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Tax amnesty
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Introduction One of the most significant and controversial aspects of South Africa’s fiscal agenda this year is the income tax and exchange control amnesty. The amnesty frees individuals from civil penalties and criminal liabilities for the illegal shifting of funds offshore in contravention of exchange control on or before 28 February 2002. It also releases taxpayers from all income taxes, interest and civil and criminal penalties stemming from the failure to disclose gross income or capital gains from foreign sources arising on or before 28 February 2002. South Africans are estimate to hold between R20bn-R80bn illegally offshore and this amnesty will certainly help broaden the tax base. Residence- based taxation The adoption of a residence-based system of taxation from 1 January 2001 means that South African residence are now taxed on their worldwide income. Taxpayers who do not disclosed the income earned by their offshore assets are guilty of tax evasion. But by disclosing this foreign income South African residents, who hold foreign assets in contravention of the Exchange Control Regulations, would be incriminating themselves. Thus Finance Minister, Trevor Manual, promulgated an exchange control and tax amnesty in his 2003 Budget speech (2003:24) to provide taxpayers with an opportunity to extricate themselves from this predicament and legalise their affairs.
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