Johannesburg - The South African Institute of Professional Accountants (SAIPA) is urging local tax dodgers to come clean in the wake of the HSBC scandal.
The association on Tuesday warned tomorrow is the last day tax payers can voluntarily tell the South African Revenue Service (SARS) that they are implicated in the HSBC tax evasion scandal.
Earlier this year, details were published in the media of files claiming London-based HSBC's Swiss division helped clients in more than 200 countries dodge taxes on accounts containing $119 billion.
Europe's biggest bank subsequently admitted failings in compliance and controls in its Swiss private bank after media reports said it helped wealthy customers conceal millions of dollars of assets in a period up to 2007.
The scandal added to a long list of banking scandals that have emerged since the financial crisis, including several at HSBC. The bank was fined $1.9 billion two years ago by US authorities for lax controls that allowed criminals to launder money and was also hit with a $611 million penalty by regulators in November for alleged manipulation of currency markets.
HMRC, Britain's tax authority, faced criticism for not being tough enough on tax avoiders or the bank itself. One UK individual has been prosecuted and HMRC has reclaimed 135 million pounds from names on the HSBC list, including 15 million pounds in penalties.
Now, SAIPA’s chairman of its national tax and SARS stakeholders committee, Ettiene Retief, says “tax dodgers must run towards the second chance Voluntary Disclosure Program offer”.
Retief adds: “Anybody implicated by the leaked HSBC information can make use of the Voluntary Disclosure Programme before the deadline to regularise their position with SARS, and avoid understatement penalties, and even prosecution. The alternative is to face a SARS audit process with, potentially, a very unpleasant outcome.”
As long as taxpayers make full disclosure, any person or company using the programme will avoid penalties of up to 200%, although they will still have to pay tax.
“Hiding information is less effective as tax authorities have ever greater access to global information through a growing web of tax treaties and information leaks,” says Retief. “The HSBC leak demonstrates the powerful dynamics at the heart of today’s connected world.”
“One of the biggest changes in the Tax Administration Act of 2011 is the broadening scope of information that SARS can request,” explains Retief. “Before 2011 SARS had to request specific information relating to a particular taxpayer.”
Since the promulgation of the Tax Administration Act, with greater international information sharing agreements, and automatic-third party data being submitted to SARS, it has become very difficult for taxpayer’s to hide income and gains, notes SAIPA. In South Africa, SARS has the authority to request information or documentation about a taxpayer from any third-party, such as the bank, financial advisor, or even your accountant, it adds.
Retief also warns taxpayers against to entrusting their financial affairs entirely to a third-party without retaining a measure of hands-on involvement. “Not knowing how others managed your finances does not absolve you from personal consequences.”
The claims in the “SwissLeaks” case emerged after a whistleblower took files from Europe's biggest bank and passed them to French authorities.