Voluntary tax disclosure a chance to ‘come clean’
USING the government’s recently announced voluntary disclosure programme, taxpayers will soon be given an opportunity to put their affairs in order if they owe tax on local assets or income, and by disclosing income and assets hidden offshore.
Taxpayers who take advantage of the programme will be able to “come clean” without having to pay additional tax, penalties and interest on their defaults.
Paula Bagraim, director of tax consulting at Stonehage Financial Services, says the international tax environment is moving towards greater transparency and a more open exchange of infor mation between tax authorities.
“In the wake of the global financial crisis, governments across the world have been scrambling to raise their tax revenues to help fund budget deficits. The relaxation of banking secrecy laws, sophisticated audit initiatives and improving co-operation with overseas tax jurisdictions and banks, including reciprocity in provision of information, will improve Sars’ ability to trace fund flows around the world and identify South African resident taxpayers with income and assets hidden offshore,” she says.
To encourage taxpayers to disclose past non-compliances to Sars and to regularise their tax affairs, a voluntary disclosure programme will be instituted in terms of draft legislation from November 1, 2010 to October 31, 2011.
“The programme is consistent with successful initiatives implemented in other jurisdictions such as the UK, Australia, the US and, more recently, Italy and Denmark,” says Bagraim.
The detail of the programme is set out in the Taxation Laws Second Amendment Draft Bill of 2010. The requirements for a valid voluntary disclosure are that:
There must be voluntary, full and complete disclosure.
There must be a default, in the form of inaccurate or incomplete infor mation submitted resulting in an incorrect assessment or refund.
A penalty/additional tax would have been imposed had Sars discovered the default.
The disclosure must be made in respect of a default which occur red at least 12 months before the start of the programme.
Taxpayers may apply unless they are aware of pending audits or investigations into their tax affairs, or audits or investigations which have commenced.
The full amount of tax will remain due by taxpayers participating in the programme. Subject to certain exceptions, additional tax, penalties and interest relating to the default will be waived.