Chair, hon Minister of Finance, Deputy Minister of Finance, hon members, the Minister of Finance, hon Trevor Manuel, upon his presentation of the national Budget Speech for 2007 and reiterating the pronouncements made earlier by the President, made critical announcements on the anticipated taxation law reforms for 2007.
The main thrust for these tax reforms has been as a result of the fiscal stance that South Africa has taken with regard to the direction and the path that our economy should take. These efforts are driven by the country's historical circumstances which required the exerted implementation of our developmental goals dictated by the Freedom Charter and the Reconstruction and Development Policy Document.
In short, our economic stance has placed a clear directive that we should strike a balance between increasing spending on services and providing infrastructure development together with tax relief in order to raise household income and savings. On top of that the intention was to lower the cost of doing business in South Africa while increasing government savings.
Hon members, it is of importance to note that since 2004 we have seen and appreciated the huge growth in tax revenue, with tax collection figures rising to 17% per year. This collection has far exceeded the targeted range of economic growth. The robustness of revenue collection was a direct consequence of strong economic growth, together with improved tax compliance and other factors which are cyclical in nature.
In the past three years, government expenditure has increased by more than 9,2%. The strong revenue patterns have also allowed us to have a reduced budget debt service cost which has also allowed us to get the physical space to spend more on services and infrastructure.
This allows us to add further to our spending plans, raising public expenditure to 7,7% for the past three years. This has been effectively done and has been part of our programmes and new initiatives that government continues to fund, and has been able to be implemented quite effectively. The positive outlook presented will continue to produce some socioeconomic and developmental benefits for future generations in the coming years without necessarily exposing them to the new debt burden.
In terms of the amendment to the revenue laws, we have noted that some of the amendments do support the growth of the economy. Firstly, we have to appreciate the fact that the SA Revenue Service has been very effective and has been approaching matters positively through broadened tax outreach, and it has given proper support services to big businesses, some of which were not tax compliant.
At present, we have experienced a rather unexpected response from corporate South Africa, and the Portfolio Committee on Finance commends corporate South Africa for the active role it has taken in terms of ensuring that it contributes towards the finalisation of these amendments and to ensure that everybody in the business sector becomes tax compliant, thereby contributing towards the positive growth of our economy.
We have to acknowledge that South Africa has a very competitive tax legislation regime, whose main intention is to promote investment, local and foreign, to encourage job creation and to bring confidence to business and also to further reaffirm the ANC position on building small business.
I would like to go straight into specific issues that relate to taxation law amendments, especially the secondary tax on companies, STC. We have noted that this proposal recommends the gradual abolition of STC which, at the moment, stands at 12,5%. Finally, it has been reduced to 10%.
We have taken that route deliberately as the ANC. It is not something that we were pressured to do. It is not something that the DA called for. It was deliberate action at the right time that we should lift the burden from corporates and reduce double taxation. [Interjections.]
The intention of this amendment has been eventually to do away with STC and replace it with the shareholder dividends tax. In the long run, the positive effects of this will be the expansion of the tax net to more businesses which were never tax compliant.
Another amendment that promotes business investment in infrastructure is the depreciation allowance for commercial buildings, including dams, railways and ports. This amendment allows for the depreciation of a building at 5% per annum, which is intended to cover the cost of the building to the taxpayer. However, this depreciation allowance does not cover businesses that are residential properties or that are bought or leased. It does cover buildings that are new, that were improved or that have remained unused for a long time.
In terms of tax relief for corporate banks, the purpose of the amendment is to provide relief for financial services, co-operatives - particularly the corporate banks - by extending small business tax relief. In this case, an income of R300 000 and below will attract a taxable rate of 10%, whereas when the income is beyond R300 000, the threshold would be 29%. The ANC supports the Bill. Thank you, Chairperson. [Time expired.] [Applause.]
Chairperson, these Bills before us were probably some of the most intricate, complex and far-reaching Bills that I have been involved with so far. The National Treasury, the SA Revenue Service and the portfolio committee had to be intensely involved with the process and the interrogation of various issues which continually confronted all the stakeholders.
The process was, however, very transparent and there were a large number of submissions received from various stakeholders in government and the private sector. The affected businesses as well as organised business generously participated in written and oral submissions to the committee, as well as to the National Treasury and SARS.
Compliments must be given to the Treasury, SARS and the portfolio committee on the progressive manner in which each input was valued, and how the National Treasury and SARS were prepared to accommodate reasonable and justified concerns. Voorsitter, die Securities Transfer Tax Bill en sy gepaardgaande administrasiewetsontwerp hanteer die samevoeging van twee bestaande wetgewings wat handel oor selkoste op transaksies van ongelyste aandele en die ongesertifiseerde sekuriteitsbelasting op transaksies van aandelebeursverhandelings. Ons glo dat dit administrasie en kontrole sal vergemaklik en alle verhandelingstransaksies meer koste-effektief sal maak.
