The carrot and the stick

The finance ministry has just announced a new voluntary disclosure programme, which it also claims can track down international tax offenders. But is this really the case? And just how “safe” are those Swiss bank accounts?

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Those who may find relief under the new voluntary disclosure programme announced by the finance ministry include individuals, sole proprietors, partnerships, deceased estates, insolvent estates, South African trusts, former South African citizens, companies, close corporations and facilitators who have defaulted on their tax affairs before 17 February 2010.

Exchange control and tax contraventions that were committed before 17 February 2010 may be forgiven to the extent that certain penalties and interest will be waived. The tax contraventions covered relate to all the types of tax administered by the SARS, including diesel refunds and the like.Regarding exchange control, the finance ministry has stated that its ability to pursue those who have been non-compliant continues to be reinforced.

Furthermore, it said that authorities all over the world are cooperating like never before, with exchange of information agreements assisting tax authorities to track down international tax offenders. I welcome the amnesty and I’m all for tax compliance. But when one looks at the state of government institutions and roads, it seems that our tax money isn’t being well spent.Be that as it may, the statements by the authorities might have more bark than bite. At a recent tax conference in Madrid, I spoke to a Swiss chartered accountant about the issue of Swiss banks and the confidentiality of numbered accounts.

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I was under the impression that this had been eroded. But he told me about a case involving certain German taxpayers who placed funds offshore to evade tax. The German tax authorities got the information from a banker and followed the trail to a Lichtenstein bank. But the bank refused to divulge any information about its clients. Its rationale was that the information hadn’t been honestly obtained and it was under no obligation to give out information.

Likewise, the Swiss chartered accountant told me, a Swiss bank will under no circumstances divulge anything relating to a client unless very specific information is requested. If the “tip off” is illegal in the eyes of the Swiss, the request will be refused as it was in the Lichtenstein case. So, when gathering information internationally, the tax authority’s position might not be as strong as they claim it is. Tax authorities won’t divulge information to other tax authorities that are on a “fishing expedition”. Only specific requests for specific information regarding specific taxpayers may be divulged in terms of the exchange of information articles in Double Tax Avoidance Agreements.

And I reckon the tax collection efforts by the authorities might prove more fruitful if they focused on proper service delivery and guaranteed the rights of all South Africans to their property and capital. The Voluntary Disclosure Programme runs until October next year. The necessary forms and details are available on the SARS website (