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An evaluation of interest deduction limitations to counter base erosion in South Africa

Author

Listed:
  • Pieter Van der Zwan
  • Danie Schutte
  • Waldo Kruggel
  • Joel Seshabela
  • Hayley Reynolds
  • Londiwe Khoza

Abstract

This paper aims to describe funding structures of companies liable for tax in South Africa and how this relates to other characteristics, including ownership, of the companies. The research that the paper reports on was performed as descriptive analyses. While no clear indication of a preference for debt could be identified, the results showed that the mean net interest coverage ratio for certain foreign-owned entities differed significantly from that of domestically owned entities. This may be evidence of profit-shifting activities.

Suggested Citation

  • Pieter Van der Zwan & Danie Schutte & Waldo Kruggel & Joel Seshabela & Hayley Reynolds & Londiwe Khoza, 2017. "An evaluation of interest deduction limitations to counter base erosion in South Africa," WIDER Working Paper Series wp-2017-35, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2017-35
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    References listed on IDEAS

    as
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    6. Sven Langedijk & Gaëtan Nicodème & Andrea Pagano & Alessandro Rossi, 2014. "Debt Bias in Corporate Taxation and the Costs of Banking Crises in the EU," Taxation Papers 50, Directorate General Taxation and Customs Union, European Commission.
    7. Thorsten Knauer & Friedrich Sommer, 2012. "Interest barrier rules as a response to highly leveraged transactions," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 11(2), pages 206-232, May.
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