There has been some confusion whether the voluntary disclosure programme (VDP) contemplated in sections 225 to 233 of the Draft Tax Administration Bill (the TAB) is the same as the VDP currently available to taxpayers. It is not.
This is according to Andrew Lewis, an Associate in the Tax practice at Cliffe Dekker Hofmeyr business law firm. He says that the current VDP allows taxpayers to disclose past tax defaults which occurred before 17 February 2010 to the South African Revenue Service (SARS).
“If disclosure is made to SARS before 31 October 2011, the taxpayer may be entitled to the following relief:
- Criminal Prosecution: SARS will not pursue any criminal prosecution for any statutory offence in terms of the Income Tax Act (the Act) or a related common law offence;
- Penalties: 100% of any penalties and additional tax will be waived, excluding any penalties imposed for the late submission of a return or for the late payment of tax;
- Interest: – where the taxpayer is unaware of a pending audit or investigation, 100% of the interest payable will be waived; and – where the Commissioner has directed that the taxpayer may apply for the VDP, 50% of the interest payable will be waived.”
“However,” says Lewis, “the relief offered under the permanent VDP contemplated in the TAB is not as favourable and does not cover all taxes as customs and excise duties are excluded.
“The taxpayers will, however, be entitled to disclose all defaults and will not be limited to defaults before a prescribed date (i.e. provided all the requirements are satisfied). Under the TAB VDP, SARS will not pursue criminal prosecution against the taxpayer and certain penalties imposed under the TAB, excluding penalties imposed for the late submission of a return or for the late payment of tax, may be waived by SARS. However, the taxpayer will still be liable for the outstanding interest amount, which may be significant if the taxes involved have been outstanding for a number of years.
Lewis explains, “Our additional concerns are that the independence of the VDP department at SARS and confidentially that it needs to maintain may be compromised when the VDP becomes a permanent fixture of our tax statutes. In such case, taxpayers may become wary of approaching SARS to regularise their affairs and defeat the purpose of the VDP.
“While the TAB will offer some relief to taxpayers who voluntarily disclose their defaults to SARS, where possible, we strongly advise taxpayers to make any voluntary disclosures before 31 October 2011 to fall within the current VDP. Furthermore, it does not appear as though the Exchange Control (Excon) VDP will be extended past 31 October 2011 and again, taxpayers are encouraged to regularise their Excon affairs at the same time,” Lewis adds.
