Somlomo, Sekela-Mongameli, Baphathiswa, malungu ale Ndlu, ndimi apha egameni lombutho wesizwe ndiza kuphosa ndigibisela malunga noMthetho woXabangelo ojengene nerhafu. Ndiqwalasele ke ngqo kuluntu nakugcino-mali, imisebenzi kunye noshishino. Mandigawule ndiwarhuqa ke ngenxa yexesha.
Lo Mthetho uYilwayo weRhafu wathunyelwa kule komiti ijongene nezimali ukufumana izimvo zoluntu ngoMeyi kulo nyaka umiyo. Siyile komiti ke sabulela ngokungazenzisiyo kubo bonke abathabatha inxaxheba ngokusinika izimvo zabo ngalo Mthetho uYilwayo. Ngokunjalo, sabulela ngokungazenzisiyo kuMphathiswa, uNongxowa weli lizwe, umfo ka Gordhan, kunye nabasebenzi be- ofisi yakhe nakubaqokeleli berhafu, i-SA Revenue Service, Sars, ngomsebenzi omkhulu abawenzileyo ngokusinika iimpendulo ezicace gca okwekati emhlophe ehlungwini kwimibono esiyifumene ngexesha lofuno-zimvo zoluntu. Ezi mpendulo ziye zasincedisa ekubeni sikwazi ukuthethisana saza safikelela ekugqibeleni kwalo mcimbi singawo namhlaje.
Singombutho we-ANC ke sibona kufanelekile ukuba siwuxhase lo Mthetho uYilwayo, kuba ubaluleke kakhulu ukuze siqhubeke nokutshintsha isebe lethu lezerhafu. Olu tshintsho luza kusincedisa sikwazi ukuqinisa ezorhwebo jikelele nokuxhasa siphinde siqinise ukukhula kwezophuhliso kwixesha elizayo. Oku sikwenzela ukuba sikhulise irhafu yesizwe siphinde sijonge nezinye iindlela zokukhulisa ingxowa yesizwe, mfo kaTrollip.
Sithethisana ke ngalo olu tshintsho lwerhafu, masikhumbule ukuba siqala inyanga apho sibhiyozela khona amasiko nenkcubeko yethu. Isihloko salo nyaka ke nje ngoko nisazi sithi: Living out the values of a just and caring society. Esi sihloko salo nyaka sivumelana notshintsho lwerhafu lwanamhlanje. Akubonakali ke ukuba singakwazi ukuba sakhe ithemba lesizwe esikhathalelanayo ngaphandle kwendlela elungileyo yoqokelelo lwerhafu. Ubuntu bethu njengabantu besizwe sama-Afrika buthi masikhathalelane. Busifundisa le nto yokuba umntu mgumntu ngomnye umntu. Ngoko ke kubalulekile ukuba sisisizwe esikhulayo sakhele phezu kweziseko zokukhathalelana. Kubalulekile ke ukuba singabahlali sivuselelane siphinde sibambisane ukwakha ilizwe lethu. Le nto ke ibonakaliswe kukuzimisela ekuhlawuleni iirhafu kwabantu bakuthi ngexesha elililo. (Translation of isiXhosa paragraphs follows.)
[Dr Z LUYENGE: Hon Speaker, hon Deputy President, Ministers, members of this House, I am standing here on behalf of the people's party, and I shall comment regarding the Taxation Laws Amendment Bill. I am focussing directly on the public and savings, jobs and industry. Let me briefly continue because of time constraints.
This Bill on taxation laws was sent to the committee dealing with finances in order to get public opinion in May this year. As members of this committee we were very grateful to all those who participated by giving us their opinions regarding this Bill. In addition, we were very grateful to the Minister, who is the national treasurer, Mr Gordhan, and the employees in his office and tax collectors, Sars, for the diligent work they have done, which is to provide us with crystal clear answers regarding the opinions we received during the public hearings. These answers helped us to deliberate and eventually finalise this issue we are discussing today.
The ANC deems it right to support this Bill, because it is very important and will allow us to proceed with the transformation of our tax laws. This transformation will not only help us to strengthen trade in general, but also to increase development in future. We are doing this in order to increase the national tax coffers and we are also looking at various ways to boost those, Mr Trollip.
