A welcome revelation or the snitch nobody likes
The world has moved on from the days where there were top secret spy agencies running around harbouring well kept secrets. These days, there is a very fine line between the world knowing your most intimate details and them not.
What are the Panama Papers?
A report by Luke Harding, a journalist for respected British newspaper The Guardian, pointed out that the Panama Papers was an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca.
The documents show the myriad of ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.
Among these are Russian President Vladimir Puten, British Prime Minister David Cameron and local money swindler J Arthur Brown.
The letter of the law
For most investors, an offshore component to their financial portfolio is an integral part of the wealth management process and an essential diversification tool in an interlinked global marketplace.
There is nothing untoward about having an offshore portfolio, provided you have ensured your clients are fully tax compliant and their accounts have been disclosed to the relevant authorities.
South Africans are allowed, by law, to invest up to R10 million outside South Africa on an annual basis on the proviso that tax clearance has been given by the South African Revenue Service (SARS).
The grey areas grow
Until now, a lack of co-operation between different countries has created some grey areas, but increased global vigilance and the launch of the Organisation for Economic Cooperation and Development’s (OECD’s) new Automatic Exchange of Information portal will increase the necessity for compliance.
While South Africa has joined a raft of developed world economies in signing up for the portal, it is important to note that the declaration of offshore interests has long been on the country’s radar.
Is South Africa involved?
Are there any South Africans involved in the Panama Papers saga outside of the already named J Arthur Brown?
A report by Eye Witness News journalist Gaye Davis points out that SARS says it has identified about 1 700 South African residents named in information contained within the Panama Papers.
Briefing a joint meeting of three parliamentary oversight committees on 26 May, SARS official Vlok Symington told Members of Parliament (MP) that SARS downloaded data were made available two weeks ago by the International Consortium of Investigative Journalists (ICIJ).
Symington added that those identified include shareholders, directors and beneficiaries of offshore companies. “The 1 700 individuals we identified is after we removed duplicates. Their roles vary from shareholders, directors andbeneficiaries. We’ve further identified 56 South African intermediaries,” he said.
The corporate wrongdoers
Another report by Independent Online pointed out that there is some reluctance in releasing these names.
The authorities are investigating several offshore accounts, amounting to millions of dollars, following the Panama Papers leaks several months ago.
However, Panama has refused to share information with South Africa on the people with these offshore accounts in various parts of the world.
SARS and other agencies said it would be difficult to calculate the money stashed in offshore accounts.
The head of financial surveillance at the South African Reserve Bank (SARB), Elijah Mazibuko, said they had been monitoring the illicit flow of money for many years.
“Illicit financial flows started many years ago, even before the Panama Papers, it’s just the magnitude of the problem now,” he told MPs. He said the SARB was working with the Financial Intelligence Centre, SARS, the South African Police Services and the Asset Forfeiture Unit to monitor the illegal flow of money from the country.
He said, that from January 2015 to date, SARB had frozen 145 bank accounts, holding R307 million, because of suspected illicit financial flow.
Editor’s Thoughts:
A very clear distinction needs to be made by SARS and the SARB as to what constitutes illegal activity. If the trusts were being set up for the purpose of growing a legacy for a family, then there should be no illegality in that. However, if the trust was set up for the purpose of not paying tax, that is illegal. The relevant authorities need to establish these guidelines and be very clear about them so that you can advise your clients accordingly. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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