Closing The Net

Treasury announced with evident satisfaction last month that South Africa had joined 12 other countries in signing a Convention on Mutual Administrative Assistance in Tax Matters at the G20 Summit in Cannes, France.  The Convention, said the Minister, seeks to promote international co-operation between revenue administrations “in the assessment and collection of taxes” and in “combating tax avoidance and evasion”.

What is actually going on is that trillions of dollars are being hidden away in offshore financial centres, and the major economies are not getting the benefit of tax.

Initially, the campaign against offshore centres was partly based on money-laundering being a tool of terrorism. However, the sophistication has now worn through and the true gist of what is intended emerges in the announcement:

“… the G20 has placed specific emphasis on the importance for better international co-operation amongst revenue authorities as cross border tax avoidance and evasion have become easier with the liberalization of financial markets.  The international response to the global financial crisis that began in 2008 and the sharp decline in revenue in many countries, including South Africa, has been to secure the integrity of financial systems through common, high standards…”

That is my underlining on the giveaway phrase “sharp decline in revenue”. Put simply, the announcement is saying: we need to collect more tax!

The convention was signed with Argentina, Australia, Brazil, Canada, China, Germany, India, Indonesia, Japan, the Russian Federation, Saudi Arabia and Turkey. It is clearly part of a determined strategy, with the VDP Programme that ended in October, to track down the family silver.

Andrew Duncan