Whilst addressing transformation in taxation laws, let us remember that we are at the beginning of the month in which we celebrate our traditions and culture. The theme, as you know, for this year's celebrations is: Living out the values of a just and caring society. This year's theme is in line with the transformation of tax laws happening nowadays. Therefore, we cannot build the hope of a caring nation without the effective collection of taxes. Ubuntu, as an African nation, requires us to care for each other. Ubuntu inculcates the value that I am because you are. It is important, therefore, that as a developing nation we build upon a caring foundation. It is important that, as a community we motivate one another and work together to build our country. This has been shown by the commitment of our people to paying their taxes in time.]
Among other aspects that the Bill addresses, are those which contribute towards the economic growth value chain such as individual and business taxpayers, savings mechanisms and employment. These will have to be welcomed and commended as they will both directly and indirectly contribute towards the achievement of our priority goals as the ANC, in particular, the creation of decent work and sustainable livelihoods. The ANC views tax evasion and avoidance, not only as a crime, but also as a basis of building a culture of corruption in our society.
In the main, the Bill's proposal seeks to tighten the rules relating to employer-provided motor vehicles with the aim of preventing tax arbitrage; promote uniformity and avoid duplication in the implementation of the retirement and pre-retirement withdrawal benefits by making the employer- provided lump sum termination payout part of the tax preferred calculation; tighten the deduction criteria for key insurance plans, which are commonly funded by employers, in order to eliminate tax avoidance by expanding the deduction allowance for insurance policies that act as commercial collateral or payment to third party business creditors; narrow the permissible instruments in the implementation of the interest exemption threshold and review its effectiveness as an incentive intended to promote savings by middle- and lower-income households.
It also seeks to place certain Shari'a compliant products such as Murabaha and Diminishing Musharaka on an equal tax footing with conventional finance products; as well as to close the loopholes relating to financial institutions that are deducting beyond what should be equitably allowed to the basic tax principles when implementing laws dealing with interest expense allocations.
It is also to the credit of our democratic parliamentary processes that a number of changes have been made to some of these original proposals as a result of the comments and inputs received during the public hearings.
Due to the following responses from the Ministry and Sars, changes were made to the draft legislation in the following areas: employer-provided motor vehicles; narrowing of the interest exemption threshold; interest expense allocation; as well as the termination of the residential entities.
The original proposals on the narrowing of the interest rate exemption threshold and the anti-avoidance amendment relating to the interest expense allocation have both been withdrawn. This is as a result of consideration of the motivations from the public comments received by the committee. The acceptance of these comments and inputs from the public, and effecting changes, as a result, shows that indeed we are a people-centred Parliament and that we take our democratic processes seriously.
Allow me to conclude by saying that it is also important to note the enormous benefits that the proposals contained in this Bill will bring to individual taxpayers, business and the economy as a whole. In particular, we are happy that the proposal to promote uniformity and avoid duplication in the implementation of the retirement and pre-retirement withdrawal pension benefit has been concluded. This will ensure that the employer- provided lump sum termination payout forms part of the tax preferred calculation. This will benefit those who are faced with retrenchment. It will be extra relief for these workers as it has the potential to bring extra needed cash in hand to cater for their immediate economic needs.
Our historic trend in tax collection over the last few years has been the lowering of personal taxes, bringing relief to low-income groups, whilst at the same time managing to broaden our tax base through better collection methods. Credit in this regard has to go to the Ministry of Finance under the leadership of hon Minister Pravin Gordhan and the SA Revenue Service for continuously improving tax collection in this country.
Mandiyicacise ke le nto ithi olu xabangelo luqondene ngqo nabantu bakuthi abangathathi ntweni ngoba lo rhulumente siwuthathe kwizirhulumente ezingaphambili ezazingahoyanga mntu. Ukuba ungajonga, abantu abaza kuthi bafumane apha ngabona bantu bangathathi ntweni. Abona bantu baza kuxhamla, xa unokujonga umise umnqwazi womsuthu kakuhle, aph' ezantsi ngabona bantu baza kufumana kakhulu. Ukuya phaya phezulu kwaba banezinto iye inzuzo isibancinane, ngoba irhafu iye ifudumala ngokuya unyuka.
Uthi ke lo Mthetho uYilwayo kwaba bantu bangathi bafumane udendo - nokuba lungenzeka kusasa - ukuba nje ukhe wapasiswa, oza kufumana isambuku-mali sama-R300 000 uyifumana nje felefele kungatsalwanga nesenti ngurhulumemente okhokelwa yi-ANC. [Kwaqhwatywa.] Kanti xa uqala apha kulamakhulu ama- R301 000 uye kuma-R600 000 abo ngabo noko ngathi bafudumele, bona ke bathi barhume i-18 lee pesenti, nto leyo ibingaqhelekanga. Yayingabonabona babulaleka kakhulu. Loo nto ithethe ukuba, Mphathiswa uPandor, siza kubaleka ngezantya singamalungu ale Ndlu siqhwaba izandla sisithi zange siwubone uMthetho-sihlomelo oYilwayo othandwa ngumntu wonke ngokungathi yimali, ngoba ungemali.
