Overview of Monetary Policy Committee Statement.
High inflation and weak economic growth continue to shape global conditions alongside monetary and fiscal policy responses. Russia’s war in the Ukraine drags on, impairing trade and raising prices of a wide range of energy, food and other commodities. Growth in the United States is set to weaken, and remains low in China.
Although energy constraints have eased somewhat in the Euro Area, recession risk is high. Additionally, a number of developing economies face debt distress, exacerbated by tighter global financial conditions.
Policy normalisation has accelerated, and monetary conditions are likely to tighten further to ensure inflation declines from its current high rates. With long-term borrowing costs high and fiscal positions extended, there is less policy space available for major counter-cyclical efforts to increase economic growth. In several economies, including South Africa, ongoing consolidation of fiscal positions will support disinflation. Asset values in major markets have also declined sharply, and investor appetite for riskier assets remains weak.
Taking these and other factors into account, the SARB’s forecast for global growth in 2023 is revised lower to 1.9% (from 2.0%).2 The International Monetary Fund’s (IMF) October’s forecast for global growth is 3.2% in 2022 and 2.7% in 2023.
The South African economy is expected to grow by 1.8% (from 1.9%) this year. Despite considerable volatility in monthly indicators, GDP growth of 0.4% is still expected in the third quarter. Fourth quarter growth is forecast to be only 0.1%, largely due to record load-shedding.
Tax Treaty Related Measures to Prevent Base Erosion & Profit Shifting (BEPS MLI).
The Base Erosion Profit Shifting (BEPS) MLI has been published in Government Gazette 47559 of 25 November 2022. The overall goal of the BEPS MLI is to swiftly update the existing network of bilateral tax treaties to reduce opportunities for tax avoidance and base erosion by multinational enterprises.
The BEPS MLI will be applied alongside existing tax treaties. South Africa currently has 79 bilateral tax treaties in force. In addition, a now defunct bilateral tax treaty with the United Kingdom was extended to Granada and Sierra Leone. 76 of these tax treaty countries have been listed by South Africa in the notifications and/or reservations to be covered by the BEPS MLI. These 76 tax treaties will, after all these countries have ratified the BEPS MLI, meet the tax related BEPS measures without the need to renegotiate these existing bilateral tax treaties.
Out of the above-mentioned 81 tax treaties, only five tax treaties will not be covered by the BEPS MLI, namely, Germany, Zambia, Malawi, Grenada and Sierra Leone. South Africa did not include its tax treaties with Germany, Malawi and Zambia in the list of the tax treaties that must be covered by the BEPS MLI because these tax treaties are currently under bilateral renegotiations and BEPS recommendations have been incorporated in the renegotiated agreements. South Africa did not include its tax treaties with Grenada and Sierra Leone as these tax treaties are incompatible with the provisions of BEPS MLI.
The BEPS MLI will come into force for the Republic of South Africa on 1 January 2023.
SARS Permanent Voluntary Disclosure Programme.
The South African Revenue Service (SARS), in terms of the Tax Administration Act No. 28 of 2011, has made provision for the Voluntary Disclosure Programme (VDP) to be permanently available to a qualifying individual, company or trust that seeks to voluntarily disclose and regularise their tax affairs.
This step is aligned to the SARS’ strategic objective, which seeks to provide clarity and certainty as well as make it easy and seamless for taxpayers and traders to comply with their obligations.
SARS would like to encourage all taxpayers who may be in default on their tax affairs, to approach SARS via the Voluntary Disclosure Programme. By coming forward willingly, such taxpayers will receive the help and advice from SARS to expedite the resolution of their request. Where through its own investigative processes SARS discovers non-compliance, it will not avail this opportunity to non-compliant taxpayers but will act within the remit of the law to deal with non-compliance.
The Voluntary Disclosure Programme is a unique opportunity for defaulting taxpayers to regularise their tax affairs, SARS encourages concerned taxpayers to make use of this legal instrument.
A defaulting taxpayer will be granted relief under the programme if the application meets the following requirements:
- The disclosure must be voluntary;
- The disclosure is full and complete in all material respects;
- The disclosure involves a default which has not occurred within five years of the disclosure of a similar default;
- The disclosure involves a behaviour referred to in the understatement penalty table in Section 223 of the Tax Administration Act;
- The disclosure would not result in a refund due by SARS; and
- The disclosure is made in the prescribed form and manner. Successful VDP applications will culminate into an agreement that will cover amongst others:
- The material facts of the defaults disclosed;
- The amount payable by the taxpayer including the understatement penalty separately reflected;
- The relief granted by SARS under the Tax VDP;
- Payment arrangements and dates in respect of tax payable; and
- The fact that the relief may be withdrawn if SARS subsequently determines that the disclosure did not constitute a valid and complete disclosure under the Tax VDP
Sincerely,
