Offshore tax haven specialist David Marchant says the Panama Papers leak is only the tip of the iceberg. And the full list of those housing money in the country through Mossack Fonseca will likely be made public in May. Tax guru Matthew Lester says that while Panama has never been a favoured destination for South Africans, preferring the Channel Islands or Mauritius, there are sure to be a few more named. Off the back of this Lester makes reference to the Special Voluntary Disclosure programme being offered to taxpayers and suggests those who haven’t been ‘named-and-shamed’ yet, should use the route that’s offered and do so immediately. It’s a comfortable compromise and better than facing the wrath of Finance Minister Pravin Gordhan. – Stuart Lowman
By Matthew Lester *
Panama has never been the premier destination for South Africans who play the offshore investment game. Most prefer the English gentleman act played by the suits from the Channel Islands. Or the comfort offered by Mauritius where one can engage in tax planning with a Mojito in hand over a dirty weekend.
So, yes there will be a few SA names on the Panama Papers. But nothing as sensational as our local politics. Or even the final round of Oscar Pistorius.
SA taxpayers will be offered a Special voluntary Disclosure Programme commencing on 1 October and ending on 31 March 2017. In the interim, the SA taxpayer with a concealed offshore stash runs the risk of investigation by the SA Revenue Service (Sars) or exchange control.
Some say, "So what? Sars will never get their act together before October. Let's procrastinate until the time comes!"
There is significance in Finance Minister Pravin Gordhan’s official press release of last week concerning the Panama Papers. He has clearly lost sympathy on the subject of offshore tax planning structures. And Sars has now been instructed to pursue taxpayers on a basis if no quarter asked or given.
Sars only has to get the name of the taxpayer and the moose is loose. New provisions in the Tax Administration Act allow Sars to deny the taxpayer access to the special VDP with a one page notification issued through E Filing. Thereafter Sars may communicate with the administrators requesting information relating to a connected person.
Many of the foreign administrators are putting on a brave face. "Your secrets are safe as houses with us," they say. That is one hell of a statement to make today.
Information sharing between tax authorities is not the immediate threat. Actually this is the least of the immediate concerns.
The Panama Papers debacle has shown that aggressive offshore tax planning is sensational news. In one week, we have seen the prime minister of Iceland resign, British Prime Minister David Cameron in a tight corner and the newly elected head of Fifa already in controversy. Investigative journalists the world over are hot on the heals of administrators.
In months to come the names of those associated with aggressive tax structuring are going to be all over the internet. Offshore administrators cannot guarantee that their files will not be hacked or leaked into the pubic domain. It would only take one disgruntled employee to let the cat out of the bag.
I sound like an imodium salesman. So what is the advise for the SA taxpayer with a concealed offshore stash?
The work has to start now! To claim the benefits of the special VDP is an extensive exercise and many taxpayers have insufficient information on hand to even commence proceedings. Taxpayers should rather work towards being ready to submit on the day the programme opens rather than being caught in the inevitable rush that will come in October 2017. Why take the risk?
If taxpayers have dealings with any administrators caught up in this debacle between now and 1 October 2016 they should make immediate disclosure in terms of the current VDP programme.
What would be nice is a simpler solution to cover VDP applicants over the next few months. Surely it would do little harm if taxpayers were allowed to inform the Sars VDP unit of their intention to apply for the special VDP when it opens on 1 October. This should cover the taxpayer against investigation in the interim. It would be a comfortable compromise.
* Rhodes University Professor Matthew Lester was educated at St Johns College, Wits and Rhodes universities. He is a chartered accountant who has worked at Deloitte, SARS and BDO Spencer Steward. A member of the Davis Tax Committee investigating the structure of aspects of the RSA tax system, he is based in Grahamstown.