Sivene namaqela aphikisayo kulaa komiti ukuba lo umthetho ufike ngelona- lona xesha lilungiselelwe ukuba kulungiselelwe abantu bakuthi yile Palamente ekhululeke neyenza umsebenzi ngendlela ephum' izandla. Manditsho ke ndithi maz' enethole. [Kwaqwatywa.] (Translation of isiXhosa paragraphs follows.) [Let me explain clearly that this amendment is directed at our people, who are very poor because this government took over from previous governments who did not care for anyone. If you consider the Bill carefully you will discover that the people who benefit are the poor people. The low-income groups are the people who will benefit. The benefits are reduced as you go higher in the income brackets, but the tax increases.
This Bill is saying to those people who are about to be retrenched - even if it is done tomorrow - if the Bill is passed: To those who will be getting a lump sum, it will not be liable for tax. The ANC-led government will not deduct a cent from that payout. [Applause.] However, if you are getting from R301 000 to R600 000, those who are well off, will contribute 18%, which is something unusual. These used to be the ones who were suffering because of tax burden. This means, hon Minister Pandor, as members of the this House, we are going to jump and applaud, saying we have never experienced an amending Bill that is as popular with everyone as money, because it is about money.
We agreed with the opposition parties in the committee that this Act is promulgated at the right time for this liberated Parliament; that is working effectively, to provide for our people. Thank you. [Applause.]]
Chairperson, when the Minister of Finance tabled the Taxation Laws Amendment Bill in this House, he remarked that nobody seemed to be listening to his presentation. His observation points to the reality that many are disinterested in taxation laws because they do not find them to be particularly exciting or easy to understand.
Taxation is, however, the single largest intervention that a government can make in an economy. Tax policy influences economic behaviour, directs scarce financial resources from one part of an economy to another, and has a significant impact on the lives of the people who rely on the tax redistribution system to improve their circumstances.
The taxation laws before us give effect to the revenue proposals announced in the February 2010 Budget and amend 13 different Acts. When the former President signed the Money Bills Amendment and Related Matters Act into law in April last year, the budget process changed significantly.
Parliament now first approves a fiscal framework and revenue proposals, then the tax laws are drafted and a process of public consultation is activated. In theory, Parliament can amend the proposed tax laws before they are enacted. The problem, however, is that the fiscal framework has already been approved and any substantial deviation from revenue proposals could affect national income and thus change the variables on the fiscal framework. To avoid this, taxation amendments should be considered before the fiscal framework is approved.
The Money Bills Amendment and Related Matters Act was passed after several years in the making to provide Parliament with an opportunity to demonstrate that it is, in fact, an active Parliament and that it will exercise its power to amend the proposed Budget to the benefit of all South Africans.
Almost a year and a half after the enabling legislation was enacted, the parliamentary budget office is still not established. On 17 August 2010 the Chief Whip of the DA wrote to the Speaker requesting a meeting to discuss progress on the establishment of the office. The Speaker responded that a report from the team tasked with implementing the Act would be tabled in Parliament within two weeks. Those two weeks have passed.
Although the parliamentary budget office is an important support mechanism for Parliament in its amendment of money Bills, the work of Parliament does not need to be delayed in its absence. The chairman of the Standing Committee on Finance, hon Mufamadi, has initiated a process to place the matter of the VAT treatment of books on the committee agenda so that it can consider whether a formal request will be made to National Treasury to include a zero rating in its development of the budget for the next financial year.
We welcome this development and thank the chairman for progressing this matter that will have a significant and positive impact on improving access to reading material for all South Africans, especially young readers whose thirst for knowledge is severely hampered by empty school library bookshelves and students who are subsidised to study and yet pay tax on the prescribed books that they need to purchase to ensure success in their examinations and ultimate qualification. The DA looks forward to progress on this in the near future.
The DA also welcomes the voluntary disclosure programme that will run from 1 November 2010 to 31 October 2011 to grant relief to taxpayers who disclose defaults which the SA Revenue Service was not aware of. This will ensure that errant taxpayers are permitted to return to their respectable position within the tax net. An opportunity also arises for the so-called informal economy to be included in the calculation of the size of our economy and to contribute to the society that generates its income.
