The South African government has published a bill that aims to give legislative effect to the foreign exchange amnesty announced by Finance Minister Trevor Manuel in his Budget speech on February 26.
In the preamble to the 18-page section on the amnesty, the government states that its purpose is to:
to enable applicants who have contravened the Exchange Control Regulations or failed to comply with the Income Tax Act, 1962, relating to foreign assets erived from legitimate sources to regularise their affairs;
to ensure maximum disclosure of foreign assets and to facilitate repatriation thereof to the Republic of South Africa; and
to extend the tax base by disclosing previously unreported foreign assets for purposes of taxing the revenue flows and capital gains.
The bill makes no mention of the “blocked” rand exit, announced at the same time, as this is covered by existing exchange control legislation and only requires that the Finance Minister make a public announcement.
The amnesty period runs from May 1 to October 31, 2003, and an independent amnesty unit made up from seconded personnel from the South African Revenue Service (Sars) and South African Reserve Bank (SARB).
The amnesty specifically excludes assets obtained from unlawful activity so it will not allow money laundering to take place.
Individuals filing under the amnesty would be released from all civil penalties and criminal liabilities stemming from the illegal shifting of funds offshore in contravention of exchange controls on or before February 28, 2002, as well as from all income taxes, interest, civil penalty and criminal penalties stemming from the failure to disclose gross income or capital gains from foreign sources, also arising on or before February 28, 2002.
In return, individuals would be subject to a 5% Exchange Control charge on funds repatriated back to South Africa, or to a 10% charge on any foreign assets remaining offshore. A zero percent charge would apply for all assets that can be held legally offshore under the normal Exchange Control limits.
The “return” levy must be paid when the funds are repatriated to South Africa, or in the case of the “offshore” levy, within three months of the amnesty approval being granted.
Treasury officials said that individuals could opt for any combination of repatriation or leaving funds offshore, and all would be able to apply their R750 000 individual allowances to these totals.
Typical international experience showed that a successful amnesty would bring in about 10% of all offshore funds, they added. While there were no clear estimates as to the total amount of “illegal funds” held by South Africans offshore, they said, figures of between R60- and R80-billion had been mentioned. – I-Net Bridge