Die Wysigingswetsontwerp op Inkomstewette van 2007 verteenwoordig die tweede gedeelte van die belastingvoorstelle soos in die begrotingsoorsig aangekondig aan die begin van hierdie jaar. Die Minister van Finansies het tydens die Medium Term Budget Policy Statement - MTBPS - onder andere aangedui dat dit nie net makliker en meer bekostigbaar gemaak moet word om besigheid te doen in Suid-Afrika nie, maar dat onnodige rompslomp verwyder moet word.
Aanvanklik was daar 'n bekommernis dat hierdie wetgewing teenstrydig hiermee kan wees, maar daar is wyd en met verskeie rolspelers en geaffekteerdes gekonsulteer. Die Nasionale Tesourie en SARS het groot empatie gewys, nie net teenoor die MTBPS doelstellings nie, maar ook teenoor die opregte en ernstige bekommernisse van die privaatsektor en geaffekteerde besighede.
Voorsitter, hierdie wetsontwerp handel oor verskeie verreikende sake, maar onder andere oor die volgende: Eerstens, die verbreding van die basis van sekondre belasting op maatskappye; die implikasie van die aanslagkoersverandering van 12,5% na 10%, en die vereenvoudiging van die intergroep STS verpligtinge.
Tweedens handel dit oor die verdienste uit, en verkope van, aandele en ander belange, asook die hantering van aandelepremies wat vervolgens as van kapitale aard geag sal kan word, asook die aanspreek van verskeie praktyke en meganismes om aanspreeklikheid te vermy, om dit hok te slaan.
Voorsitter, ten opsigte van herorganisasie van maatskappye, veral binne groepsverband, is daar verskeie voorsienings om sekere onnodige beperkinge op te hef terwyl ander konsessies heroorweeg moes word; alles om dit makliker te maak vir besigheid. (Translation of Afrikaans paragraphs follows.)
[Chairperson, the Securities Transfer Tax Bill and its associated administrative Bill manage the conjunction of two existing pieces of legislation which deal with stamp duty on transactions of unlisted shares and uncertified securities tax on transactions of stock exchange trading. We believe that it will simplify administration and control and ensure that all stock exchange transactions are more cost effective.
The Revenue Laws Amendment Bill of 2007 represents the second part of the tax proposals as set out in the Budget Review at the beginning of this year. The Minister of Finance indicated, among other things, during the Medium-Term Budget Policy Statement - MTBPS - that not only must it be made easier and more affordable to do business in South Africa, but the unnecessary red tape must also be eliminated.
Initially the concern was that this legislation could be contradictory to this, but role-players and affected people were widely consulted. The National Treasury and Sars have shown great empathy, not only towards the MTBPS goals, but also towards the sincere and serious concerns of the private sector and affected businesses.
Chairperson, this legislation deals with various far-reaching matters, but among others also the following: Firstly, the broadening of the basis of secondary taxation on companies; the implications of the assessment rate being lowered from 12,5% to 10%; and the simplification of the inter group STS obligations.
Secondly, it deals with the earnings from, and sales of, shares and other interests, as well as dealing with share premiums which can henceforth be viewed as capital, and addressing various practices and mechanisms to avoid accountability in an effort to curb this.
Chairperson, in regard to the restructuring of companies, especially within groupings, there were various measures to lift unnecessary restrictions, while other concessions had to be reconsidered; all in an effort to make things easier for business. ]
The section dealing with the research and development of intellectual property, the corresponding tax concessions, and the retention of these properties as assets for our future economy, was very challenging at times. Specifically, concerns were raised about the accountability on royalties for the assumed further development of non-South African intellectual properties and the cross-border transfer pricing of intellectual properties, but all were amicably dealt with eventually.
Voorsitter, die uitdaging is om die bates van ons ekonomie te beskerm, terwyl ons wetgewing tegemoedkomend moet wees ten opsigte van die vereistes van moderne internasionale handel en besigheidsvestiging. Hiersonder kan ons weinig op ons eie vermag, wat weer ons ekonomie kan laat stagneer. (Translation of Afrikaans paragraph follows.)
[Chairperson, the challenge is to protect the assets of our economy, while our legislation must be accommodating in regard to the requirements of modern international trade and the establishment of business. Without this, we cannot achieve much on our own, which in turn could lead to the stagnation of our economy.]
Furthermore, in support of increased international compliance, the South African tax system must also account for realities and restrictions in foreign countries in order to protect South Africans investing in these foreign countries from, among others, hyperinflation consequences.
