CAPE TOWN - The South African government is set to introduce a global minimum corporate tax, targeting multinational corporations with annual revenues exceeding £750 million. Finance Minister Enoch Godongwana announced the move during the 2024 National Budget Speech in Parliament, highlighting it as a strategy to curb tax competition and ensure fair taxation of multinational enterprises operating within the country.

According to South African Government News Agency, the proposed tax reform is expected to generate an additional R8 billion in corporate tax revenue by the 2026/27 fiscal year. The draft Global Minimum Tax Bill, published for public comment, aims to establish a minimum effective tax rate of at least 15% for qualifying multinational corporations, regardless of where their profits are made.

This initiative is part of a global effort to address the challenges of base erosion and profit shifting, particularly those arising from the digitalisation of the economy. South Africa's participation in the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting has been instrumental in developing these tax rules. The framework's two pillars focus on ensuring a coherent tax treatment of multinationals and introducing a global minimum tax to limit profit shifting to low-tax jurisdictions.

The implementation of this tax reform involves two key measures: an income inclusion rule and a domestic minimum top-up tax. These measures will enable South Africa to tax profits of qualifying South African multinationals operating abroad at effective rates below 15% and collect top-up taxes from multinationals paying less than the minimum rate within the country.

The Finance Minister emphasized the broader tax policy strategy of broadening the tax base while enhancing compliance and administrative efficiency. Efforts to modernize the South African Revenue Service (SARS) have led to significant improvements in revenue collection, including expanded tax registration, improved debt collections, and reduced fraudulent activities.

Additionally, SARS is deploying advanced technologies to combat illicit tobacco trading, resulting in significant assessments against key players in the illicit gold and tobacco industries. These measures reflect the government's commitment to improving revenue collection and addressing economic challenges through effective tax policy and enforcement.