Tax Bills & Rates Bill: finalisation

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Finance Standing Committee

24 November 2021
Chairperson: Mr J Maswanganyi (ANC)
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Meeting Summary

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The Standing Committee on Finance considered and adopted the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill and the accompanying reports.

National Treasury requested an additional amendment be made to the Taxation Laws Amendment Bill. The Minister of Finance proposed amending clause 4 and clause 56 of the Bill. In both clauses, the effective dates were 1 January 2022. Treasury proposed that the effective date be postponed to 1 January 2023. This would allow Treasury more time to deliberate with the stakeholders on the impact of the proposed amendments as these were the anti-avoidance measures aimed at curbing abuse. The Committee accepted the new amendment.

Concerning the Committee Report on the Rates Bill, the Committee agreed to add a note that action was needed to combat the illicit trade of alcohol and tobacco.

Meeting report

The Chairperson welcomed the members of the Committee and all those attending the meeting. This meeting was to consider the reports on the three Bills.

The Committee Secretariat read the apologies into the record.

The Chairperson thanked and congratulated the officials from National Treasury and SARS. In the previous year, SARS had been able to collect more revenue than what was expected. This had gone a long way to ease the pressure that Government was facing in terms of the little resources that it had. The exercise and work the Committee was doing this morning had a serious impact on how Government performed. SARS had proved itself last year under the difficult conditions of Covid. SARS had been able to collect more revenue than what was expected. This should not go unnoticed. There were people who worked very hard to realise this achievement that had not been expected. He thanked SARS. The Committee should move faster because it was already behind time. The Committee had a long agenda. After the reports, the Committee had to adopt, clause by clause, the amendments in the Bills. This afternoon the Committee would table the report on the MTBPS. Today would be a long day. He requested that the Committee try by all means to move a bit faster.

Consideration and adoption of the Committee report and voting (clause by clause) on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B21 – 2021]

The Chairperson took the Committee through Committee report on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

Dr D George (DA) commented on paragraphs 5.7 and 5.8. The problem had been raised during the hearings about the illicit trade in alcohol and tobacco. He was not opposed to taxing these items because of the impact that was had on the health of the population. However, there was a problem with the illicit trade in alcohol and tobacco. The Committee needed to say something in those sections regarding action that needed to be taken to combat the illicit trade of alcohol and tobacco.

The Chairperson asked Treasury and SARS to include a line as to how the Committee could condemn the illicit trade of alcohol and tobacco as suggested by Dr George.

Dr Zakhele Hlophe, Content Advisor, Parliament, said that a paragraph could be added on that matter although it was covered elsewhere above in the report. Those issues had also been raised in the hearings. He also noted a correction that needed to be made to 5.7. There was a reference, ‘behavioural medication’ but it was supposed to be ‘behavioural modification’. That would also be changed.  

The Chairperson said that a sentence should be included condemning the illicit activities on alcohol and tobacco.

Ms M Mabiletsa (ANC) moved for the adoption of the report.

Mr I Morolong (ANC) seconded the adoption of the report.

Dr George said that the DA reserved its position.

The Committee adopted the Committee report on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

The Chairperson took the Committee through the Rates and Monetary Amounts and Amendment of Revenue Laws Bill clause by clause.

Ms Mabiletsa moved for the adoption of the Bill.

Ms Z Nkomo (ANC) seconded the adoption of the Bill.

Dr George said the DA reserved its position.

The Committee adopted the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

Consideration and adoption of the Committee report and voting (clause by clause) on the Taxation Laws Amendment Bill [B22 – 2021]

Mr Ismail Momoniat, Deputy Director General: Tax and Financial Sector Policy, National Treasury, commented on a proposed amendment by National Treasury to the Bill. After the Bill was introduced National Treasury received a few submissions from the Banking Association of South Africa, the JSE and SAICA. There were some concerns with the clause on how collateral was treated, the changes that were made. What Treasury did in the Bill was more of a technical clarification and not a new policy issue. There were some challenges with the wording. Treasury proposed that instead of the clauses taking effect in January 2022 that instead they take effect in January 2023. This would allow Treasury enough time to make engagements with the stakeholders. There were some critical issues about how collateral was treated. Some of the collateral was there for regulatory reasons. It would not take effect for the next fiscal year. Treasury raised the issue because TLAB, like the Rates Bill, was a money bill. If there were changes to be made then certain procedures needed to be followed.