Voorsitter, hoewel die DA van mening is dat ons voortdurend krities moet wees om te verseker dat ons 'n kompeterende, ontwikkelende ... [Inaudible] ... steun ons hierdie wetsontwerp. Baie dankie. [Tyd verstreke.] (Translation of Afrikaans paragraph follows.)
[Chairperson, although the DA is of the opinion that we should constantly be critical in order to ensure that we have a competitive, developing ... [Inaudible.] ... we will support this Bill. Thank you. [Time expired.]]
Chairperson, I would like to follow the hon Marais in commending the process through which these Bills were dealt with and in this regard I would like to congratulate and thank the chairperson of our committee, hon Nene, who deserves praise for the phase of public consultation and the manner in which he handled affairs of that committee.
I must also mention the positive and professional role played by Treasury and the South African Revenue Service officials who briefed us, and who commented in great detail on proposals contained in the public submissions. While they had their instructions, they tried their best to be accommodating and in many instances accepted public advice and our recommendations. The final Bill, Chairperson, is certainly a much better piece of legislation because of their diligence.
The IFP will support both the Revenue Laws Amendment Bill and the Securities Transfer Tax Bill. I want to highlight just four areas where our initial concerns have been successfully addressed. Firstly, we welcome the reduction in the Secondary Tax on Companies to 10%, although we hope that the hon Minister will be able to announce further reductions in the next budget.
Secondly, we support the increased depreciation allowances for buildings and infrastructure, including port assets used for transport purposes. Thirdly, we welcome the tax exemption on accommodation provided to foreign workers by local employers. To have done away with this exemption, or to have limited it severely would have placed the ability of local employers to attract skilled foreigners at risk at a time when our economy desperately needs the skills that they bring.
Fourthly, we are particularly pleased that the original intention to subject public benefit organisations to the skills development levy has been dropped. We know that this would have placed pressure on available funding for public benefit organisations and might have done more harm than good. We agree with Treasury and Sars that more research into this matter is required.
As I indicated earlier, we support both the Bills. Thank you Chairperson.
Chairperson, the main focus of the Revenue Laws Amendment Bill is the broadening of the base for Secondary Tax on Companies, the amendments amount to a switch of STC from a company level tax to a shareholder level tax with the reduction of the rate from 12,5% to 10%.
As far as other amendments are concerned, the ACDP shares the view that our children in amateur sports need support so that they can develop into future stars. We therefore welcome the amendments that allow professional sporting organisations to obtain tax deductions for funding amateur sport development directly. This concession will play a significant role in developing amateur sport in our country.
We also support the amendment allowing for tax-free treatment of up to R3 000 additional death and injury benefits that certain employers provide in addition to the tax-free compensation under the Compensation for Occupational Injuries and Diseases Act. We note that our policemen and women who daily put their lives on the line to protect us would be major beneficiaries of this proposal.
The ACDP will consequently support these Bills. I thank you.
Thank you, Chairperson. Most view taxes as a way for the state to make money, but the MF believes that it is crucial that we educate our people on tax, its reasons and benefits.
In respect of the Revenue Laws Amendment Bill, the MF supports all provisions, especially in view of the controls it sets in the various sectors, including export and import. We do, however, hope that mechanisms will be enhanced to secure our system against corruption and tax evasion.
As for the Securities Transfer Tax Bill and the Securities Transfer Tax Administration Bill, the MF once again supports their provisions. We, however, have no objection to merging the Stamp Duties Act and the Uncertified Securities Act in view of the mergers' intention that this will serve to create a new transitional taxation beneficial to ownership of all securities.
The MF will support both the Bills. I thank you.
Chairperson, the legislation that deals with securities transfer taxation suggests that greater onus will be placed on persons to declare their security benefits in order to avoid penalties that relate to tax payments. One of the key aspects of the Bill is the penalty imposed with regard to tax evasion. If it was the intent of the person to omit information which falsifies receipt or expenditure of taxable amounts, that person will have committed a tax evasion offence.
Given the already strict rules governing our Revenue policies, the legislation will hopefully mean that greater compliance will be expected from persons and should this happen, Sars coffers will continue to increase, hopefully to the benefit of our people in the end.
One of the ways in which payment of any tax interest or penalty will be done in respect of transfer of a security will be through the use of electronic payment tools.
The Revenue Bill has undergone certain changes to comply with business concerns, yet it still remains the obligation of business to work transparently with the state.
Finally, the FD supports both the Revenue Laws Amendment Bill and the Securities Transfer Tax Bill. I thank you.
Thank you, Chairperson and hon members. Since the first Budget Speech in Parliament on 22 June 1994, the new ANC government has made a commitment to investigate virtually every aspect of the South African tax regime against the backdrop of the political, social and economic goals of the incumbent government. One of its key commitments was to close loopholes within the tax regime by introducing timeous legislation.
