Johannesburg — THE South African Revenue Service (SARS) was concerned at the abuse of transfer pricing among multinationals, particularly where there were temptations to boost the balance sheets to get more income, said SARS commissioner Pravin Gordhan yesterday.

It was a complex challenge for tax authorities globally, said Gordhan. "It is a matter that can harm SA's tax base."

Gordhan was speaking at the South African Institute of Chartered Accountants financial services conference held at Emperors Palace in Kempton Park . "SARS intends looking more closely at this matter," he said.

According to the 2007- 08 SARS annual report, large corporates were still pushing the boundaries in that they regularly took contentious positions in areas such as transfer pricing, tax structuring, valuations, and international tax.

The report said SARS was concerned about compliance in transfer pricing, particularly in manufacturing and structured finance transactions, which were more attractive with high interest rates.

Transfer pricing involves the price at which transactions between units of a multinational firm take place, including intercompany transfers of goods, property, services and loans.

Over the past two years, SARS had conducted more than 50 transfer-pricing audits. Tax analysts have warned that the more monetary value a financial transaction has, the more likely it is that SARS will look into it.

Gordhan appealed to the accounting profession to defend their professional integrity and think of the integrity of the system, and what measures and controls should be put in place to combat fraud.

"One needs to have the guts to be a whistle-blower." Gordhan said accountants needed to act with integrity, and expose corruption wherever they might find it.

SARS obtained 514 convictions, and completed 2098 investigations, last year related to large businesses.

Gordhan said the global financial crisis had raised new questions about the roles of leadership. "The roles of CEOs, chief financial officers, auditors, and accountants are going to be challenged in the light of the financial crisis," he said. If leadership was driven by bonuses and incentives, then something was clearly wrong, he said.

There were fascinating challenges facing boards, he said. If the board were to be objectively and routinely representative of shareholders, it should not be richly populated with personal friends and business associates of the CEO.

Meanwhile, Gordhan commended employers for filing their pay-as-you-earn tax declarations.

There are 325000 registered employers. The vast majority of employers had submitted copies of employee tax certificates, but 50000 were still outstanding.

Gordhan said the customised, prepared tax return was an innovation containing information from a third party, such as the taxpayer's employer, bank and insurance company.