Chairperson, this tax legislation continues the work of tax reform. The task of democratising our regime is a major undertaking and these pieces of legislation are one step, amongst many, in a move towards a democratic tax regime which has been underway for several years now. The ANC is committed to the creation of a better life for all.
Tax receipts are a device that a majority party must use to promote its goals of social and economic transformation. Although the 2007 Budget is for a surplus, expenditure in the key antipoverty sectors is increasing. This legislation legitimises some of the main tax policy changes announced in the Minister of Finance's February 2007 Budget Speech.
The legislation includes measures to encourage individuals to save both for their deferred consumption needs and for their retirement benefits. This legislation, in addition, seeks to assist small businesses by extending the small business tax amnesty for an extra month - until 30 June 2007.
As far as personal income tax relief is concerned, individuals earning less than R43 000 will not be taxed. In February 1996 only individuals earning less than R14 600 per annum were not required to pay tax. This demonstrates the commitment of the ruling party in crafting a tax regime that is pro- poor.
The tax on retirement funds has been repealed. Long-term savings for pension, provident funds and individual retirement annuities can expand tax- free thereby maximising retirement benefits of future retirees. The commitment by the national government to ensure that individuals will have adequate financial resources to sustain themselves during retirement is also demonstrated by the amendments proposed in the Pension Funds Amendment Bill, currently before Parliament.
This legislation and the Pension Funds Amendment Bill collectively ensure, firstly, that every future retiree receives benefits which are, firstly, inflation related and, secondly, that every retiree receives a proportional share of what he or she would have been entitled to. The total effect of these changes is that individuals and not financial institutions benefit from the retirement fund industry.
A new tax regime is provided for lump sum payouts for retirees and death. The legislation provides for the following: The first R300 000 lump sum amount will be tax free; an amount between R300 000 and R600 000 will be subject to an 18% rate; an amount between R600 000 and R900 000 will be subject to a 27% rate ... [Interjections.] ... and all amounts above R900 000 will be subject to a 36% rate. These rates apply to pension, provident and retirement annuity funds. The interest and dividend exemption for individuals below 65 years of age will increase to R18 000. In 2000 it was R3 000. The exemption for older people will increase to R26 000. In 2000 it was R4 000.
Last year an amnesty for small businesses, including taxi operators, was approved. The amnesty period was from 1 August 2006 to 31 May 2007. This legislation extends the amnesty by a month. It is noted that 275 398 applications were received for this amnesty. The last two weeks for the application witnessed a large number of applications after a slow initial start - hence an extension was logical.
It has become politically necessary for the ANC government to address the need of individuals to provide for adequate financial resources after retirement. This would free financial resources in the form of increased take-up of social grants, which is already is absorbing voluminous state resources. State resources would be better utilised by those unable to provide for retirement on their own and those who are very poor.
In 1994, the corporate tax rate dropped from 40% to 35%. In 1999, tax on company profit dropped to 30% and it is a documented fact that the corporate tax rate dropped to 29% in 2005. Moreover, July 2006 witnessed the elimination of the Regional Services Council, RSC, and the Joint Business Council, JBC, levy. A reduction in Secondary Tax on Companies, STC, from 12,5% to 10% and its individual replacement with a dividend tax implies that business will incur a drop in tax liability.
Retaining the 29% company tax rate obscures the reduced tax burden of companies. The corporate tax rate for New Zealand is 33%, for Belgium 33,9% and for the United States and Japan it is 40%. The corporate tax rate for developing countries such as Argentina is 35%, for India it is 35,9% and for Egypt it is 40%.
In conclusion, the select committee requested me to make an appeal to the citizens of this country that they should ensure that next time they visit their tax consultants, they do not use a broken VCR remote control as a calculator. [Interjections.] That is very important. That is what they asked me to say. Lastly, the Select Committee on Finance appeals to the NCOP to support this piece of legislation. I thank you. [Applause.]
Debate concluded.
Chairperson, on a point of privilege: In terms of Rule 33, as a member of this august House, I request that the hon Goeieman distributes that input. It is quite useful and empowering, and it will enable us to ensure that in our constituencies we are able to educate the people about this. It was very good research. Thank you very much, Chair. [Applause.]
I think the request will be taken care of by the hon Goeieman and his team, hon member.
I shall now put the question in respect of the Third Order. The question is that the Bill be agreed to.
In accordance with Rule 63, I shall first allow political parties the opportunity to make their declarations of vote if they so wish. Is there any party that wishes to make a declaration? There is obviously none.
We shall now proceed to the voting on the question. Those in favour will say "Aye".
HON MEMBERS: Aye!
Those against will say "No".
HON MEMBERS: No!
I think the "Ayes" have it.
The majority of members have voted in favour. I therefore declare the Bill agreed to in terms of section 75 of the Constitution.
Bill agreed to in accordance with section 75 of the Constitution.
I shall now put the question in respect of the Fourth Order. The question is that the Bill be agreed to.
In accordance with Rule 63, I shall first allow political parties the opportunity to make their declarations of vote, if they so wish.
Is there any party that wishes to make a declaration? There is obviously none.
We shall now proceed to the voting on the question. Those in favour will say "Aye".
HON MEMBERS: Aye!
THE HOUSE CHAIRPERSON (Mr T S Setona): Those against will say "No".
HON MEMBERS: No!
I think the "Ayes" have it.
The majority of members have voted in favour. I therefore declare the Bill agreed to in terms of section 75 of the Constitution.
Bill agreed to in accordance with section 75 of the Constitution.