The 2009 tax statistics reveal that 5,5 million individual taxpayers, from a total population fast approaching 50 million, contributed 31,2% of tax revenue. This is a significant contribution by a relatively small portion of our population. The DA does not welcome the increase in the general fuel levy and the one for the Road Accident Fund. We believe that government should not be increasing the tax burden when it has not made any significant progress in plugging the gaping holes in the application of the people's money. The procurement process is highly inefficient at best, and at worst riddled with corruption. The tender default register remains empty and we await progress following the preliminary report on 27 October 2009 of the government task team to affect saving.
We also await progress on the implementation of the wage subsidy, the introduction of a poverty line index, progress on reducing the size of the administration bureaucracy and increasing the number of teachers, nurses and policemen who serve at the coalface of service delivery. The recent public sector strike, currently on hold, demonstrated the wide disparities in compensation between different classes of public servants.
The taxation laws include a number of amendments to tax on individuals, including partial compensation for fiscal drag. The DA believes that it is possible to offer taxpayers more comprehensive relief from the impact of inflation on their disposable income and greater incentives to save through higher tax-free thresholds on interest-bearing cash investments.
The DA supports the ideal of a lower carbon footprint and believes that incentives are required to encourage economic behaviour which is beneficial to our environment. Our concern that the flat rate carbon emission tax on new vehicles was implemented in isolation from a broader strategy to lower the carbon emissions from all sources in our economy has been addressed. Given that consumers do have a choice to purchase lower emission vehicles, we do not oppose the tax and believe that it will encourage the desired consumer behaviour.
Some motor dealers have falsely advertised that the tax is applicable to all new passenger vehicles to boost their sales. New passenger vehicles that emit less than 120g per kilometre will not be subject to the tax. Although measures have been taken to counter tax arbitrage facilitated through transfer pricing, this risk will always exist while our corporate tax regime is higher than that offered in other more attractive jurisdictions.
Although participation in a race to the bottom in terms of corporate tax is not constructive, National Treasury should continually work towards a lower tax regime that will attract taxpayers into our tax net. The micro business turnover tax should be redesigned, given that it has proved to be unattractive to its target market.
The committee has raised with National Treasury our concern that the tax laws are becoming increasingly complex and complicated and that their simplification should be considered. Treasury has responded that improvements are being made where possible, but that oversimplification can result in unintended distortions to the detriment of particular taxpayers.
The DA remains convinced that a tax commission is required to formally consider how a suitable balance between simplicity and comprehensiveness can be achieved, and we look forward to the result. There was broad consultation during the parliamentary hearings and the willingness of the National Treasury to interact with various stakeholders is noted with thanks. The DA will support the Bills.
Speaker, the proposed Bills will not only provide personal income tax relief, but will also close various tax loopholes to ensure a more equitable tax system. The big question is: Is this the end of the road of tax relief? Is next year going to be different? A few options spring to mind. We can see maybe even higher fuel levies ...
Hon members, order please. You are speaking too loudly now.
We can see higher fuel levies next year. We in Cope want to urge, if that is on the cards, that Treasury starts building into their future plans a higher fuel levy for a conditional grant to provinces to take care of regional roads. A good road infrastructure is vital for economic growth.
The other option is a range of new taxes. Are we preparing for a new Tobin tax next year? Maybe the Minister can say something about this. This debate today is against the background of a severe public sector strike. It was Mr Vavi who has reminded us that, since the economic downturn in 2008, we have lost over 1 million jobs and that we still have the highest inequality of any middle-income country in the world. Both these reasons do not justify the strike, but show how absurd it was.
When companies see revenues plunge and wages rise, they cut jobs. In 2009 Anglo Platinum agreed to a 9,5% wage hike, but immediately shed 15 000 jobs. The public sector is no different. Last year we saw an 11% increase and therefore 35 000 jobs were not created. So, an out of control public sector wage bill is bad news for fiscal discipline. If you do not start shedding jobs, or cutting infrastructure spending, or raising taxes, or introducing new ones, what do you do? The best way out is to see economic growth. Even if you have to shed jobs, you will see more revenue for the state. So, what we need in these difficult times is patience, a sustainable and well-anchored fiscal and monetary policy. So Cope wishes Sars all the best in collecting their due taxes and call on all South Africans to make use of the instruments created today to come clean and pay their due taxes. We shall support the legislation. [Applause.]
