international tax policies - olive branch seen to work
18 January 2007

Pravin Gordhan was positively beaming at the OECD tax conference in Cape Town, where 39 tax authority heads from across the world met to discuss international tax policy.

Not only had SA successfully hosted a major tax conference, but Gordhan, commissioner of the SA Revenue Service, boasted about a new relationship of trust with corporate SA.

Late last year Sars concluded landmark negotiations with JSE-listed packaging company Nampak. After years of bitter dispute, Nampak now joins FirstRand and Massmart as companies that have negotiated tax disputes. The aim is to achieve a win-win outcome, without expensive litigation.  Nampak financial director Tim Jacobs is relieved it's all over. "It was an overhanging concern," he says. "In some cases the disputes stretched so far back that the people involved had left."

Nampak's tax headache started in 2002 when it acquired the Malbak group of companies. "We worked out that on Malbak alone we were exposed to R750m in contingent liabilities with interest and penalties," says Jacobs.  The negotiations resulted in Nampak paying R250m. "It's not Mickey Mouse money, but consider that the assessments started at R1bn."

Jacobs says if companies can find a more conciliatory approach and do enough work to prove their case, there's a good chance they'll get out of penalties and interest bills. "That's a big motivation to compromise."   The deal may mark a paradigm shift in the way Sars deals with corporate taxpayers. In the past couple of years tax administration has moved into the boardroom. Teams of astute Sars negotiators now engage with CEOs and CFOs, whereas previously discussion stopped at the tax department's door.

Gordhan says Sars will be approaching the Institute of Directors to see how it can help communication with board members. Sars will also work with chairmen and boards directly to "get tax onto the agenda". Gordhan wants meetings with board audit committees to see how tax risk features, as well as with banks, insurance companies, accounting bodies and law societies.

Gordhan likens the relationship between taxpayers and authorities to a romantic date. "Someone has to make the first move and Sars is willing to do that."

UK tax authorities have apparently had much success in wooing business into what is known in tax circles as "enhanced relationships". A team of 150 UK investigators has resolved a number of complex technical disputes. Says HM Revenue & Customs director-general Dave Harnett: "We can resolve disputes in five-and-a-half months, compared with five to six years in the past."

Click here for full article, including PWC, FTA, KPMG & Nampaks view on the matter. 

Jacqui Pile, http://secure.financialmail.co.za