An analysis of the possibility to implement a CSI tax levy in South Africa: Lessons from Mauritius

Abstract

"The voluntary approach to corporate social responsibility has failed in many cases."1 The Mauritius corporate social responsibility (CSR) landscape changed profoundly in 2009 with the addition of sections 50K and 50L to the Income Tax Act 16 of 1995 (Mauritius), making contributions to a CSR fund mandatory. Before 2009, the Mauritius government repeatedly called on the private sector for assistance to overcome unemployment, poverty, and other challenges in their country. Due to an unsatisfactory response to their request and factors such as poverty, and high unemployment levels, the government made the drastic decision to implement mandatory CSR legislation. The main objective of this study was to investigate the factors contributing to the enactment of mandatory corporate social responsibility (CSR) legislation in Mauritius and the possibility to implement similar legislation in South Africa. An analysis of the Mauritius tax legislation and relevant government publications scrutinised, by way of a literature review, revealed that what is referred to as mandatory CSR, is in fact mandatory corporate social investment (CSI). The study further indicated that the same socioeconomic factors as those present in Mauritius prior to 2009 and worse apply to South Africa. An analysis of South African CSI practices and contributions indicated that an additional R3.111 billion could have been raised if a 2 per cent CSI levy was applied to after-tax profits of certain categories of companies, as in Mauritius. This represents 1.2 per cent of the South African Department of Social Development's 2022/2023 budget. It is recommended that similar legislation should be considered for South Africa. It will ensure that all profitable companies in South Africa contribute to CSI and that more funds will be available to address some of the socio-economic needs. The study addressed the gap in empirical research done in Mauritius after 2018 and 2020 and is also the first comparative study conducted on this topic regarding South African law.