors, Gordhan said.