'Let's deal on tax abuse': Gordhan

Minister of Finance Pravin Gordhan has challenged tax practitioners to co-operate with the state in exposing abuses of a provision of the Income Tax Act that are costing the country billions every year.

Gordhan told a news conference that the proposed 18-month moratorium on section 45 of the Income Tax Act might not be necessary if tax advisers quickly came clean about the abuse of a provision for the tax-exempt transfer of assets within a corporate group.

But he cautioned that SARS and the Treasury would have to be convinced that they had a full picture of the schemes being used to abuse the provision before they would agree to lifting or to curtailing the moratorium.

He said the Treasury had a particular responsibility to protect the country's revenue stream in the light of the recent recession.

Investors using section 45 to avoid paying taxes forces the Treasury to borrow more than it otherwise would have to.

"We have a responsibility to say to those who are organising their thoughts around this provision: 'Stop it'," he said.

"We are saying: 'Create the conditions for us to work in a collaborative way so that businesses that have legitimate transactions can get on with them and those that have crossed the line can correct and readjust their schemes to the right side of the law," Gordhan said.

MPs heard at a meeting earlier this week that the moratorium could torpedo valuable deals currently pending, including Cyril Ramaphosa's R1.3-billion acquisition of the McDonald's burger chain's South African operations.

The McDonald's deal depends on tax concessions enabled by section 45.

The moratorium was proposed on June 3 in draft legislation likely to go through parliament by September.

SARS tax expert Franz Tomasek said the moratorium would, if approved, suspend the tax concession on all deals concluded after June 3.

"We know that there is a lot more out there. What we want is this industry to come forward and say these are all the schemes, these are all the facts about the schemes and if there is any other information you require you are welcome to it," Gordhan said.

"We want a quid pro quo. You want faster responses from us, you want the 18 months to come down to three months, then you co-operate . allow our tax experts to establish what the facts are, to look at the schemes or packages as quickly as possible, and clear the decks."