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South Africa To Sign Offshore Tax Agreements

by Lorys Charalambous,, Cyprus

11 August 2010

The South African Revenue Service is negotiating tax information exchange agreements (TIEAs) with several offshore international finance centres to improve bilateral tax transparency, a parliamentary committee has been told.

The South African Revenue Service (SARS) has in particular identified planned agreements with Guernsey, Jersey, San Marino, the Cayman Islands, and the Bahamas. Agreements with other territories are also in the pipeline, SARS has said.

The agreements are to be based on the Organization for Economic Cooperation and Development’s standard on transparency and tax information exchange, which will, upon entry into force, allow the South African tax authority to request information to assist in civil tax matters and in the investigation of fiscal crimes.

In comments to local newswire Business Report, SARS spokesman Adrian Lackay explained that the tax authority's latest initiative is an attempt to stem capital flight offshore after it was estimated last year that ZAR3bn (USD400m) in revenues may be being lost through tax evasion. Another SARS spokesman admitted, however, the estimate could not be justified, noting that the extent of capital flight remains a ‘grey area’.

"We don't have an estimate because of the bank secrecy that has existed until now. We could never estimate the amount of money stowed away in tax havens or what potential revenue loss was,” Lackay told the Business Report. He explained that once the agreements are in place, “[SARS] will have a better idea of who has what kind of money in those jurisdictions."

In March, South Africa and Bermuda concluded negotiations on a TIEA incorporating the OECD standard. In a statement to the Bermudian parliament, Finance Minister Paula Cox said that the TIEA “will, upon signing sometime later this year, provide for a full exchange of information on criminal and civil tax matters between the two countries.”

TAGS: South Africa | compliance | tax | investment | offshore confidentiality | tax information exchange agreement (TIEA) | tax compliance | Bahamas | international financial centres (IFC) | Bermuda | Cayman Islands | Guernsey | Jersey | offshore | agreements | San Marino | Africa

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