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We are committed to act with integrity in all matters related to tax, including a policy of full transparency with all tax authorities and the payment of all taxes properly due under the law wherever we operate.
We strongly support global and local tax transparency requirements and we are comfortable that our tax governance framework is aligned to these requirements.
We are a major investor, taxpayer, employer and purchaser of local goods and services, and contribute to value creation in our countries of operation through capital investment and the provision of income, incentives and benefits to our employees.
In 2018, Vodacom’s external revenue 1 generated was R86.7 billion, on which we made a profit before tax of R22.1 billion 2 (excluding dividends). The Group’s tax charge of R6.5 billion was 7% higher than the prior year (2017: R6.1 billion), in line with growth in profit before tax (if adjusted for the profit of associate from Safaricom). The Group’s effective tax rate (ETR) decreased to 29.6% in 2018 from 31.7% in 2017. In the prior year, our ETR was elevated by 1.4ppts in relation to a once-off capital allowance adjustment, for the disposal of passive network assets to Helios Towers in Tanzania. This year, the ETR benefited from the inclusion of our share of the after tax profits from Safaricom in the Group’s profit before tax. When we compare our total corporate taxes paid in actual cash terms, to our profit before tax, our actual cash paid ETR was in line with the South African statutory tax rate of 28%. We therefore paid R0.28 in corporate tax for every R1 we generated in profit in our countries of operation in 2018.
In cash terms we contributed more than R20.8 billion to the public finances of governments on the African continent, compared to R16.1 billion of cash passed to governments in 2017, of which a significant number relates specifically to the telecommunications industry.
The difference between the total contribution to public finances of R20.8 billion (2017: R16.1 billion) and the tax charge of R6.5 billion (2017: R6.1 billion) relates to a multitude of taxes other than corporation tax and the inclusion of 34.94% of Safaricom’s contributions to public finances. 39.94% of Safaricom’s after tax profits is included in the Group’s profit before tax. The year-on-year increase in the total contribution to public finances is primarily related to the increase in service revenue and profits.
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