Hon Chairperson, hon members, trade agreements define rules for the conduct of trade policy. These rules must strike a balance between commitments and flexibility. While governments have many good reasons for signing trade agreements, it is crucial that effective agreements must strike an appropriate balance between flexibility and commitments.
With regard to the South African-Germany trade agreement, Germany is one of South Africa's most important trading partners, with trade worth more than R42 billion in 2002. The country is South Africa's most important supplier of imports such as capital goods and technology, and ranks second as a purchaser of South African exports after the United Kingdom.
It is a major direct investor in South Africa with an investment volume of around R18 billion, the main sectors being the automotive industry, the chemical industry, and the mechanical and electrical engineering industries. More than 450 German companies provide around 60 000 jobs in South Africa. We've just seen what they did with the BMW investment in this country.
The following taxes are especially affected regarding this international agreement between the Federal Republic of Germany and South Africa. On the side of Germany, it is income tax, corporation tax, capital tax and trade tax. With regard to South Africa, it is normal tax, secondary tax on companies, and withholding tax on royalties. In addition to the existing taxes, the agreement shall also apply to any identical or substantially similar taxes that are imposed after the date of signature of this agreement.
The agreement also provides for profits and taxes in respect of shipping and air transport; associated enterprises; dividends; interest; income from employment; director fees; entertainers and sportspersons; pensions, annuities, etc; and the elimination of double taxation.
With regard to the South Africa-Mexico Trade Agreement, trade with Latin America is actually relatively small. Only 2% of South Africa's total trade is with the Common Market of the South, Mercosur. Trade ties are expected to grow substantially in the future. Trade between South Africa and Mercosur grew significantly between 1994 and 2000 from R2,7 billion to R6 billion.
Mexico is South Africa's third largest trading partner in Latin America and the Caribbean, after Brazil and Argentina, and South Africa is Mexico's largest trading partner in Africa. Trade between the two countries has been growing at a steady pace. The main exports to Mexico are iron and steel products, machinery and equipment, metal ores, chemicals, cereals, and raw hides and skins. Imports from Mexico include wheeled tractors, machinery and equipment such as paper, paperboard and chemical products.
Another significant step in the relations was the signing of the Technical Co-operation Agreement in the field of social development in 2006.
Tourism between the two countries is also growing. Approximately 1 500 visa applications from Mexico and other Central American countries travelling to or through South Africa were processed during the period March to October 2008.
The agreement between the Republic of South Africa and the government of the United Mexican States seeks to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The establishment of a Joint Binational Commission would allow both countries the opportunity to review bilateral co-operation projects and to identify co-operation in new areas.
The agreement applies to the following taxes: In terms of Mexico, they are federal income tax and business flat-rate tax; and in terms of South Africa, they are normal tax, secondary tax on companies, withholding tax on royalties, and tax on foreign entertainers and sportspersons.
As with the agreement with Germany, the agreement in this case shall, in addition to the existing taxes, also apply to any identical or substantially similar taxes that are imposed after the date of the signature of this agreement.
In conclusion, the trade agreements seek to regulate taxation and remove fiscal obstacles between the two countries, as well as provide for fairness in the business practices in a foreign country through the provision of nondiscrimination. The exchange of information relating to the agreement is also important, as well as collaboration between the contracting states in the case of South Africa and Mexico in the collection of revenue claims.
Hon Chairperson, the select committee moves that this House supports these international agreements. I thank you. [Applause.]
Debate concluded.
Question put: That the Report on Agreement between Republic of South Africa and United Mexican States for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report on Agreement between Republic of South Africa and United Mexican States for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income accordingly adopted in accordance with section 65 of the Constitution.
Question put: That the Report on Agreement between the Republic of South Africa and the Federal Republic of Germany for the Avoidance of Double Taxation with respect to Taxes on Income and Capital be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report on Agreement between the Republic of South Africa and the Federal Republic of Germany for the Avoidance of Double Taxation with respect to Taxes on Income and Capital accordingly adopted in accordance with section 65 of the Constitution.