Exchange Control Amnesty and Amendment of Taxation Law Bill: briefing

Meeting report

FINANCE SELECT COMMITTEE
27 May 2003
EXCHANGE CONTROL AMNESTY AND AMENDMENT OF TAXATION LAW BILL: BRIEFING

Chairperson: Ms D Mahlangu (ANC)

Documents received:
Exchange Control Amnesty and Amendment of Taxation Laws Bill [B26-03]
Explanatory Memorandum on the Bill
Application Form - Exchange Control Amnesty And Accompanying Tax Relief [See Page 34 in this document for application form]

South Africa Revenue Service: Mr F Tomasek, Law Administration
National Treasury: Mr M Ponti, Deputy Director: Legislative Oversight and Policy Co-ordination Tax Policy
South Africa Reserve Bank: Mr A Ellis, Exchange Control Department Investigations

SUMMARY
After being briefed on the Bill by SARS, the Committee unanimously approved it.

MINUTES
Mr F Tomasek (SARS) noted that the Bill deals with two aspects:
- Chapter One deals with the Exchange Control Amnesty and Accompanying Tax Measures
- Chapter Two deals with the General Amendments to the Taxation Laws.

Chapter One
Mr Tomasek in going through this chapter pointed out that in applying for amnesty, no one would be prejudiced for acting as an advisor or in any such manner to the applicant. However, it should be noted that the Bill only protects people who have defrauded the government. Its provisions do not, therefore, cover those who have defrauded private companies.

Based on the provisions of this chapter all those who have taken their money offshore are now exonerated, provided that those incomes emanate from lawful activities. The Bill clearly states that if a person has complied with its provisions, and is not excluded in terms of Clause 10, then such person must be given amnesty. This means that the person is exonerated of such crimes and would not be further prosecuted by the SARS.

He emphasised the point that the Amnesty Unit is an independent unit and does not form part of either the SARS or SARB. Therefore the Unit is not allowed to declare any information received by it to either of the two.

He then made a distinction between successful and unsuccessful applicants. He noted that the successful applicants are exonerated immediately. However the unsuccessful ones are clearly protected against prejudice by the provisions of Clause 26.

Discussion
Dr E Conroy (NNP, Gauteng) asked whether the term 'illegal' means something that is illegal in South Africa or in the country where the income was generated.

Mr Tomasek responded that it would be something that is considered to be illegal from a South African point of view.

The Chair asked what would happen to those people who fail to convert their money into South African currency after returning from their trips abroad.

Mr A Ellis (SARB) responded that in terms of the definition provision of the Bill that would be regarded as a foreign asset unless one converted such currency into South African currency within 30 days of returning from such trip.

Chapter Two
Mr Tomasek explained that this Chapter contains general amendments to the taxation laws, including, inter alia, the Transfer Duty Act, Income Tax Act, Customs and Excise Act, Stamp Duties Act, South African Reserve Bank Act, Value-Added Tax Act and Tax on Retirement Funds Act. He noted that it important to bear in mind that when someone does not qualify to be a resident in terms of the double-resident provision then such person would not qualify either in terms of this Bill.

Discussion
Ms Fubbs (ANC, Gauteng legislature] noted that normally the Memorandum at the end of the Bill states the financial implications of the Bill. This one did not do so and she asked what would be its financial implications.

Mr Tomasek responded that at this stage it is not be possible to clearly state the financial implications of the Bill and thus one would have to wait and see as the Bill unfolds.

Ms Fubbs asked what would happen if someone is caught before being exonerated.

In a similar vein, Mr Z Kolweni (ANC, North West] also asked what would happen if someone applies to the Amnesty Unit for amnesty without knowing that he/she is being investigated.

Mr Tomasek responded that Clause 10 clearly states that if someone voluntarily deliver an application to the Unit before the General Manager or the Commissioner delivers the notice to him/her in terms of the Bill then such person should be exonerated. However if the requirements of Clause 10 are not met, although the person has delivered the application before the said notice was issued, then such person would be protected against any prejudice in terms of Clause 26. Therefore this differs from a case where a person is caught by the SARS, before he/she has attempted to make such application and one may clearly not speak of voluntariness in such cases. He thus sent a warning that people who do not take advantage of the Bill might be sorry as there would be no mitigating circumstances and the sentence might be very heavy when they are caught by the SARS.

The Chair noted that she had discussed the status of this Bill with some IMF officials who said that such an Act has only been introduced in a few countries and there was not much success in those countries. She asked how the delegation views the take-up of the Bill in South Africa.

Mr Tomasek replied that one should not take everything that is being said by people who are not on the ground since they do not really know what is happening on the ground. Even though he cannot clearly be certain of the Bill's take-up success, South Africa has been able to pull-out twenty percent of its offshore income at the moment. Therefore based on that, he can say that people have shown much interest in this process and only time will tell the success or failure of this Bill's take-up.

The Chair noted that there were no further questions from Members.

Voting on Bill
The Chair read the motion of desirability. The Committee unanimously supported the Bill.