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The Portfolio Committee on Trade and Industry today held initial engagements on Transfer Pricing in South Africa to understand the impact of transfer pricing on trade and industry and its broader impact on the economy. The impact of transfer pricing on the economy emerged from the Committee’s Colloquium on Beneficiation in 2014.

The Committee heard that transfer pricing was enabled by the current auditing practices, loopholes in existing legislation and the lack of implementation thereof related to tax and mining, as well as challenges in alignment of related legislation like for example the Broad Base Black Economic Empowerment and the Minerals and Petroleum Resources Act. Committee Chairperson, Ms Joanmariae Fubbs, emphasised that the lack of compliance was not due to the lack of legislation but due to improper implementation by officials.

The presenters, Mr Floyd Shivambu, a member of the Committee, and Mrs Bridgette Radebe, the president of the South African Mining Development Association (SAMDA), noted that transfer pricing by mining companies led to large outflows of financial resources from South Africa (SA) to tax havens. According to the presenters, those outflows, weaken the economy through reducing taxes that are payable to the country, reduce the profits available to black empowerment partners and deprive mine workers of better wages. It therefore undermines job creation and the industrialisation efforts of government.

The Committee will engage the Portfolio Committee on Mineral Resources and the Standing Committee on Finance on the matter. The Chairperson will also request the Minister of Trade and Industry to engage his counterparts in Mineral Resources and Finance on the impact of transfer pricing and the implementation of the Mining Charter.

Issued by Parliament of RSA