Unpacking SARS’ Tax “Amnesty” Programme
27 December 2010
Posted by: Author: Muneer Hassan
Unpacking SARS’ Tax "Amnesty” Programme
Who it applies to, what relief is available, and how one applies…
It’s not exactly another tax amnesty, but the new voluntary disclosure programme (VDP), which became effective on 5 November 2010, should find favour with defaulting taxpayers.
The VDP aims to provide relief from interest, hefty penalties, and criminal prosecution, to defaulting taxpayers who voluntarily disclose their affairs between now and next October. Taxpayers should make use of the window period to comply with the rules.
While welcoming the implementation of the VDP, the South African Institute of Chartered Accountants (SAICA) outlines the difference between the previous tax amnesty and the new programme.For instance, in terms of the VDP the full tax remains due and payable. Be also aware that the VDP extends relief against interest, penalties, additional tax and criminal sanctions, but (very importantly) does not extend to administrative penalties imposed under the Income Tax Act arising from late payment or submission of tax returns.
On the upside, SAICA observes, many taxpayers will be delighted to learn that the disclosure programme applies to all types of taxes administered by SARS. The disclosure programme extends to any default on or before17 February 2010. To qualify for the provisions of the VDP, defaulters should apply to SARS during the one-year window period.
A default is committed by the submission of inaccurate or incomplete information, failure to submit information, or the adoption of an incorrect tax position. SAICA points out that the VDP has been touted for some time, but gained momentum when finance minister Pravin Gordhan tabled the Taxation Laws Amendment Bills in Parliament in August 2010, as well as a document that provided detail on tax administration covering the disclosure programme. On 5 November, the VDP was implemented amid expectation that it would improve compliance and extend the tax base.
The VDP says that if one has committed any tax avoidance misdemeanours in the past, feel free to come forward now and you won't be punished. It says if you owed SARS unpaid taxes, SARS will not charge you interest or penalise you. However, if you don't come forward during the window period and SARS catches you, then you'll face the full might of the law, which could include interest, penalties, and/ or criminal prosecution.
Confidentiality could potentially create a tricky situation in which tax advisors and registered auditors could find themselves—but one that SARS, the South African Reserve Bank (SARB), and the Independent Regulatory Board for Auditors (IRBA) have noted and addressed.
The relevant situation is that the VDP rules do not grant confidentiality to accountants. This issue would however only arise where the advisor acts as both the tax practitioner as well as the registered auditor to the taxpayer—in which event the registered auditor would be duty-bound by the ‘reportable irregularity’ rules to inform the IRBA, which would in turn report the matter to SARS as a VDP default.
Be that as it may, that is no reason to discourage taxpayers—private or corporate—from coming clean. The agreement between SARS, SARB and the IRBA is that SARS would not act on such tax VDP defaults for a period of up to six months, so even if there's a possibility that your tax default will be communicated to SARS, it doesn't mean you'll automatically be in trouble. People should therefore use this opportunity to come clean—or face the music.
Source: By Muneer Hassan (Taxbreaks)