Finance Minister Pravin Gordhan is widely expected to announce a new foreign exchange control and tax amnesty in his budget tomorrow in a bid to encourage taxpayers who have not disclosed billions of rands worth of offshore assets to declare them and pay the due tax.The move would help to reduce the government’s revenue shortfall‚ as well as broaden the tax base for future years.
A new amnesty‚ along the lines of the previous one in 2003‚ is one of a raft of measures Gordhan is expected to announce as the government tries to stave off a downgrade of South Africa’s sovereign credit rating to junk status.
It is reliably understood that Judge Dennis Davis‚ who chairs the advisory committee on tax set up by Gordhan in 2013‚ suggested to the Treasury that a second amnesty be implemented this year‚ as new reporting requirements globally coming into effect in 2017-18, threaten to expose those with secret offshore bank accounts.
The 2003 amnesty raised R2.9-billion in levies‚ with R48-billion of the R69-billion that was declared having been held offshore illegally. More than 42000 applications were approved.
In addition‚ the South African Revenue Service (SARS) has since 2012 had a voluntary disclosure programme in place to allow taxpayers to declare their offshore assets in return for the waiver of penalties and criminal sanctions.
But tax experts say this regime is not attractive enough to encourage people to come forward‚ as there is no tax relief on accumulated interest. Another major deterrent is the hefty penalties the Reserve Bank imposes for non-declaration of money taken offshore.
More than R9-billion in tax has been collected from voluntary disclosures over the last few years‚ but there is understood to be much more in undeclared assets abroad.
Barclays economists Miyelani Maluleke and Peter Worthington noted in a report on the budget that “the Davis Tax Committee apparently found evidence of large pools of offshore assets that were not regularised in the first amnesty”.
Last year’s disclosures were that
HSBC’s Swiss division had helped wealthy customers from more than 203 countries evade taxes on secret accounts‚ and included claims that South Africans had R23-billion in more than 2200 accounts. SARS gave those with illegal accounts a deadline to come clean or face penalties. But pressure is now mounting on those with hidden bank accounts‚ ahead of the implementation of the Organisation for Economic Cooperation and Development’s plan for the automatic exchange of information between tax authorities globally on foreign accounts in 2017-18.
South African Institute of Tax Professionals president Keith Engel said he had received reports from a number of tax practitioners whose clients wanted to come clean because of the new world order.
“Several of these clients are holding funds in the hundreds of millions‚ some even billions of rand.
“They missed the first amnesty because they did not trust the government at the time‚” Engel said.
“Pressure exists to regularise the funds‚ due to the HSBC affair and the greater sharing of information. Banks are also now asking questions‚ making these offshore funds less tenable.
“The problem is that the voluntary disclosure programme is not generous enough. There is no tax relief on interest earned‚ some of which dates back to the ’90s. The interest charges alone are killing and can wipe out the funds entirely. The other thing is that the exchange control dispensation is uncertain. — BDLive
Tax amnesty, offshore funds on budget menu
The move would help to reduce the government’s revenue shortfall‚ as well as broaden the tax base for future years.
A new amnesty‚ along the lines of the previous one in 2003‚ is one of a raft of measures Gordhan is expected to announce as the government tries to stave off a downgrade of South Africa’s sovereign credit rating to junk status.
It is reliably understood that Judge Dennis Davis‚ who chairs the advisory committee on tax set up by Gordhan in 2013‚ suggested to the Treasury that a second amnesty be implemented this year‚ as new reporting requirements globally coming into effect in 2017-18, threaten to expose those with secret offshore bank accounts.
The 2003 amnesty raised R2.9-billion in levies‚ with R48-billion of the R69-billion that was declared having been held offshore illegally. More than 42000 applications were approved.
In addition‚ the South African Revenue Service (SARS) has since 2012 had a voluntary disclosure programme in place to allow taxpayers to declare their offshore assets in return for the waiver of penalties and criminal sanctions.
But tax experts say this regime is not attractive enough to encourage people to come forward‚ as there is no tax relief on accumulated interest. Another major deterrent is the hefty penalties the Reserve Bank imposes for non-declaration of money taken offshore.
More than R9-billion in tax has been collected from voluntary disclosures over the last few years‚ but there is understood to be much more in undeclared assets abroad.
Barclays economists Miyelani Maluleke and Peter Worthington noted in a report on the budget that “the Davis Tax Committee apparently found evidence of large pools of offshore assets that were not regularised in the first amnesty”.
Last year’s disclosures were that
HSBC’s Swiss division had helped wealthy customers from more than 203 countries evade taxes on secret accounts‚ and included claims that South Africans had R23-billion in more than 2200 accounts. SARS gave those with illegal accounts a deadline to come clean or face penalties. But pressure is now mounting on those with hidden bank accounts‚ ahead of the implementation of the Organisation for Economic Cooperation and Development’s plan for the automatic exchange of information between tax authorities globally on foreign accounts in 2017-18.
South African Institute of Tax Professionals president Keith Engel said he had received reports from a number of tax practitioners whose clients wanted to come clean because of the new world order.
“Several of these clients are holding funds in the hundreds of millions‚ some even billions of rand.
“They missed the first amnesty because they did not trust the government at the time‚” Engel said.
“Pressure exists to regularise the funds‚ due to the HSBC affair and the greater sharing of information. Banks are also now asking questions‚ making these offshore funds less tenable.
“The problem is that the voluntary disclosure programme is not generous enough. There is no tax relief on interest earned‚ some of which dates back to the ’90s. The interest charges alone are killing and can wipe out the funds entirely. The other thing is that the exchange control dispensation is uncertain. — BDLive
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