Author: Fiona Forde (Financial Mail)
IN an anaemic economy, SA’s treasury officials are looking for ways to draw in more revenue, and offshore bank accounts are prominent targets.
One likely route is an overhaul of the voluntary disclosure programme (VDP) to collect tax owed. An announcement could be made in the budget speech next month.
There has been a sense among officials for some time that not enough is being done to rope in tax evaders and avoiders, particularly those with vast wealth stashed overseas.
Considering the various generous tax amnesties in the not-too-distant past, treasury officials feel they cannot simply announce another amnesty whenever there’s a crunch, hence the idea of improving the VDP.
“Nomenclature is everything in this project,” one planning official explains.
Five years ago, the SA Revenue Service (Sars) initiated a pilot project to encourage people to come forward and regularise their affairs, in return for a relaxation of the penalties that are often charged. The VDP was written into law two years later.
Though it has so far raked in close to R9bn from 7 000 voluntary applications, according to mid-2015 figures, treasury wants to make it even more attractive, particularly to those who are still not disclosing offshore assets.
Of the R9bn, only R705m has been identified as taxable income on foreign-held reserves or profit shifting, yet it is assumed that tens of billions of rand are still held in Europe and elsewhere.
The days of secret bank accounts stashed away in safe havens such as Switzerland, Jersey, Panama and more recently Mauritius were drawing to a close anyway. The OECD’s plan for the automatic exchange of information about wealth among revenue collectors and other institutions worldwide is scheduled to come into effect in 2017.
However, treasury officials say they cannot wait until then and were expected to announce their provisions to draw in more tax in February’s budget speech.
At least this was the thinking three finance ministers ago, when Nhlanhla Nene presided over national treasury towards the end of last year. Whether the incumbent, Pravin Gordhan, is keen to implement the changes remains to be seen. His spokesman, Phumza Macanda, issued a one-line response on his behalf: “As is usually the case with tax policy matters, you will have to wait for the budget.”
Gordhan’s views on fiscal prudence are well known, though. It was he, during his previous tenure as finance minister, who appointed Judge Dennis Davis in 2013 to oversee an overhaul of the tax regime and find ways to maximise collection. It is assumed that he would favour amendments to do just that, even if it means chasing down the very rich.
Taxation is only one side of the coin; the other is foreign exchange, the policy for which sits with the Reserve Bank. Though the Bank and Sars operate independently of one another, insiders say the Bank will not stand in the way of efforts to draw in extra revenue.
Currently the penalties imposed by the Bank on undisclosed foreign reserves are so severe that they can potentially wipe out one’s capital or force what’s left of it to be repatriated. This would tend to discourage compliance.
Proposals are now being considered to ensure that taxpayers pay outstanding dues to the Bank while keeping the bulk of reserves offshore if they choose.
However, treasury has a new headache: the uncertainty prompted by Nene’s ousting is forcing even more funds to be taken offshore.
This article first appeared on financialmail.co.za.