My colleagues have already alluded to most issues regarding this Bill. I will only touch on one aspect, which was omitted, which is port infrastructure depreciation. The new and unused port infrastructure will be eligible for a write-off of 5% per annum. This means that the port infrastructure will have a lifespan of 20 years and beyond.
With regard to the depreciation of environmental fixed assets, a taxpayer will be allowed a deduction of 40% of the costs of acquiring environment treatment and the resettling assets from the taxpayer's income in the year of assessment that the asset was brought into use. A further 20% should be deducted in each succeeding year of the assessment.
An amendment proposed on the company re-organisation is provided in clauses 41-47 of the Bill. The purpose of this amendment is to repeal the financial instrument limits from domestic re-organisation provisions. The financial instrument will be retained for foreign assets.
We in the ANC feel that an effective tax system that is perceived to be fair and legitimate is a prerequisite for building a prosperous and stable society. Given the challenge of the Reconstruction and Development Programme, it is essential that South Africa has in place both a revenue- raising and an expenditure policy that are capable of meeting the demands of the future and putting South Africa on a growth path that is sustainable and equitable and creates jobs.
The ANC does not view taxation policy in isolation, but as part of the broader revenue-raising policy, which is in turn integrally linked to the government expenditure policy and favours an approach to taxation that rests on the three pillars of sound macro-economic management, a comprehensive system of the contract of fiscal responsibility.
The ANC favours a broad comprehensive tax base as a narrow tax base inevitably favours certain forms of income and certain goods or services over others. This makes the system unfair as it favours those taxpayers who are able to take advantage of tax-advantaged forms of income over others. It also makes the system inefficient as it creates distorted incentives for taxpayers to take income in other forms and distort their labour savings and consumption decisions to take advantage of tax deferentials.
Broadening the tax base promotes efficiency by closing loopholes and enabling the reduction of tax rates. The ANC aims for a tax that meets the following objectives: It must be transparent, fair and perceived to be so by the taxpayers themselves. It must raise revenue in a cost-effective manner. It must levy taxes as efficiently as possible with minimum distortion. The tax system must distribute the tax pattern equitably according to the taxpayer's ability to pay and the tax system must support economic growth.
One of the ANC's most important considerations in devising the tax regime is the tax system that must support economic growth. This principle must be seen within the broader imperative of ensuring that such growth and benefits of economic prosperity are shared amongst all South Africans.
The tax relief thus given to small business, which includes co-operative banks, is aimed at promoting the use of services of these banks by lowering the tax burden and administrative costs and thus ultimately the costs are passed on to members through the bank fees. We all know about the charges of banks which keep on escalating all the time. This developmental thrust is found throughout the Bill, as I have mentioned, and it aims at increasing the tax exemption for work-related debt and disability benefit as well as those aimed at promoting the development of amateur sports.
The tax regime we seek to achieve ...
... sikholwa ukuthi izosiza kakhulu ikakhulukazi ekudonseni osomabhizinisi bethu ukuthi babe yingxenye enkulu ekwakheni umnotho wezwe lakithi. Kusiphatha kabi kakhulu ukubona abantu abamnyama ezindaweni ezifana noSoweto, KwaMashu, e-Claremont naseMlazi amabhzinisi abo efa. Sikholwa-ke ukuthi ... (Translation of isiZulu paragraph follows.)
[... we believe would help especially in attracting our business people to play a big part in creating the economy of our county. It saddens us to see our people's businesses in places like Soweto, KwaMashu, Claremont and Umlazi go under. We believe that ...]
... the tax regime that we are seeking to achieve ...
... izosisiza ekutheni laba bantu bethu ababukeka ... [...will help those people who seem to be ...]
... outside of the economic mainstream ...
... bazobuya beze neno ngoba inqubomgomo yethu yentela isiza ukuthi ingahlali kakhulu emqaleni kubona ... [ ... to be included because our tax policy helps to relieve them from paying more...]
... and by so doing we hope that this will promote the economic integration ...
... ezosiza ukuthi abantu bakithi babe yingxenye ezweni nasekwakheni umnotho wezwe lethu. Yingaleso sizathu uKhongolose eseka lo Mthethosivivinywa. Ngiyabonga. [Ihlombe.] [... which will help our people to be part of this country and grow the economy of our country. It is for this reason that the ANC supports this Bill. Thank you. [Applause.]
Chairperson, this piece of legislation is clearly exceedingly important. The Bills, between them, are 70 pages in length and the explanatory memorandums 104 pages. When the presentation was done to the committee by the Treasury and SA Revenue Service, it was a 90 slide presentation. The hearings have been very extensive.
One of the interesting aspects of the debate here this afternoon is that every party feels that it owns the policy recommendations incorporated in these two Bills. So, I think we must declare a victory and say thank you very much for the support and allow these two Bills to move to the next stage. Thank you very much. [Applause.]
Debate concluded.