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  • Combating Tax Avoidance in Multinational Corporations

Combating Tax Avoidance in Multinational Corporations

22 February 2017

By: Marcus Botha & Sumayyah Pahad, BDO Tax Services

The Minister of Finance, Pravin Gordhan’s 2017 Budget Speech delivered earlier today reinforced government’s commitment to address cross-border tax avoidance by multinational corporations.

The automatic exchange of information between tax authorities will come into effect from September 2017 increasing multinational corporations’ filing requirements on cross-border activities to reduce cross-border revenue leakages, money laundering and harmful tax practices. The Standard for Automatic Exchange of Information Agreements (AEOI) in Tax Matters (or Common Reporting Standard (CRS)) is a global model of automatic exchange of information under the Multilateral Competent Authority Convention to which South Africa is a signatory. In terms of the CRS, 32 tax authorities exchange information obtained from financial institutions and asset managers. The CRS sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, and common due diligence procedures to be followed.

The South African Revenue Service (SARS) and National Treasury have already made massive strides with the Base Erosion and Profit Shifting (BEPS) [action 13]. The Tax Administration Act was amended in 2015 to implement Country-by-Country (CbC) reporting. SARS adopted the regulation with effect 23 December 2016.

This microscope on multinational corporations and the increased reporting obligations, further increases the pressures on multinationals to manage their taxes in a transparent manner.

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