NGO Highlights Tax Avoidance
BYLINE: Ann Crotty
Finance Minister Pravin Gordhan's insistence on the need to ensure companies in Africa pay their fair share of tax comes just weeks after UK-based NGO ActionAid released a damning report on a document issued by auditing and consultancy services group Deloitte, which advises companies on how to avoid paying tax on their African operations.
According to ActionAid, the Deloitte document advises international companies to invest in Africa through Mauritius to avoid tax. ActionAid, which acknowledges that tax avoidance is legal, states that the Deloitte report provides companies wanting to invest in Mozambique with details on how they can achieve a 60 percent reduction in withholding tax and a 100 percent reduction in capital gains tax by investing through Mauritius.
"Mozambique is one of the poorest countries in Africa where over 50 percent of the population lives below the poverty line and the average life expectancy is just 49 years," ActionAid said.
Mauritius, which has been described as the "gateway to Africa" for international businesses, has 14 double taxation treaties with African countries.
An example used by Deloitte describes how a Chinese company investing directly in Mozambique would be required to pay a 20 percent withholding tax on profits remitted as dividends to its Chinese parent. The withholding tax is in addition to the 32 percent tax paid on the profits. If the Chinese company sold its Mozambique operation it would have to pay 32 percent on any capital gain.
However, if the Chinese company invested in Mozambique through Mauritius it would only have to pay 8 percent withholding tax on any dividends paid to China. In addition, it would have to pay no capital gains tax if it sold the Mozambican operation at a profit because of the double taxation treaty Mauritius has with Mozambique. …