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Phillip Fry
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Africa more aggressive on tax collection because of international economic slow downBy Amanda Visser, Sep 17 2008 courtesy of http://www.fin24.com George, South Africa - Regulators and administrations in Africa will become more and more aggressive about tax collection for their governments as the international economic slowdown affects companies' profitability. Martin Walbeck, Ernst and Young's head of tax for Africa, said that while governments' income targets are rising, profitability is falling. He told the company's fifth African conference on tax that in South Africa this would certainly lead to more audits. "This will to lead to increasing court action, tax controversies and more audits. The focus will progressively be on law enforcement and aggressive planning (for tax evasion)." The conference focus was on the latest tax developments, investment opportunities and planning, as well as issues of transparency in Africa. In all, 21 African countries attended the two-day conference and 45 multinationals sent representatives. Walbeck added that unbridled globalisation was continuing, but that the role-players were no longer the "usual suspects". There has been a shift in power which is visible at two levels - a broader economic level and ownership. In the past year there have been several significant transactions in Africa, including a Chinese bank taking a 20% stake in Standard Bank, Dubai World's extensive acquisitions in Africa, and the wooing of South Africa's cellphone company MTN by an Indian company and others. "It's important to be aware of the trend and how to derive advantage from it," said Walbeck. Fastest growing economy Stephan Kuhn, an Ernst & Young regional partner, explained how that company had prepared itself for the changes. He heads the EMEIA region (Europe, Middle East, India and Africa), which represents 87 countries with 60 000 employees. Thirty thousand of its employees are in tax and 850 are tax partners. This shows the importance of tax issues for companies doing business - and wanting to do business - in Africa, said Kuhn. Walbeck notes that there are enormous opportunities in Africa with its market of 800 million people. "Of course there are challenges, but the trends are in the right direction." He referred to Angola which currently has the fastest growing economy. There are even predictions that this country's economy will surpass that of South Africa within 10 years. Zambia has already received acknowledgement for its stock exchange which was last year's best performer. It is clear, said Walbeck, that it is not only "the mining industry" that has potential, but also the financial sector. Herbert Gatsinzi, Ernst & Young's senior tax manager in Kigali, Rwanda, said that that country had become the "destination of choice" for investors. Important tax reforms in 2006 had largely been shaped on the Organisation for Economic Co-Operation and Development (OECD) tax model. Company tax rate is running at 30% and small enterprises have a predictive turnover tax system with a fixed rate of 4%. The country aims to become the nucleus of information technology in the region. Various tax incentives for companies in the sector form part of the planned revisions. These include provision for an end investment allowance of 40 to 50% on capital assets.
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