Panama snubbed SA on data exchange request

PANAMA, widely recognised as one of the world’s tax havens, declined a request by the South African government to enter into a bilateral arrangement for the exchange of information.

However, the refusal was made before the huge leak of information about the offshore holdings of wealthy individuals and entities disclosed as the Panama Papers. These were released by an international consortium of journalists on the basis of data obtained from files of Panamanian law firm Mossack Fonseca.

The South African Revenue Service (SARS) identified 1,700 individual South Africans in the Panama Papers data.

Panama is also one of a handful of countries that has refused to participate in a global automatic exchange of tax information — an initiative of the Organisation for Economic Co-operation and Development — which will come into effect next year.

Chief director of the Treasury’s tax policy unit Yanga Mputa said on Wednesday that no further approach had been made to the Panamanian government for an agreement allowing for a bilateral exchange of information.

She and representatives of SARS, the Reserve Bank, the Treasury and the Financial Intelligence Centre briefed three parliamentary committees on the work under way to deal with illicit financial flows. One issue to emerge from the discussion was the need for closer co-operation among the entities.

SARS group executive for product oversight, legal and policy Vlok Symington told MPs that SARS had identified 1,700 individual South African residents in the Panama Papers. Their status varied from shareholders and directors to beneficiaries. In addition, 56 South African intermediaries had been identified, Symington said.

SARS is matching the identities of these individuals with the SARS database and testing the Panama data against the income tax declarations of the South African residents. So far 79 of a total 560 offshore entities had been matched to 81 South African residents.

Symington said it was too early to predict the level of tax avoidance or evasion and cautioned that the processes of profiling and enforcement were lengthy.

“The data available to SARS with respect to the Panama Papers is a useful starting point for further inquiry but will require substantial follow-up work,” Symington said.

In April SARS participated in a special meeting of the Joint International Tax Shelter Information and Collaboration Network on the Panama Papers. An international action plan was agreed on aimed at obtaining more information and sharing it efficiently among tax administrators.

“International co-operation will intensify once a better understanding of the Panama data becomes available,” Symington said.

He noted that transfer pricing audits in the 2015-16 fiscal year had yielded R721m from the mining and quarrying industry, R95m from the oil refinery sector and R43m from manufacturing.

Reserve Bank head of financial surveillance Elijah Mazibuko told MPs from the finance, trade and industry and mineral resources committees that since January 2015 about 145 bank accounts with about R307m had been frozen for suspicious illicit financial flows.

A total of 77 new investigations was opened during this period and arrests were made.

He said there had been a “dramatic” increase in the number of referrals of suspect transactions.

It was legal for South African residents to invest up to R10m plus R1m a year offshore, he said.