SACTWU makes second submission to the Davis Tax Committee (dtc) Print
Tuesday, 18 August 2015 17:03


Press Release: Immediate

The SA Clothing and Textile Workers’ Union (SACTWU) today made its second submission to the Davis Tax Committee (DTC). This submission comments on the Committee’s interim report on base erosion and profit shifting (BEPS).

In the union’s first submission, made in February 2014, we emphasised that tax reform can and must assist in reducing inequality, promoting redistribution, enhancing tax efficiency and equity, and in doing so make a substantial contribution to job creation and the resources available on the expenditure side of the budget.

Profit shifting not only reduces revenue available to the state, it is also a challenge to tax integrity and tax equity. Integrity suffers because some are perceived as ‘getting away with it’ while others do not, which may have implications for the tax culture. Tax equity suffers because it is usually the rich and corporate tax payers who are able to avail themselves of profit shifting practices should they wish to; as a result, not only do these tax payers not pay their fair share, but other taxes, paid by the working class and other tax payers, must fill the gap.

Our submission expresses support for the DTC’s tentative conclusion that more aggressive corporate tax practices and illicit financial flows (IFFs) may have followed in the wake of the global economic crisis. This conclusion informs several proposals made in our submission of February 2014 and reiterated in this submission.

For instance, we urged the South African government to continue to support all measures aimed at ensuring that tax haven abuse is addressed decisively. Despite this and tax havens’ role in profit shifting, the DTC’s interim report does not contain a comprehensive discussion of tax havens. We fear this may be because the Committee largely adopts OECD language and ideas on BEPS matters, which do not regard tax havens as a sufficiently important matter.

Our submission again emphasises the importance of ensuring SARS has adequate capacity to address ongoing tax abuse, including transfer pricing abuse. Yet, issues related to capacity barely feature in the DTC interim report.
SACTWU also expresses its concern that South Africa has not yet been able to address the lack of data available to inform tax reform work. We welcome the DTC’s tentative support for a tax gap measurement effort.

There is also still far too little work on effective corporate tax rates. We are concerned that National Treasury, the department responsible for fiscal policy-making, do not have sufficiently accurate information on effective corporate tax rates by sector or by individual company. The implication of this is, amongst others, that fiscal policy is not informed by a clear awareness of actual trade-offs. 

As a result, debates about increasing or decreasing the corporate income tax rate too often remain at a vague level.  As is the case in the Committee’s interim report on VAT, the burden to increase tax revenue is then moved to VAT, which will have a negative impact on the poor and on inequality.

Finally, the DTC’s strong reliance on the OECD and its developed country view sees it neglecting other more critical perspectives, such as that of the United Nations, whose Model Tax Convention is generally regarded as being more favourable to developing countries. Furthermore, surely a document such as this, compiled by an African country, should have engaged actively with the African Union’s High Level Panel on IFFs from Africa.
 

The subsmissins can be found here :

SACTWU DTC BEPS submission cover letter.pdf

SACTWU Davis Tax Commission BEPS submission.pdf
 


Issued by
Andre Kriel
General Secretary
SACTWU

If further information is required, kindly contact SACTWU’s Mr. Etienne Vlok on office number 021 4474570, or cell number 082 448 0506