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Amnesty then and now

Monday, 24 April 2017   (1 Comments)
Posted by: Author: Lisa Brunton
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Author: Lisa Brunton (CDH)

On 15 May 2003, then Minister of Finance, Trevor Manuel, announced the introduction of a joint tax and exchange control amnesty. He punted the amnesty as an opportunity, in the face of the prevailing unfavourable international economic climate, for South Africans (including inter alia, deceased estates and trusts) to place their confidence in the South African economy and declare their contravention of the Exchange Control Regulations (Regulations) and certain tax acts. The minister assured South Africans that in applying for amnesty, they would achieve the regularisation of their affairs in respect of foreign-held assets.

He observed that the time was ripe for the proposed amnesty, given the prevailing desire of many South Africans to repatriate their foreign held assets voluntarily and regularise their affairs due to greater international co-operation in tax compliance efforts and enhanced surveillance of international capital flows. In addition, the promulgation of the Financial Intelligence Centre Act, No 38 of 2001 (FICA) had increased the risk of holding illegal foreign assets. Internationally, the legal and economic environment had also become less favourable for illegally held foreign assets. Since 1994, South Africa had expanded its tax treaty network, thereby facilitating improved international information exchange. The global community had become increasingly intolerant of tax haven jurisdictions and had reinforced measures to combat illegal money laundering. Finally, the then prevailing state of the global economy indicated that the growth prospects of foreign earnings were comparatively less attractive than the earning potential from domestic investments.

In the run-up to the 2003 amnesty, many South Africans holding funds illegally outside South Africa had been reluctant to repatriate such funds or even disclose their existence for tax or other purposes for fear of criminal prosecution in terms of the Regulations. In addition, they were concerned about the considerable tax penalties, which would have been inevitable had the South African Revenue Service (SARS) found out about the illegally-held foreign funds. In terms of FICA, SARS had been granted the power to impose income tax on a calculated amount of the value of assets or funds owned offshore which had not been declared or accounted for in any tax return submitted for the 2003 and subsequent tax years.

Please click here to read full article.

This article first appeared on cliffedekkerhofmeyr.com.

Comments...

Giles Butlin says...
Posted Thursday, 27 April 2017
The article states the following - "So on the face of it, the amnesty then and now, appear fundamentally similar, with minor inconsequential differences; except that the unutilised portion of any applicant’s offshore capital investment allowance may not be set off against the market value of foreign assets in respect of which relief is sought." There are, in fact some substantial differences between the 2003 amnesty & the SVDP eg. where the election in respect of assets held in trusts is made, they remained trust assets for Estate Duty purposes per the 2003 amnesty but not so for the SVDP; the levy for the tax SVDP (40% highest 5 year value included in 2015 taxable income can be substantially greater than the 2003 amnesty equivalent, particularly where low-yielding assets are concerned (which is frequently the case)

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