Subscribe to our Newsletter


click to dowload our latest edition

CLICK HERE TO SUBSCRIBE TO OUR NEWSLETTER

News

Disclosing the ‘schlepped’ funds

Published

on

HILARY JOFFE

Do you recall those ads that had a man boasting of his new luxury boat in Mauritius and his offshore mansion whose existence he failed to disclose to the revenue or exchange control authorities?

They are part of a last-minute effort by SARS to persuade taxpayers with undisclosed foreign assets to regularise these in terms of the Special Voluntary Disclosure Programme (SVDP), which expires on August 31.

The programme, which the minister of finance announced last year, was intended to give people who “schlepped” funds abroad, the chance to come forward, ahead of a new international agreement between tax authorities that comes into effect on September 1.

The agreement will see the authorities of different countries sharing information on the bank accounts and other assets of individuals and trusts under the new Common Reporting Standards mechanism.

There was also a hope that government could use the SVDP to rake in some much needed extra revenue, at a time when the economy is weak, tax collections are falling behind budget and South Africa is at risk of a downgrade to junk status.

The chairman of the Davis Tax Committee, Judge Dennis Davis, had estimated that the SVDP could bring in as much as R10 billion to R15 billion in extra revenue for government.

As the SVDP deadline looms, tax experts report a flurry of last minute interest from individuals wanting to apply in terms of the progamme, but it’s as yet unclear how successful it will be from government’s point of view.

SARS told Business Day newspaper  on Wednesday that almost 600 people have so far applied for the SVDP, which has uncovered about R6,4bn to date of previously undisclosed foreign assets.

This is believed to be far short of the approximately R40bn which government had been hoping for under the programme, and well below the numbers who took advantage of previous amnesties.

The pressure for taxpayers to come forward and disclose, is that if they don’t, they risk that the taxman will find out from other tax authorities about their undisclosed offshore assets, which will be hit with full taxation, full interest, and no relief from penalties or even potential criminal prosecution.

However, the problem, say tax experts, is that applying for the SVDP is not cheap, nor is it simple. Says Andrew Wellsted,  head of tax at law firm Norton Rose Fulbright: “It is a little more expensive than we are used to for these types of programme, and less user-friendly.”

Those who apply have to pay tax of 16 per cent of the value of their foreign assets plus an exchange control levy of 5 per cent of the value of the assets, if they opt to bring these back to South Africa, or 10 per cent assuming they leave the assets abroad.

Even on the most basic calculation, that’s 26 per cent, which notes Wellsted is  “quite a lot”. They also have to provide full disclosure – there has been an insistence from the authorities on quite detailed information of the circumstances in which the funds were externalised, he says. That often involves implicating other people who were involved, which many don’t want to do.

However, the net is closing in, not only because of the new Common Reporting Standard, but also, Wellsted points out, because increasingly foreign banks are not allowed to bank you unless they know where the money came from – and that it is legitimate.

People have been watching and waiting, it seems, and one of the reasons they may have delayed applying, is they have been getting different advice from different experts.

Many have in the end gone to tax lawyers, rather than tax accountants, because consultations with lawyers have the advantage of legal privilege – so confidentiality for those with foreign assets in the event that they choose, for whatever reason, not to apply for the SVDP.

Within the next few days, however, many will have to decide which way they go.  

Continue Reading
1 Comment

1 Comment

  1. Sharon Suttner

    Aug 24, 2017 at 6:01 pm

    why would anybody want to declare their overseas assets

    to swell the coffers of this corrupt government

    They will then have a whole new source of revenue to abuse

    Once again members of the public will become the cash cows with no control of where the 26% ends up’

Leave a Reply

Your email address will not be published.