Listed media\u00a0company, Naspers, through its subsidiary 24.com, says it is\u00a0concerned by Google’s\u00a0competitive advantage through its ability to avoid paying taxes in South Africa.<\/p>\n
The search and advertising giant’s tax\u00a0practices have come under intense\u00a0scrutiny in recent months, particularly in the UK, and in other European countries like\u00a0France, who claim that Google\u00a0abuses tax and accounting laws that allows it to pay less tax.<\/p>\n
And in South Africa,\u00a0as in the UK,\u00a0entities which are not local tax residents, are only subject to income tax in respect of income which arises from a \u201csource\u201d within the country.<\/p>\n
Naspers’ 24.com believes that\u00a0Google clearly has a dominant position in the South African market and local digital publishers would benefit if the playing fields were leveled, “making global companies abide by the same rules, price structures and economics faced by smaller local businesses”.<\/p>\n
The media\u00a0company argues that\u00a0digital publishers in South Africa are struggling to compete for a slice of the on-line advertising pie with Google, which currently transacts through an off-shore entity without having to declare revenue or profits, thereby avoiding paying local taxes.<\/p>\n
Google\u2019s current revenue from South Africa from online advertising is put at between R800 million and R1 billion, making the potential loss for South African companies, and for tax revenues in this country significant, 24.com says.<\/p>\n
Based on these figures, lost tax revenue from Google is estimated at R140 million per annum in corporate taxes, and possibly a further R100 million in PAYE.<\/p>\n
Geoff Cohen, CEO of 24.com, said: \u201cIn the digital age, we accept that we compete with businesses from all over the world. However, it is clearly wrong that, as we invest in building a tax-paying business employing hundreds of South Africans, we are competitively disadvantaged through aggressive tax planning strategies of global businesses.\u201d<\/p>\n
New e-tax laws in SA<\/strong><\/p>\n South African tax legislation will change effective 1 April 2014, to ensure that global e-commerce businesses comply with local VAT regulations.<\/p>\n However, 24.com notes where the companies are not registered locally, they will not be subject to a local income or purchase tax.<\/p>\n Cor Kraamwinkel, associate director of Price Waterhouse Coopers (PwC), said: \u201cThese new VAT measures applicable to imported ‘electronic services’, are unlikely to result in an increased income tax liability for offshore service providers.”<\/p>\n “Although a foreign company may be registered as a VAT vendor in South Africa, this does not necessarily result in that foreign company having a taxable presence or permanent establishment in South Africa for corporate income tax purposes.”<\/p>\n This, Kraamwinkel said,\u00a0 enables many foreign companies to avoid a South Africa corporate income tax liability by relying on relief offered in terms of a double taxation agreement between the foreign country and South Africa.<\/p>\n The Google tax<\/strong><\/p>\n 24.com highlights a legal development in Italy dubbed \u201cthe Google tax\u201d which could set an international precedent, opening the way for local taxing of Google on-line advertisements purchased in countries around the world, including South Africa.<\/p>\n It says that the new provisions apply to Italian purchasers of online advertising, requiring them to buy only from businesses that are registered for Italian VAT payments, thus forcing them to comply with local tax laws.<\/p>\n “Significant legislative changes will be required before South African internet businesses will be able to compete with some of their global counterparts on a level tax playing field in South Africa, 24.com said.<\/p>\n Google South Africa responds<\/strong><\/p>\n Last year, BusinessTech asked Google South Africa for clarity on its position within the South African market, but a Google spokesperson skirted the queries, saying that the company does not break up revenues by country (except for the US and UK) and simply stated that it complies fully with the tax rules in South Africa, as in every country it operates.<\/p>\n Why digital tax is good for South Africa<\/strong><\/a><\/p>\n SA digital tax coming in April<\/strong><\/a><\/p>\n Is Google dodging tax in South Africa?<\/strong><\/a><\/p>\n Google\u2019s tax affairs under scrutiny<\/a><\/strong><\/p>\nMore on 24.com and Google<\/h3>\n