Tax Avoidance in South Africa

The Paradise Papers were obtained by German newspaper, Suddeutsche Zeitung, providing unprecedented insight into the mechanics of a number of countries considered key nodes in the global shadow economy, threatening to embarrass thousands of high-profile individuals.

According to the newspaper the 13.4 million documents from more than 19 “secrecy jurisdictions” will put pressure on authorities to tighten up tax avoidance laws.  More than half a million secret records from Appleby’s office in Mauritius, are said to from South African companies.

Mauritius is one of the most touted countries as a gateway for those seeking to do business in Africa and a tax haven favoured by many large South African corporate to establish their offshore arms.

Dick Forslund, an economist whose Alternative Information and Development Centre has tackled companies like Lonmin for putting in place “transfer-pricing arrangements” designed to push money through secrecy jurisdictions, says there’s often no good reason for setting up offices in tax havens.

“In most cases, there’s no reason for these arrangements other than to siphon off money or to get some tax benefit. If you buy a hotel in Mauritius, that’s legitimate. But for a company to push sales commissions or management fees through Mauritius when there’s nothing there, that’s not legitimate.”

Forslund describes this as “an accepted practice now — everyone is doing it”. And the South African Revenue Service “is doing nothing about it”.

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