Based on my analysis that Exchange Control has to go as summarised below, we are holding a Seminar on the consequences of Abolition for off shore investment on the 16th of February 2006 at the Radisson Hotel, Waterfront at 11.00 The seminar will be hosted by Close Trustee Services of Guernsey, St James Global Finance and me as we have done on previous occasions. If you want to attend booking is essential. Please telephone Roderick at 7020322 or alternatively email him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

“THE END OF EXCHANGE CONTROL - WHAT NEXT?”

In a circular to clients some two and a half years ago and after examining the Amnesty Bill then being proposed, I forecast that Exchange Control would be abolished after a decent interval had elapsed following the ending of the Amnesty period. A growing number of experts now agree and believe that Mr. Manual will announce the “big bang” during his February 2006 budget. The million dollar question is how this will affect prior Exchange Control transgressions. In particular, the Treasury will be concerned with the upset of some 43 000 Amnesty Applicants who spent a lot of time and money regularizing their offshore holdings. At the same time SARS will be keen to find new incentives to encourage taxpayers to ‘come clean’ offshore without too great a penalty.

My own view is that the path blazed by Maggie Thatcher in 1979 in the UK will be followed, being that while Exchange Control was completely abolished in October of 1979, prior breaches would still be liable to prosecution. However, in fact because of a secret instruction from Maggie, none took place. To assuage Amnesty Applicants the Treasury may require that persons wishing to repatriate foreign assets will have to prove that they were not sent offshore prior to the abolition. Otherwise they will be subject to a levy of between 20-40%. This however will not encourage Tax Payers to regularize their affairs and may well result in substantial assets remaining offshore unbeknown to SARS.

My suspicion is that like in the UK, no prosecutions will result and any penalty/levy will be quietly dispensed with in the fullness of time thereby encouraging Tax Payers to regularize their affairs. Many investors will then be looking to reduce their offshore costs which are often substantially in excess of their real value and levied presumably on the pre Amnesty basis of maintaining the secrecy of such investments. With that falling away the market will no doubt become very competitive!