Panama Papers

OVERVIEW OF PANAMA PAPERS Leak of information held by Mossack Fonseca, Panama-headquartered law firm involved in incorporation of offshore entities First obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ) in 2015 > 100 media partners involved in analysing the information Details of the leak: > 11.5 million internal files > 210 000 offshore companies > 14 000 banks, law firms, company incorporators, etc. involved Includes nearly 40 years, from 1977 through the end of 2015 2.6 terabytes of data Source: ICIJ 2

THE PANAMA DATA Data downloaded on 10 May 2016 (date released by ICIJ Latest update in January this year Roles vary: shareholder, director, beneficiary, nominees 1917 cases where South African residents are involved were found 3

Offshore company and bank account in the same jurisdiction TYPICAL STRUCTURE (1) Offshore company and bank account in the same jurisdiction MF Intermediary   Nominee Directors Client Bank 4

Export Under Invoicing (EUI) TYPICAL STRUCTURE (2) Offshore company and bank account in different jurisdictions Intermediary Bank MF Nominee Directors Client   Export Under Invoicing (EUI) 5

Use of a Panamanian Foundation/Trust (PF/T) TYPICAL STRUCTURE (3) Use of a Panamanian Foundation/Trust (PF/T) MF   Nominee Directors Client PF/T Bank Offshore Co Intermediary 6

MATCHING THE DATA Process to match the Panama data to the SARS database has been concluded Results are: 1917 cases where South African residents are involved were identified 1666 of these remain after removing duplicates The duplicates are those that have more than one offshore investment or play more than one role in one or more offshore structure Thus far 1083 of the 1666 SA residents have been matched against the SARS database (i.e. registered taxpayers) 292 have no records on the SARS database 291 have incomplete records on the SARS database Overwhelming majority are individuals 7

PROFILING THE MATCHES Profiling includes verifying the Panama data against the income tax declarations of the South African residents Thus far, 814 cases have been risk-profiled Of which 701 meet the risk criteria (i.e. no or relatively low disclosure of foreign assets or income) 8

ENGAGING THE TAXPAYERS In June 2016 engagements with selected taxpayers commenced Most of the taxpayers responded It soon became evident that a large proportion of taxpayers used a very similar offshore structure It also became apparent that the offshore structures of 603 SA residents (out of the 1666) was facilitated by a single South African intermediary 9

SPECIAL VOLUNTARY DISCLOSURE PROGRAMME The Special Voluntary Disclosure Programme (SVDP) commenced on 1 October 2016 It is scheduled to end on 31 August 2017 Thus far SVDP applications to the value of around R700 million (in tax revenue) were submitted to SARS This represents roughly R4,4 billion in offshore assets Relatively low numbers at this stage – volumes are expected to increase significantly towards the end of the SVDP window 10

ENFORCEMENT Large scale Enforcement action (audits & criminal investigations) on hold to give SVDP a chance But Enforcement preparation is in an advanced stage Potential Enforcement cases have been selected, each representing a particular offshore structure An in-depth investigation of one of these offshore structures has been concluded The SARS findings have been challenged The taxpayer's arguments as to the legitimacy of the structure have been provided Consultations with SARS counsel on the way forward have commenced Interesting though, some taxpayers who used this structure have applied for SVDP 11

INTER-DEPARTMENTAL COOPERATION Close cooperation between National Treasury, SARS and SARB in the development of the Special Voluntary Disclosure Programme The Financial Intelligence Centre provided advice and input to the Special Voluntary Disclosure Programme (see http://www.fic.gov.za/Documents/160928%20Website%20Notice%20Final.pdf) The Independent Regulatory Board of Auditors provided advice and input on the same Programme (see http://www.irba.co.za/upload/report_files/20160905022438_39.-Reportable-Irregularities.docx) 12

INTERNATIONAL COOPERATION Joint International Tax Shelter Information & Collaboration Network (JITSIC) Part of the Forum on Tax Administration (“FTA”) Objective of JITSIC is to collaborate and exchange information in the most effective ways to tackle tax avoidance SARS participates actively in special “Panama Papers” JITSIC meetings In 2016 two meetings were held and in 2017 one was held thus far Next meeting is in June this year International action plan was agreed on, aimed at obtaining more information and sharing it efficiently amongst tax administrators 13

PROGRESS SUMMARY (against May 2016 SCoF presentation Action May 2016 March 2017 Matching offshore entities with residents 79 of a total of 560 off-shore entities have been matched (in degrees of accuracy) to 81 South African residents 620 of a total of 620 offshore companies have been matched to 1666 SA residents Matching SA residents to SARS database 81 SA residents matched 1083 SA residents matched Profiling the matched cases Profiling not yet started 814 cases profiled International cooperation 1 JITSIC meeting 3 JITSIC meetings Inter-departmental cooperation Not yet formally commenced Commenced Special Voluntary Disclosure Programme In design stage Implemented In-depth investigation of offshore structures Not yet commenced In Progress 14