Tax System Makes South Africa Unpopular With Multinationals

by Robert Lee, Tax-News.com, London

18 January 2002

According to the Executive Chairman of a leading South African based paper manufacturing company, changes in the corporate tax regime have made South Africa an increasingly unpopular location for multinational companies.

Before 2001,companies were only obliged to pay local taxes on earnings arising in South Africa. However, as the result of legislative changes which took effect last year, SA-based multinationals are now taxed on their offshore earnings as well, which Eugene van As, head of SAPPI, believes has had a detrimental effect on the country's attractiveness to international business.

Speaking to the South African Business Day newspaper, Mr van As lamented the fact that tax policy changes have 'made it less attractive to run SAPPI from here', explaining that 'if you take away all the positives, then you are left with the negatives.'

He commented that the country's far from central location is both an advantage and a disadvantage, as communication with the company's European and American operations is problematised by the distances involved, but that as South Africans are not centrally located: 'they are a lot less arrogant and a lot better at integrating foreign operations.'

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