Foreign assets tax amnesty flops
Only a few hundred applications made before the deadline
THE tax amnesty for undeclared foreign assets, which the government had hoped would yield billions of rand in additional revenue, has been a flop, with just a few hundred applications made ahead of next week’s deadline.
The South African Revenue Service (SARS) has so far handled 499 applications only under the special voluntary disclosure programme, which allows taxpayers with undeclared foreign assets to come forward before August 31 to regularise their tax affairs.
Although tax lawyers said there had been a last-minute flurry of interest in the past two weeks, sources said the programme had so far brought to light hardly more than a 10th of the nearly R40-billion hoped for.
Tax experts blamed the low level of interest in the programme partly on the size of the levies applicants had to pay and the complexity and risk of the process.
Taxpayers are required to provide a detailed explanation of how and when the money was sent offshore and who was involved.
Offshore bank accounts, offshore property and discretionary trusts have been the assets most commonly declared under the programme, which was announced in the February 2016-17 budget.
It opened in October last year, comes to a close at the end of August and provides tax and foreign exchange relief. Judge Dennis Davis‚ who chairs the Davis tax committee, strongly urged the Treasury to introduce the amnesty.
There were hopes that the programme would generate large sums for the fiscus and plug the revenue shortfall. South African Institute of Tax Professionals chief executive Keith Engel said the response had been muted because of the difficulties and complexities of the application process.
PwC tax leader in the Western Cape James Whitaker said that while the number of applications had been far lower than the 42 000 during the 2003 tax amnesty, the amounts involved were larger and typically involved bequeathed offshore discretionary trusts.
He expects a rush of applications at the last minute.
“SARS expects the same in line with previous experience,” spokesman Sandile Memela said. Engel expected the number of applications to rise to about 800-1 000. The 2003 tax amnesty raised R2.9-billion with R48-billion of the R69- billion that was declared having been held offshore illegally.
Once the current programme closes at the end of August, taxpayers with undisclosed offshore assets will be subjected to full taxation, full interest and no relief from either penalties or potential criminal prosecution.
Memela said that the 499 applications did not include taxpayers who had used the continuing voluntary disclosure programme to regularise their tax affairs. This began in 2012 and by midMarch April 2016 R6.3-billion had been collected from 8 401 taxpayers who voluntarily declared their undeclared assets in return for the waiver of penalties and criminal sanctions.
Memela said SARS would from September gain a better appreciation of the extent of offshore assets held when the automatic exchange of information between tax authorities started.
Engel said there were three impediments to the current programme. First, under exchange control and Independent Regulatory Board for Auditors regulations, tax advisers were required to report any declaration of illegally held assets made by a client who decided not to apply for amnesty. This had discouraged many of the banks and accounting firms from actively promoting the special dispensation.
Another problem was the complexity of the documentation required. For example, proof of the value of the undeclared assets over a number of years was required. Finally, the fee for coming clean was too high to act as an incentive for taxpayers to come forward. — BDLive