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SRA FIGHT TAX HAVENS SCOURGE

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MBABANE – Another day, another leak showing how big companies, the rich and the famous make use of tax havens.


These leaks have become a common place in recent years. The latest and the largest yet, are the Paradise Papers, the 13.4 million documents released a fortnight ago exposing clients of the Bermuda- based law firm, Appelby which has offices in other tax havens such as the British Virgin Islands, the Isle of Man and Guernsey.


According to the latest estimates of the Tax Justice Network, governments are losing E9.1 trillion (US$700 billion) a year in tax jurisdictions-the tax havens.
The release of the Paradise Papers follows shortly after the Panama Papers. The Panama Papers are an unprecedented leak of 11.5 million files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.


The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Of the list of people, about 10 Swazis or Swazi-based businesspeople were also listed. Their names are known to the Times SUNDAY but are deliberately withheld.


Using offshore structures is entirely legal. There are many legitimate reasons for doing so. Businesspeople in countries such as Russia and Ukraine typically put their assets offshore to defend them from ‘raids’ by criminals, and to get around hard currency restrictions. Others use offshore for reasons of inheritance and estate planning. But most persistent than the leaks themselves are concerted efforts at global tax reforms , especially by the Organisation of Economic Co-operation and Development (OECD), which South Africa and other nations have begun to implement in earnest.

The OECD’s Common Reporting Standards have taken effect, which requires countries to obtain information from their financial institutions and automatically exchange it (the scope of which is pre-agreed) with other countries every year. The agreement is based on reciprocity and those who do not provide quality information will be excluded.
As of August this year, there were 95 signatories to it, including South Africa and Seychelles. But the initiative has been criticised for not accommodating the needs of developing countries, many of which have not signed up including Swaziland.


Despite that Swaziland needs information sharing regarding tax matters to curb the scourge of tax erosion through tax haven, the Swaziland Revenue Authority (SRA) Commissioner General Dumisani Masilela confirmed that the country is not a signatory of OECD.
Speaking to the Times SUNDAY yesterday, the commissioner general said the reason Swaziland is not part of OECD which is aimed at preventing tax avoidance by big companies and the rich is because its membership is predominantly the western countries.


However, he noted that it is starting to open due to the emergence of the leaks detailing how governments are losing billions of Emalangeni through the shifting of money to the tax havens. Masilela said some individuals are structuring their companies so that they could shift their profits to the tax havens hence organisations including OECD are starting to be more accommodative.


As things stand, Masilela said Swaziland does not seem to be eligible in his view despite its important role. Against this backdrop, Masilela told this publication that Swaziland is collaborating with OECD through the Africa Tax Administration Forum.  To be signatory to the OECD, the taxman said they are in a process of joining the Global Tax Forum which is supposed to be processed by the Ministry of Finance through Cabinet.
“As Swaziland we are processing to join the Global Forum which will assist us to manage these tax erosion issues and share information with other tax administrations. We have the appetite to join global forums to share tax matters,” Masilela said.


OECD’s base Erosion and Profit Shifting action plan, which is being implemented over the next few years, will also go some way towards stopping companies from abusing complex mechanisms to limit tax liability in countries where their economic activities took place.



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