Amnesty by any other name…

A sec­ond round of re­lief planned around Novem­ber this year

Finweek English Edition - - Money Clinic -

THE SOUTH AFRICAN RE­SERVE BANK (“SARB”) re­cently is­sued a Mem­o­ran­dum on the ob­jec­tives of Reg­u­la­tion 24 and the Vol­un­tary Dis­clo­sure Pro­gramme (“VDP”), which ap­pears on the SARB web­site.

This fol­lows a Trea­sury me­dia state­ment dated 10 May 2010, re­leas­ing a draft of the 2010 Sec­ond Tax­a­tion Laws Amend­ment Bill (“2TLAB”) for pub­lic com­ment, which gives ef­fect to the 2010 Bud­get tax pro­pos­als.

The Trea­sury pub­lic com­ment pe­riod ended 11 June, while the SARB por­tion closed on 2 Au­gust 2010. The tax commu- nity is now wait­ing for amend­ments to be made and the con­se­quent launch by (hope­fully) 1 Novem­ber 2010 and will ex­pire on 31 Oc­to­ber 2011.

On the face of it, there seem to be many sim­i­lar­i­ties with the 2004 In­come Tax and Ex­change Con­trol Amnesty of­fered to non­com­pli­ant tax­pay­ers and those who were in breach of Ex­change Con­trol Reg­u­la­tions.

But An­ton Maskowitz from RMB Pri­vate Bank’s In­ter­na­tional Ad­vi­sory Ser­vices says that the VDP is not a sec­ond tax amnesty that waives all tax li­a­bil­i­ties. “The mech­a­nism would pro­vide qual­i­fy­ing tax­pay­ers with amnesty against tax penal­ties and in­ter­est aris­ing from pre­vi­ous de­faults,” he says.

An­other ma­jor distin­guish­ing fac­tor from the 2004 Amnesty is the fact that SARB and the South African Rev­enue Ser­vice (SARS) have now is­sued their re­spec­tive pro­pos­als sep­a­rately.

“Pre­vi­ously, if South African res­i­dents de­clared for­eign as­sets, re­lief was given on all in­ter­est and ex­change con­trol penal­ties and taxes. Now, no tax re­lief will be given. How­ever, in­ter­est and penal­ties on out­stand­ing tax li­a­bil­i­ties will be waived,” says Maskowitz. “A penalty for Ex­change Con­trol breaches will be levied, but no fur­ther Ex­change Con­trol ac­tion will be taken.”

The ac­com­pa­ny­ing ta­ble com­pares the pro­posed VDP to the 2004 Amnesty and at­tempts to high­light the ap­par­ent main dif­fer­ences based on the in­for­ma­tion avail­able in the draft leg­is­la­tion.

As it cur­rently stands, a de­fault­ing tax­payer will only be granted re­lief un­der the pro­gramme, pro­vided SARS was not aware of the de­fault; a penalty or ad­di­tional tax would’ve been levied had SARS dis­cov­ered the de­fault; and the full dis­clo­sure is made.

SARS has de­fined a “de­fault” to be the sub­mis­sion of in­cor­rect in­for­ma­tion or the fail­ure

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