Tax and our contribution to public finances

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 committed to:
  • Complying fully with all relevant regulatory obligations in line with our broader social responsibilities and our stakeholders’ expectations;
  • Acting with integrity in all tax matters in line with our Tax Code of Conduct, disclosing all relevant facts to tax authorities in all countries in which we operate under a policy of full transparency based on open and honest relationships with those authorities;
  • Pursuing clarity and predictability on all tax matters, wherever feasible; and
  • Seeking to protect shareholder value in line with our broader fiduciary duties.
We will not:
  • Seek to establish arrangements that are artificial in nature, are not linked to genuine business requirements and would not stand up to scrutiny by the relevant tax authorities; and
  • Artificially transfer profits from one jurisdiction to another to minimise tax payments; or pay more tax than is properly due under a reasonable interpretation of the law and upon receipt of a lawful demand.

The value we create through our contribution to the economy

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.

Total tax contributions made to governments across our countries of operation
Country Rm   Country   Rm  
South Africa 11 207   Zambia   58  
Kenya 4 507   Ghana   21  
Tanzania 2 231   Mauritius   15  
DRC 1 753   Cameroon   12  
Mozambique 659   Ivory Coast   7  
Lesotho 274   Angola   6  
Nigeria 93          

For further information, read our Public Finances report 2018.

Public Finances report 2018
  • External revenue is the sum of revenues generated from transactions with independent parties (all transactions with the Vodacom and Vodafone Group entities were excluded).
  • Profit before tax represents the total profit before tax in each country, excluding dividend income less expenses.
  • Excludes staff expenses of R821 million (2017: R742 million) capitalised against property, plant and equipment. Includes dividends of R44 million (2017: R44 million) relating to the forfeitable share plan which was offset against the forfeitable share plan reserve.