Draft legislation on the grey money amnesty was presented to Parliament's Finance Portfolio Committee this week, but public hearings on the law were postponed after Finance Minister Trevor Manuel sent it back for redrafting.
Manuel apparently ordered the removal from the law of parts relating to an amnesty for financial advisers and physical facilitators, who helped people get their money offshore.
Martin Grote, the national treasury's chief director of tax policy, was quoted as saying in a committee briefing this week that facilitators such as tax consultants and attorneys have to comply with a higher level of professional ethics than ordinary individuals and should face the legal consequences of their actions.
While it appears the amnesty will not cover advisers and facilitators, the draft law, contrary to expectations, does not oblige applicants to disclose how they got their money offshore or who helped them do so.
Barbara Hogan, the chairperson of the finance portfolio committee, also raised concerns about what would happen to information submitted during the amnesty.
Many potential amnesty applicants are worried that information they disclose could later be used for further investigation into their tax affairs.
The draft law states only that the South African Revenue Service (SARS) and the Reserve Bank will draw on the information you make available to the amnesty unit, but your identity will not be disclosed.
In terms of the draft legislation:
- You will have to disclose the market value of the offshore assets you have, and this will be the value translated into rand at the closing spot rate on February 28, 2003;
- You will have to state how much of the market value of the asset/s represents, or has been derived from, assets accumulated outside of South Africa or transferred from South Africa in contravention of the Exchange Control Regulations;
- You will have to give a description of the asset/s and disclose its/their location;
- You will have to submit a valuation certificate of each asset and original or certified copies of statements of account relating to the assets for the period February 28, 2003 to the date of your application;
- You will not qualify for the amnesty if you fail to submit a tax return for the tax year ending February 2003 or fail to pay the amnesty levy; or if your assets were derived from unlawful activities, other than those covered by the amnesty; or if you have been notified, before the amnesty begins, that you are being audited or investigated for exchange control contraventions or failure to comply with the Tax Act, unless this notice is subsequently withdrawn;
- Anybody who donated funds or assets that are held by a discretionary trust which is not domiciled in South Africa can apply for the amnesty in respect of the assets held by the trust;
- Likewise, anyone who is a beneficiary with a "contingent right" to any foreign asset within a discretionary trust which is not domiciled in South Africa, can apply for the amnesty in respect of assets held by the trust;
- Your applications will have to be submitted to an amnesty unit, which will be administered by a chairman in consultation with the Reserve Bank and SARS;
- The amnesty unit must inform you whether or not it has approved your application, and if it is declined, the unit must give you reasons;
- The levies of five percent of funds you repatriate and 10 percent of those left offshore, will only apply to your assets which exceed the amount you are legally allowed to take offshore, namely R750 000, less the levy;
- If you repatriate your funds, you will have to do so within three months of your amnesty being approved and you will have to pay the levy on the day you repatriate the funds;
- If you leave your funds offshore, you must pay your levy within three months of your application being approved;
- You can apply for a further three-month extension on these dates, but will have to show why you cannot reasonably meet the original deadline;
- If your application is approved, you will be deemed not to have contravened exchange controls up to February 28, 2003 and you will not be liable for income tax in respect of any tax years up to February 28, 2002 in respect of the assets you declared and any assets you no longer hold;
- You must include the asset/s in your statement of assets and liabilities in your 2003 tax return;
- You become liable for capital gains tax on the grey money you declare, and the base cost will be calculated as if you became a resident on February 28, 2003; and
- The tax amnesty does not apply to amounts you have already paid or taxes levied as a result of returns you have already submitted.
The public hearings on the draft law are now scheduled for Monday.