Ms Yanga Mputa, Chief Director: Tax Policy Unit, National Treasury, said that the changes had to be made according to the Money Bills Amendment Act. Treasury had discussions with Adv Frank Jenkins (a Senior Parliamentary Legal Advisor) on the matter so that it could follow the correct procedure and correct provisions in terms of the Money Bills Amendment Act. The two clauses that the Minister was proposing be amended were clause 4, dealing with the clarification of the definition of contributed tax capital, and clause 56, dealing with the rehypothecation of collateral. In both clauses, the effective dates were 1 January 2022. Treasury was proposing that the effective date be postponed by a year to 1 January 2023. This would allow Treasury more time to deliberate with the stakeholders on the impact of the proposed amendments as these were the anti-avoidance measures aimed at curbing abuse. Even though there could be abuse it could impact on legitimate transaction. The year would allow Treasury to deliberate with the stakeholders and if need be, make other proposals in the coming budget. Treasury was proposing amendment to the effective date of clause 4 and clause 56.

The Chairperson asked what impact it was going to have on the collection of revenue. He wanted to know this before the Committee agreed to what Treasury was recommending. The Committee did not want to agree on something that would later have a negative impact on the collection of revenue. Why a year later? He wanted Treasury to provide rationale why the effective date was a year later and not a few months? The Chairperson wanted clarity on the impact of this amendment and the timeframe.

Ms Mputa said that in terms of the Money Bills Amendment Procedure Act, Section 8.5 touched on what was the motivation and what was the impact on revenue collection. Here Treasury was changing the effective date to 1 January 2023 to give it more time to deliberate. As the proposed tax amendments were aimed at addressing tax avoidance schemes the extension of the effective dates would not result in quantifiable direct cost to Government at the moment. Currently, Treasury was not making any changes meaning that the proposal would remain as it was in the current legislation. Treasury was trying to curb tax avoidance. At this stage Treasury could not say what the impact or direct cost to Government would be. However, Treasury was of the view that now that it had proposed these changes and would deliberate with the stakeholders it would at least find some time. The reason for postponing the effective date for a year and not a few months was because if there were changes that needed to be done it took a year to make changes in the legislation. Announcements would have to be made in the 2022 budget if there were changes that were required. Therefore, the changes could take effect on 1 January 2023. The current changes that were announced in this year’s budget had a proposed effective date of 1 January 2022. That was the reason why Treasury was proposing a year. There was currently no quantifiable direct cost to Government as the amendments were addressing tax avoidance schemes.

The Chairperson presented the proposed amendments, of changing the effective dates, by Treasury to the Committee. He asked the members if they had any comments or clarity-seeking questions. He asked the members if they agreed with the proposals.

Dr George said that he was not opposed to the request from Treasury.

Ms Mabiletsa said that this was a fair request because the effective date was just being moved to a later date. Treasury was not changing the entire thing. She was not opposed to the request either.

The Chairperson took the Committee through Committee report on the Taxation Laws Amendment Bill.

Dr Hlophe commented on clause 5.5 and clause 5.6. He noted that these observations would need to be changed given that there were amendments to the clauses in the Bill. Both would need to be changed because they spoke to the same provisions that were now being postponed to apply in 2023. He also noted that the Committee only received the letter this morning. The information contained in the letter would be added because the Committee agreed with the amendment.

