Only weeks after African Tax Administration Forum (ATAF) member
countries and the OECD signed a memorandum of co-operation on
transparency and exchange of information, SARS formally agreed to a
further exchange of information forum with its fellow BRICS
(Brazil, Russia, India and China) countries. This illustrates
SARS' proactive approach to improving the enforcement of
transfer pricing regulations.
The BRICS countries have officially committed to sharing their
experiences of best practice in the area of transfer pricing,
capacity building and general anti-avoidance and a coordinated
group has been established to discuss tax policy and
administration. It is hoped that this will provide a greater scope
for consensus building and exchange of ideas and experiences
between developing countries on key aspects of international
To enhance the auditing ability of SARS officials working in the
transfer pricing division, SARS formally indicated the intention to
second a number of employees to other BRICS countries for training
and will receive BRICS officials in return, so that each BRICS
country is able to learn from the skills and experience of their
respective fellow members.
In addition, SARS expressed particular interest in the Advanced
Pricing Agreement (APA) regimes of the other BRICS countries and
there is consensus to focus more effort on addressing the practices
currently resulting in what is perceived to be a concerning erosion
to the tax base. India has specifically committed to assisting
South Africa in this regard and has pledged to share its resources
and knowledge with SARS. In addition, China is also being assisted
by India in their implementation of an efficient APA system.
In the past few years, India has emerged as a benchmark for many
aspects of not only the BRICS nations, but many other
countries' tax systems. India's transfer pricing
legislation and court case precedent has been applied as a
guideline for other countries in the process of drafting
legislation in this regard. With the assistance of India, it is
likely that the APA process will be introduced and developed more
quickly and efficiently. This is good news for tax professionals
and multinationals in South Africa and China alike.
What is interesting to note is that none of the BRICS countries
are members of the OECD. Brazil, in particular, has legislated
transfer pricing rules quite at odds with OECD accepted practice.
This is perhaps because traditionally developed and developing
countries have had different positions on issues relating to
international tax policy, and it is widely recognised that the OECD
guidelines are more applicable to developed nations and thus not
always suitable to transactions occurring in less developed
economies. Further, comparability concerns have often hindered the
application of the OECD methodologies.
India, being the most notable transfer pricing influence on the
BRICS countries, acknowledges the OECD principles in applying
Indian fiscal law. However, during the past few years, Indian tax
authorities have consistently been aggressive, often ignoring
generally accepted international principles and therefore it is
important that in accepting assistance from India, South Africa
consider their position as an OECD observer country.
By establishing a forum to promote the sharing of resources, the
BRICS countries may be able to provide working solutions for the
problems being experienced by developing nations in applying the
OECD methods. This will greatly assist many developing countries,
including the other ATAF members, especially in the light of the
ATAF exchange of information agreement committed to by SARS.
In addition to a more collective approach to transfer pricing
being applied, easing the ability of developing countries to engage
in more efficient trade, the commitment of the BRICS countries to
work more closely will likely result in more aggressive transfer
pricing regulations being introduced, meaning increased tax
revenues and enhanced ability to achieve sustainable growth, much
desired goals of most developing nations.
It is important, however, that the BRICS countries as well as
the ATAF member countries carefully manage the balance between
effective development of transfer pricing regulations and ensuring
that these countries remain attractive investment locations.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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