Tax transparency and developments to stop evasion are high on the political agenda. The ongoing public scandals that have affected a number of countries have brought unneeded pressure on governments.

In recent years, tax havens and banking secrecy laws have come under increased scrutiny from organisations, including The Group of Twenty (G20), European Union (EU), Organisation for Economic Co-operation and Development (OECD), as well as various national governments. The severity of the problem has led to numerous investigations into large institutions, as well as senior individuals. The exact amount of tax lost through evasion activities is unknown; however, the importance of minimising the huge sum that people believe it to be is a high priority among these groups, especially due to the uphill struggle the financial sector across the world finds itself in following the financial crisis.

Various governments have made it clear both to financial institutions who oversee the perceived tax evasion, as well as to the customers, that failure to abide by the appropriate tax laws will not be dealt with lightly. The public scrutiny alone is not worth the risk to any financial institution when the fight for every customer is so important. The resulting systems development, customer identification, and customer verification projects being put in place are costing the industry a considerable amount, although the end gain will undoubtedly outweigh the initial fees, therefore showing the importance of implementing these developments now.

This article considers the new developments being implemented to reduce tax evasion and increase tax transparency through information exchange regimes, as well as the immediate steps being taken by national governments and tax agencies to identify the undeclared income and capital growth of residents, and obtain financial information via financial institutions.

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Contact:
Nazrien Kader at Deloitte
Email: nkader@deloitte.co.za