SA miners panned for R3.4bn transfer pricing
ALTHOUGH there is no conclusive evidence as to how much money South Africa is losing in terms of transfer pricing, the mining and extractive industries are responsible for R3.4bn of it.
Dumisani Jantjies, financial analyst of the parliamentary budget office, singled out the mining industry as one of the biggest culprits when it comes to base erosion and profit sharing (BEPS).
Jantjies was part of a delegation that presented at a joint committee meeting of the parliamentary oversight committees on finance, mineral resources and trade and industry to discuss the prevalence of transfer pricing in South Africa.
In light of the mining industry’s large contribution to BEPS, Jantjies said, the following questions need to be considered: should South Africa review its current royalty bill? Is our mining tax regime progressive or too lenient? Are the disincentives for transfer pricing too low?
“More work on this needs to be done from a [parliamentary] oversight point of view,” Jantjies said.
During question and comment time, Mbuyeseni Ndlozi, MP for the Economic Freedom Fighters (EFF), said National Treasury should consider a so-called “sixth method” when addressing the dilemma of base erosion and profit sharing, similar to how Latin American countries have tackled it.
“These countries tax companies at the price at which minerals are sold to manufacturers. If we do this, we’ll recover trillions of rand and we can even forgive the president for Nkandla,” he quipped.
Joan Fubbs, chairperson of the oversight committee on trade and industry and an ANC MP, said South Africa should look at the countries where mining companies have their primary listing.
“In the first instance South African-owned producers should be listed and domiciled in South Africa. They can have their secondary listings outside.
“Huge amounts of legitimate money flows out of South Africa and we have to look at ways in which we can keep the funds here.”
In reply, Ismail Momoniat, deputy director-general at National Treasury, said however that the issue of domicile is “not a simple one”.
“There are exchange control applications and many companies have dual listings. We’re not strong enough to insist that companies should have their primary listings in South Africa.
“If we want foreign capital from outside to flow into South Africa we have to accept it would come from overseas funders who do have power over us.
“All these issues are complex. Merely banning transfer pricing won’t solve the problem. We’ll have to figure out which way is the best going forward.”