Pretoria, 29 April 2013 – Joint media statement from SARS and National Treasury on proposed limitations against excessive interest tax deduction for public comment. The annual tax proposals announced by the Minister of Finance in the Budget are given effect by a series of tax bills expected to be tabled during the year, including the Tax Laws Amendment Bill, 2013 (“2013 TLAB”) and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, 2013.
The purpose of this Media Statement is to elicit a first round of public comment on proposed rules to limit excessive interest tax deductions in response to Government’s concern over tax schemes that lead to base erosion, first raised in the section 45 proposals in 2011. As noted in a recent paper by the OECD (Base Erosion and Profit Shifting, available on http://www.oecd.org/tax/beps.htm), “base erosion constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for many countries”. Base erosion includes profit shifting schemes, like excessive deductions and income-shifting to low-tax countries.
The outcome of this first round of consultation will be incorporated thereafter into the forthcoming 2013 TLAB, expected to be released for public comment (and parliamentary hearings) in June 2013.