A SUBMISSION TO THE NATIONAL ASSEMBLY
The media release
In accordance with the media statement issued by National Treasury of 24 February 2016, there were three forms of relief that may be claimed jointly or severally, namely:
- Exchange Control relief for unauthorized assets.
- Tax relief for pre-tax monies to the extent of 50%.
- Tax relief for taxable investment income arising before 1 March 2010
Reliefs not distinguished
The draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, 2016 published on 12 April 2016 (157 tsh 2016) appears to link the two tax reliefs. Thus it follows that an applicant is forced to apply for both the 50%-of-capital relief and the before-1 March 2010 relief, as distinct from choosing only one relief or both reliefs.
Many applicants have already paid tax on their offshore assets before remitting funds offshore (usually unspent travel allowances provided through the RSA banking system—prima facie proof of tax legitimacy), and it is thus unfair again to subject to tax such post-tax capital.
There is in any event a presumption in our tax law against double taxation (Meyerowitz on Income Tax 2007/8 (The Taxpayer) paragraph 3.3; Silke on sa Income Tax (Lexis Nexis) paragraph 25.3; and the Appellate Division cases of Isaacs v cir 1949(4) SA 561(a) at 567–8; and cir v Delfos 1933 ad 242).
Moreover, the normal VDP currently in the Tax Administration Act does not require applicants to pay tax on post-tax capital (as distinct from pre-tax capital).
The Special VDP will fail in its objectives unless this penal provision is addressed.
The principles of certainty, continuity and legitimate expectation dictate that the provisions of the Bill dated 12 April 2016 should accord with the media statement of 24 February 2016.
I have made submissions on behalf of interest groups and await the response from the Parliamentary Committee on Finance. It is to be hoped that pragmatism will prevail, so as to encourage participation in the Special VDP, failing which, the normal VDP currently in the Tax Administration Act might hold more appeal than the Special VDP for those with post-tax capital abroad.