Time running out for tax dodgers

VOLUNTARY DISCLOSURE: THIS MAY BE YOUR LAST CHANCE

Experts say government could do more to increase incentives to own up to undisclosed overseas assets, but cheats have some hard decisions to make.

The special voluntary disclosure programme (SVDP) to encourage taxpayers with undisclosed offshore income and assets to regularise their affairs may be too punitive to encourage optimal uptake, tax experts have warned.

Finance Minister Pravin Gordhan announced during the 2016 Budget the programme would be relaxed for six months from October 1, in anticipation of the automatic exchange of information between tax authorities starting next year.

Nowhere to hide

This will make it much more difficult for taxpayers to hide offshore assets.

A similar 2003 exercise raised between R3 billion and R7 billion.

Johan van der Walt, head of dispute resolution and tax controversy services at KPMG in South Africa, says it is very difficult to speculate how much tax revenue the SVDP will collect.

A lot of South African money offshore has not been regularised, he says.

Conversations with gatekeepers – wealth managers, banks and trust companies in Switzerland, the UK, Jersey and Guernsey – suggest that there could be a substantial uptake if the SVDP terms were more enticing, he says.

Van der Walt says when the tax elements of the SVDP and the levies applicable to exchange control add up, taxpayers can take quite a significant hit – up to 30%. So taxpayers might decide not to come clean, move the funds or leave South Africa.

International indications suggest that once taxpayers have to go beyond 15% towards 20%, the disincentive starts kicking in.

“The South African [SVDP] regime … is certainly one of the more expensive regularisation processes and that could mean that the uptake is not optimal, but it is very difficult to say because a lot of these discussions are only starting now and people are feeling their way and actually waiting for total certainty regarding the parameters.”

Heinrich Louw, senior associate at Cliffe Dekker Hofmeyr, says if the relief is not sufficient taxpayers won’t regularise their affairs, but the automatic exchange of information is a significant concern and may encourage them to come clean.

He says, in the current draft, many taxpayers won’t qualify for the SVDP and will have to go through the normal VDP process, in which case there will be no special exchange control relief.

Louw says his sense is that the SVDP may raise less money than the 2003 amnesty, but it is too early to speculate.

Judy Snyman, fiduciary specialist at AlphaWealth, says if taxpayers don’t make use of the SVDP they could face dire consequences.

Last dance

There will be no mercy and taxpayers will likely have to pay the maximum penalties as they would have had several opportunities to come clean.

National Treasury recently proposed changes to the SVDP to simplify the process.

Van der Walt says it appears unlikely that the parameters and the relief offered will change substantially.

Treasury did not comment.

Picture: Bloomberg ON YOUR TRAIL. New information-sharing treaties between different countries’ tax authorities will from next year uncover the tracks many tax cheats thought would remain hidden forever. That means they have some tough choices to make between now and then.