Signed into law in January 2016, the tax amnesty enabled Brazilian residents to regularise their tax affairs without facing criminal prosecution and instead only face a one-off tax charge of 15% and a 15% penalty.
Just over half of the undeclared assets were held in the US, followed by the Cayman Islands (23%), the UK (5.7%), the Bahamas (3.9%), and Switzerland (3.4%).
Known as the Special Regime for Exchange and Tax Regularisation (RERCT), the Brazilian government estimated that there could be as much as BRL400bn in undisclosed assets overseas.
According to Reuters, the Brazilian Senate last year expected the amnesty would raise around BRL11bn.
The deadline for making disclosures closed on 31 October.
Voluntary disclosure
Brazil is by no means the only country to have introduced an amnesty to encourage taxpayers to regularise their offshore and undeclared assets without facing criminal charges.
Few governments, however, have seen the levels of interest they had expected.
Indonesia introduced a similar amnesty in June in a bid to make up some of the shortfall in tax revenues. Indonesians will be able to pay a tax rate starting at 4% on declared assets that they choose to leave overseas. The rate will increase incrementally until the programme closes in March.
According to Bloomberg, however, as of September the amnesty had only delivered a small proportion (18%) of the expected revenue.
In May, Argentina confirmed that it would offer a new amnesty allowing people with undeclared assets to regularise their situations by January 2017. It is estimated that Argentines hold around $400bn in assets offshore, with the government hoping to raise around $60bn from the scheme.
The offer of a ‘new’ scheme, however, suggests a previous attempt to encourage the regularisation of undeclared assets was not successful.
The Liechtenstein Disclosure Facility (LDF), an agreement between Liechtenstein and the UK’s HM Revenue & Customs, raised about a third of the £3bn it had hoped to raise, underscoring the varying degrees of success the amnesties have had.
Common Reporting Standard
While it could be argued that the expectation of the various governments in terms of the value of the undeclared offshore assets was optimistic, there likely remains a cache of undeclared assets that have yet come to light.
The introduction of CRS in 2017 and 2018 by 101 countries means that it is increasingly likely that previously undeclared assets will come to light, leaving people at risk of prison and/or fines, as well as a hefty tax bill.
