A recently appointed tax review committee has argued that, by handing out a credit in lieu of foreign taxes on African management fees, South Africa was “giving away its tax base”. It recommended that South Africa should rather “develop a coherent policy in respect of [bilateral tax] treaty negotiation and interpretation”.
A report last week alleges that MTN has moved billions of rands, which were earned in Africa, to accounts in Mauritius.
The money was claimed as ‘management fees’ but according to the report MTN does not employ any staff in Mauritius.
Several African countries are challenging these payments, which reduce MTN’s taxable profits in those countries.
MTN responded by saying it takes serious exception to any suggestion that it is involved in a tax avoidance scheme.
“Such suggestions lack facts or merit, and could be very damaging to our brand,” the company said.
“At no point has MTN ever been found to be involved in any scheme that seeks to help the company avoid its tax or legal responsibilities in any jurisdiction where we operate, including South Africa.”
MTN is fighting to keep the tax break, arguing that a withdrawal of the tax credit would make South Africa less favourable as a location for headquarters, and may lead to MTN relocating elsewhere.