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Ignore the amnesty at peril

Ignore the amnesty at peril

Date: 2016-03-11
South Africans with undeclared money squirreled away in offshore accounts who do not take cognisance of the latest tax amnesty had better be considering emigrating.

Addressing the annual BDO South Africa post-budget presentation in Durban, Rhodes Business School tax professor Matthew Lester said new reporting requirements for financial institutions globally would come into effect in 2017/2018 and expose anyone with secret offshore bank accounts.

Finance Minister Pravin Gordhan announced during his budget speech on Wednesday the country would introduce a second tax amnesty for funds illegally held offshore to encourage South Africans to repatriate their capital without excessively onerous penalties.

Renamed a "voluntary disclosure programme", it follows the 2003 amnesty that raised R2,9 billion in levies with R48 billion of the R69 billion declared having been held offshore illegally. That amnesty saw more than 42000 applications approved and it has been reliably understood Dennis Davis, the head of the government's advisory committee on tax, had suggested to Treasury a second amnesty be implemented.

The South African Revenue Service (SARS) has also had a voluntary disclosure programme in place since 2012 to allow taxpayers to declare their offshore assets in return for the waiver of penalties and criminal sanctions.

Gordhan announced a six-month period effective 1 October 2016 for individuals to bring home their capital for relatively small penalties ahead of the international shake-up. Lester warned anyone caught with undeclared assets after this amnesty would face criminal prosecution and penalties twice the value of the funds confiscated.

"If you have offshore capital, do something about it," he warned.

The amnesty was not open to trusts and excluded any individuals already under a SARS investigation.

Gordhan's move comes as the South African Treasury stems attempts for the global rating agencies to downgrade the economy to junk status. Lester said the tone of this week's budget signalled Treasury believed it had done sufficient to avoid the negative rating and in reality South Africa's debt levels were below the projections the International Monetary Fund (IMF) had made in 2014.

Lester credited this to the country's tax buoyancy - the indicator measuring efficiency and responsiveness of revenue mobilisation to gross domestic product growth (GDP) - that had escalated in the past three years despite the sluggish GDP.

"The wealthy in South Africa are getting wealthier and they must pay," he said.

Lester acknowledged there were many South Africans wanting to know what SARS was doing to tackle the value-added tax (VAT) irregularities in the "grey economy" those companies outside the top 500 companies not audited by the tax authorities.

The IMF reportedly believes South Africa was losing 8% of potential VAT revenue or R20 billion by not focusing on the smaller players currently abusing the system.

He dismissed the proposed sugar tax to achieve the intended goal to introduce healthier eating in South Africa, indicating it was the poor who typically consumed sugar and the diabetics who avoided it