Mr Speaker, this complex legislation, like all complex legislation, has good features, less than good features and some features which are less than acceptable. I will limit my comments to echoing a couple of statements made by the hon George.
The first one is that during the process in which we have been involved, we witnessed much rather than participated in it. There was an exchange between highly-paid consultants representing the top layers of the economic system on the one side, and the Treasury on the other. What was lacking within that process was the voice of the common citizen, the voice of the average taxpayer who is carrying the lion's share of the fiscal burden.
So, I think that we endorse the proposal of the Tax Commission which places an emphasis on the representation of ordinary citizens, over and above what we Members of Parliament can provide in what are often extremely technical debates.
The second issue, which needs to be brought about as soon as possible, as the hon George indicated, is the budget office. There is no reason why it should not be there. We have delayed the enactment of legislation which enables us to amend money Bills for many many years. This is a necessary instrument to bring the democratic process to completion and it needs to be done.
The other suggestion, Minister, please, is for a composite text. Tax amendments are pounding one another. We have got bis, tres, quatres, quinques, septes of the sections. I understand that within the Treasury they are actually using a composite text. It would be nice to re-enact the law, because I understand that there are even doubts on what the law is, and there are differences between what Butterworths is publishing and what others are publishing. So, certainty on the tax law this is an imperative.
Another issue, Minister, is that we tried to close loopholes, but I think that a great deal of damage has been done in terms of simplicity. Complexity has been increased. On the issue of the headquarters of foreign companies, for instance, the system has become so hard to understand that we may have created a tax disincentive for foreign companies placing their headquarters in South Africa rather than in Botswana, where they are currently doing it for no other reason than the fact that the tax system is simpler.
Personally speaking, carbon tax is not something we can endorse. There is no proven connection between a carbon tax and its positive effect in redressing the terrible situation of global warming and climate change. So, in the end, the carbon tax is another luxury tax by a different name and will be remembered amongst taxes like the window taxes in England.
The fuel levy is a regressive form of taxation, and I will leave the rest for another day. Thank you. [Time expired.]
Hon Chair, Ministers and Deputy Ministers present, hon members and comrades, the point of departure for the ANC in approaching this debate on the Taxation Laws Amendment Bill must start with ANC policies. The ANC regards the amending Bill as a valuable contribution in the ongoing reform of the taxation legislation regime.
In 1994, the Reconstruction and Development Programme, commonly known as the RDP, proposed the reform of the financial sector and ongoing transformation of the financial system. This RDP proposal was in recognition of the fact that the ANC government inherited a distorted financial system. The RDP notes that assets and taxation practices contributed very little to the development of new sectors of the economy.
This Bill seeks to regulate our tax relationships with foreign countries. Underpinning this tax relationship is our developmental agenda at home, on the continent and with the rest of the world. Such a developmental agenda must inform the nature and the content of the taxation regime and its impact upon trade. Therefore, in crafting the Bill, consideration has been given as to where the Industrial Policy Action Plan, Ipap 2, seeks to steer our trading relations and how this is informed by our new economic growth path, a subject that we have recently debated in this House.
The Bill will bring about the application of best international practice and ensure the most modern methods of determining compliance on tax collection by foreign and domestic companies. At this point in time, the ANC recognises that our economy is export-led, in the main, with its focus on raw material and commodities. The Bill recognises this current scenario, but is crafted in such a manner to allow for further amendment. This will ensure progress on the new growth path and have future implications on the taxation regime.
The Bill further seeks to encourage foreign investment. Any tax regime must be based on a scientific appreciation of the global environment. Within the context of economic globalisation, we are increasingly conscious of insistent demands for the free movement of commodities, finance and capital across the globe. This Bill has, in content, been crafted to appreciate this reality, one which we will still be engaged with in the longer term.
In this regard, our taxation system is not merely about the creation of a foreign investor-friendly environment in order to do business. While recognising the importance of foreign investment, such an approach will negate the nature of the economy we are trying to build. However, tax legislation must be informed by the ANC's policy approach on industrial strategy, international co-operation and our continental focus. Importantly, as we enter into a new trade bloc agreement with Brazil, Russia, India and China, the structure of our tax regime is going to be critical.
A developmental state ensures that its tax regime speaks to the objectives of what that state seeks to achieve, both nationally and internationally. Therefore one of the key focuses of this Bill must be that it seeks to ensure that both local and foreign investment generate a significant amount of capital. That capital is then steered in such a manner that it contributes towards the creation of decent jobs and the reduction of poverty so as to achieve the national priorities.