The Chairperson asked if there was a reason Treasury sent letters very late to Parliament. He hoped that Treasury was not ambushing the Committee so that it did not have time to study those letters and simply agree. What was the reason for sending letters an hour before a meeting started?

Mr Momoniat responded that Treasury only became aware of this provision sometime last week. Treasury had to process it to see how best to resolve it. Then it had to get a letter from the Minister which it was only able to do last night. The Minister had been indisposed so there were some technical difficulties. He apologised on behalf of Treasury for the letter being sent just before the start of the meeting.  

The Chairperson said that Treasury should try by all means to do things in time. Otherwise, it would look like this Committee was just there to adopt Bills from Treasury without going through a thorough and rigorous process of Parliament. It would not look good for Parliament to do things in that manner. The Committee understood that the Minister was not well. He was not sure if someone had been appointed to act on his behalf or what the arrangement was. In the future things should be tried to be done differently. In the eyes of the public it did not look good.

Ms Nkomo moved for the adoption of the report.

Ms Mabiletsa seconded the adoption of the report.

Dr George said the DA reserved its position.

The Committee adopted the Committee report on the Taxation Laws Amendment Bill with amendments.

The Chairperson took the Committee through the Taxation Laws Amendment Bill clause by clause.

Ms Mabiletsa moved for the adoption of the Bill.

Mr G Skosana (ANC) seconded the adoption of the Bill.

Dr George said the DA reserved its position.

The Committee adopted the Taxation Laws Amendment Bill with amendments.

Consideration and adoption of the Committee report and voting (clause by clause) on the Tax Administration Laws Amendment Bill [B23 – 2021]

The Chairperson took the Committee through Committee report on the Tax Administration Laws Amendment Bill.

Ms Mabiletsa moved for the adoption of the report.

Mr Skosana seconded the adoption of the report.

Dr George said the DA reserved its position.

The Committee adopted the Committee report on the Tax Administration Laws Amendment Bill.

The Chairperson took the Committee through the Tax Administration Laws Amendment Bill clause by clause.

The Chairperson asked a question about the memorandum at the end of the Bill. Was that not supposed to come at the beginning of the Bill? Were the objects of the Bill not supposed to be the introductory part of the Bill? Was the memorandum supposed to be separate from the first clause? The Chairperson sought clarity on this matter.

Ms Mputa said that in terms of the Section 75 Bill National Treasury had attached the memorandum of the Bill. In terms of Section 77 an explanatory memorandum was added to the Bill. She noted with regards to the TLAB, a Section 77 Bill, Treasury did not attach it to the Bill it was a separate document. Under a Section 75 Bill the requirement was that it should be at the end of the Bill.

Mr Franz Tomasek, Head: Legislative Policy Tax, Customs and Excise, SARS, said that the memorandum of objects was essentially a set of explanations of all the clauses in the Bill. It served a similar purpose to an explanatory memorandum that National Treasury releases in respect of the Money Bill. It was practice to attach it to a Section 75 Bill. It was attached as an explanation of the Bill and to cover the procedural elements.

The Chairperson asked if the Committee had to adopt the memorandum separate from the Bill. He wanted to know how the memorandum affected the procedure of the Committee. Did the memorandum have to be adopted or was it for noting? What procedure did the Committee have to follow?

Mr Tomasek said that in his understanding the Committee would simply note the memorandum of objects. Its contents were also drawn upon in the Committee’s report.

The Committee Secretariat said that precedent in the Committee was that it adopts the Bill together with the memorandum.  

Mr Morolong moved for the adoption of the Bill.

Mr Skosana seconded the adoption of the Bill.

Dr George said the DA reserved its position.

The Committee adopted the Tax Administration Laws Amendment Bill.

The Chairperson asked if there were any notices for the Committee.

The Committee Secretariat said that the next Committee meeting would be the following Tuesday. The Committee would be considering and adopting its BRRR Report.

The Chairperson thanked the members of the Committee and all those in attendance in the meeting.

The meeting was adjourned.

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