TAX NEWS - June 2010

South Africa Tax: Taxpayers granted a grace period

Noncompliant taxpayers will be given a 12-month grace period in which to put their tax affairs in order, according to draft tax laws recently released by the National Treasury.

The voluntary disclosure programme, contained in the Taxation Laws Second Amendment Draft Bill, is not a tax amnesty, as taxpayers would still have to pay the outstanding tax they owed on assets or income, tax analysts said yesterday.

However, taxpayers who took advantage of the programme would be able to "come clean" without having to pay additional tax, penalties and interest on their defaults, said Paula Bagraim, a tax director at Stonehage Financial Services.

The voluntary disclosure programme was announced by Finance Minister Pravin Gordhan in the budget review.

"The international tax environment is moving towards greater transparency and a more open exchange of information between tax authorities," said Ms Bagraim.

"In the wake of the global financial crisis, governments across the world have been scrambling to raise their tax revenues to help fund budget deficits.

"The relaxation of banking secrecy laws, sophisticated audit initiatives and improving co-operation with overseas tax jurisdictions and banks, including reciprocity in provision of information, will improve the South African Revenue Service's (SARS's) ability to trace fund flows around the world and identify South African resident taxpayers with income and assets hidden offshore."

Emil Brincker, a tax director at commercial law firm Cliffe Dekker Hofmeyr, said that the terms of the programme also compared quite favourably with s imilar initiatives in other countries , such as the UK and Australia.

I n those countries interest was still payable, but as much as 100% of it might be waived in SA.

Mr Brincker said an important aspect of the initiative was that one could provide information to SARS on an anonymous basis to establish whether one would meet the requirements of the programme.

Once one had received an indication of the way in which SARS would perceive the relevant default, one could then formally make the application, he said.

The programme would be implemented from November 1 this year until October 31 next year .

Disclosure by taxpayers would have to be made in respect of a default which occurred at least 12 months before the commencement of the programme.