Global minimum corporate tax to bring in R8bn in 2026/27

To bolster its corporate tax base, a global minimum corporate tax will be implemented in South Africa, with multinational corporations subject to an effective tax rate of at least 15%, regardless of where the company’s profits are located

global minimum corporate tax to bring in r8bn in 2026/27

Global minimum corporate tax to bring in R8bn in 2026/27

In a bid to make South Africa (SA) a more attractive business destination, government will implement a global minimum corporate tax, with multinational corporations subject to an effective tax rate of at least 15%, regardless of where the company’s profits are located.

As per the Budget Review 2024, implementation of the global minimum tax is gathering pace. SA joins around 54 countries taking steps to implement it, including Japan, South Korea, the UK and EU member countries.

The thinking is to limit harmful tax competition or the race to the bottom of effective corporate tax rates for large multinationals, with countries competing to attract income by offering low tax rates and tax incentives.

Finance Minister Enoch Godongwana says these proposed reforms are expected to yield an additional R8-billion in corporate tax revenue in the 2026/27 financial year

In 1980, statutory corporate tax rates around the world averaged 40.11% and by 2022, the average was 23.37%, according to estimates from the Organisation for Economic Development (OECD), based on rates in 180 jurisdictions.

Hopes are riding high that implementing the minimum tax of 15% in SA will bolster the corporate tax base. The global minimum tax ensures that any multinational with annual revenue exceeding €750-million will be subject to an effective tax rate of at least 15%, regardless of where its profits are located.

Tax for multinationals

Government proposes to introduce two measures to effect these changes — an income inclusion rule, and a domestic minimum top-up tax — for qualifying multinationals, from 1 January 2024.

The income inclusion rule will enable South Africa to apply a top-up tax on profits reported by qualifying South African multinationals operating in other countries, with effective tax rates below 15%. The domestic minimum top-up tax will enable SARS to collect a top-up tax for qualifying multinationals paying an effective tax rate of less than 15% in SA.

Finance Minister Enoch Godongwana says these proposed reforms are expected to yield an additional R8-billion in corporate tax revenue in the 2026/27 financial year.

The move cannot come too soon. Revenue from both corporate income tax and value-added tax (VAT) is expected to remain subdued due to low profitability in many sectors, and the adjustment costs of new investments in energy generation and storage.

Windfall tax gains ended

Windfall tax gains from high commodity prices over the last two years have come to an end, leading to a sharp fall in mining tax revenue. For the first 10 months of 2023/24, mining provisional corporate tax collections fell by R39.2-billion or 50% relative to the same period in the previous year.

Lower commodity prices, weaker global growth, increased power cuts and operational problems at SA’s ports have weighed heavily on the sector.

Although commodity prices are expected to stabilise, corporate profitability is projected to remain weak in 2024/25. Collections from the manufacturing sector also contracted over the period, while the finance sector registered marginal growth.

Following robust growth over the two years prior, import VAT and customs duties collections have slowed considerably. Net VAT collections for 2023/24 have been revised down by R26-billion, compared with 2023 Budget expectations.

The Budget Review notes that high VAT refund payments resulted from increased investment in embedded generation and higher costs of doing business, including the use of more expensive road transport due to operational and maintenance failures in the rail network.

The Explanatory Memorandum and Draft Global Minimum Tax Bill to be released today will contain more details on these proposals, as well as a request for public input. DM

OTHER NEWS

22 minutes ago

Terrified Chicago mom rings 911 during home invasion - only for dispatcher 'to tell her to phone politician instead and ask for more police funding'

22 minutes ago

Man Utd, Newcastle targets among FIVE relegated stars who could make prompt Prem return

22 minutes ago

Member of Israel's War Cabinet says he'll quit the government June 8 unless there's a new war plan

22 minutes ago

Former Irish international rugby player and leading businessman Tony O'Reilly dies

22 minutes ago

How FICO leverages AI to optimize business decisions

23 minutes ago

Austria to unblock funds for UN Palestinian relief organisation

23 minutes ago

The U.S. economy and inflation might be cooling off, but lower interest rates are still far away

23 minutes ago

Super Swiatek wins another 'great battle' against Sabalenka for third Rome title

25 minutes ago

Cork fend off Clare fightback to pick up valuable win in Ennis

25 minutes ago

Meet the 'replacements' who could take over seats in Europe if elected MEPs bow out

25 minutes ago

Why are some Australian households about to be charged for generating too much solar power?

25 minutes ago

'An achievement I am extremely proud of'

25 minutes ago

#PiyushGoyalToNews18 | Union Minister Piyush Goyal In An Exclusive Interview With Network18| N18S

25 minutes ago

Maple Leafs' Draft Day Surprise Looks More Like Genius Move with Knights' Easton Cowan

25 minutes ago

Phil Foden voted Premier League player of the season over Arsenal and Chelsea stars

27 minutes ago

Sugar’s big twist was more than a gimmick

27 minutes ago

6 Penn students among 19 pro-Palestinian protesters arrested during attempt to occupy building

27 minutes ago

Dallas Stars into their 2nd West final in a row after knocking out last two Cup champions

31 minutes ago

Barcelona predicted lineup vs Rayo Vallecano - La Liga

32 minutes ago

Lathicharge in Mulund as MVA accuses BJP of doling out 'huge' cash

32 minutes ago

What Ross Atkins’ comments tell us about Blue Jays’ next moves

32 minutes ago

Prince Edward says death of Queen Elizabeth so soon after Prince Philip made it ‘far more emotional’

32 minutes ago

Children glued to their phones at meal time face obesity risk

32 minutes ago

Alabama Softball Wins on a Surprise Home Run

32 minutes ago

Mariners Moose Tracks, 5/18/24: Jonny Farmelo, David Fletcher, and Jung Hoo Lee

33 minutes ago

As ethnic armed group claims to have captured a town in western Myanmar, Muslim Rohingyas flee again

34 minutes ago

‘Oh, Canada’ Producers Talk Nerve-Racking Wait For Interim Agreement – Cannes

35 minutes ago

Diddy 'is terrified other damaging videos will emerge after he was filmed beating up ex Cassie Ventura in hotel hallway and is holding crisis talks with lawyers as his career implodes'

35 minutes ago

Canucks-Oilers Notebook: Skinner’s return, McDavid’s disappearance, and MIller’s growth

35 minutes ago

SBNation Reacts Results: Seahawks fans expecting return to the postseason

35 minutes ago

Highlights! ‘Thunder’ Injects Fury-Usyk PPV With Melting KO

35 minutes ago

Instagram generation confuse normal stress and anxiety with mental health conditions

35 minutes ago

Richards Bay slip closer to play-offs after City defeat

35 minutes ago

Imprisoned British-Russian dissident thanks Cambridge college for honour

35 minutes ago

Ferrari upgrades overhyped? Carlos Sainz hits out over ‘out of reality’ Imola predictions

37 minutes ago

Houston distributes water as more than 500,000 remain without power after devastating storms

37 minutes ago

Driver who struck and killed Glenview teenager was going 122 MPH at time of fatal crash: court docs

39 minutes ago

Ben Affleck seen WITHOUT his ring for the first time amid claims he and Jennifer Lopez have been living apart for 'several WEEKS'

39 minutes ago

Amy Winehouse's viral hot mic moment dissing Justin Timberlake at the 2008 Grammys CUT from new Back To Black biopic

40 minutes ago

John Wayne Bobbitt says women cut off their partners’ penises out of ‘jealousy,’ unfulfilled ‘childhood dreams’ in response to grisly Colorado murder

Kênh khám phá trải nghiệm của giới trẻ, thế giới du lịch