The matter of global competitiveness and the nature of the new economic bloc that we enter into will always pose fundamental questions on how we structure our taxation regime and for what objective. The ANC does not enter into this debate on the basis of seeking competitiveness as an end in itself, but rather how the taxation regime leads to greater equity and fairness in local and global trade. Greater equity must lead to a better sharing of basic and natural resources, thus resulting in distribution of wealth to the poor.
The Bill recognises that we operate in a highly regulated environment which, globally, seeks to structure a particular outcome, one which the ANC may not necessarily agree with. Equality, solidarity and sound governance are principles we strive for, and this must influence how we structure changes to the tax regime. The complexity that faces a developmental state such as ours is to ensure that our influence and a more progressive world outlook are achieved and how this must impact upon the nature and the structure of our tax regime.
We are deeply conscious that many industrialised countries in Europe and North America would want to extend their access to the market through a system of greater tax liberalisation. The ANC believes that the international tax system needs to be regulated appropriately in order to protect developing countries and reflect the principles of equity, solidarity and sound governance that were mentioned earlier on. We, of course, desire to protect our fiscus through the adoption of new amendments to the tax regime. These amendments should be viewed in the ongoing restructuring of our economy, the new growth path and the developmental state's capacity to drive economic transformation.
The need for this amending Bill to address certain specifics is reflected in the tax on cross-border trade finance exemptions, which are defined more clearly, and interests associated with letters of credit agency. The Bill seeks to realign the definition of foreign dividends in line with the international law of the country under which foreign companies are established. Here, a direct tax credit or a participation exemption is encouraged. We are conscious that some foreign companies get into an excessive amount of debt while remaining free from capitalisation restrictions even when the main operations of the company in question are contained within a local South African branch.
In this regard, the ANC therefore requests the hon Minister Mr Gordhan and the Deputy Minister to ensure that transfer pricing is efficiently implemented and a monitoring tool is designed. Thank you. The ANC supports the Taxation Laws Amendment Bill. [Time expired.][Applause.]
Chairperson, hon Minister, the ACDP shares concerns expressed during the Finance Committee's deliberations that the tax laws are becoming more and more complex with all the amendments, and that some sort of consolidation or simplification is required. Although I have studied tax law, I still find legislation complex, and understand how other MPs, let alone your normal, average citizens, would also struggle to follow the amendments. One of the key issues I do understand relates to tax rates and the thresholds for individuals. Minister, it is commendable, given the budgetary constraints, that personal income tax relief amounted to R6,5 billion, albeit that this relief will basically address inflation and the fiscal drag.
The ACDP also supports the voluntary disclosure programme and trusts that defaulting taxpayers will make use of this opportunity to bring their tax affairs into order. This programme will run from 1 November 2010 to 31 October 2011, with the penalties and some, or all, of the interest being waived. Sars, as we understand, will also not pursue any criminal prosecutions during this time.
Minister, as we are dealing with tax issues, would you care to comment on reports that the budget deficit for the year may be far less than the level estimated in your February Budget Speech? This is if the current trend of a 23% increase in government revenue between April and July this year compared to last year continues, which is almost twice the 12,3% growth projected in your Budget.
On the other hand, we understand that slowing economic growth will also reduce revenue and the public sector wage increases will no doubt boost government expenditure. But overall, do you expect the budget deficit to be less than the projected 6,2% of GDP, or is it still too early to speculate on this issue? Clearly, if it is less, this would buck the global trend for increasing budget deficits.
Lastly, hon Minister, the ACDP wishes to commend Sars on tightening up on revenue collection, and we will support these Bills. I thank you.
Hon Chair, hon Ministers and Deputy Ministers, hon members as well as officials from Treasury, the Taxation Laws Amendment Bill deals with, among other issues, payment of royalties by mining companies. As the beloved movement of South Africans and the pride of Africans, the African National Congress fully supports the amendments being proposed in this Bill with regard to refinements to the minerals royalty legislation.
Notwithstanding the argument suggesting that these amendments are just but scratching the surface of the economic transformation of our country, the ANC believes that the introduction of these changes will help to promote our strategy of minerals beneficiation and thereby, grow the economy. The changes will also help in establishing co-ordination between the implementation of the Minerals and Petroleum Resources Royalty Act and other taxation laws. This co-ordination is important for increasing our tax base.
Hon Chair, it is our insistence that the proposed changes will ensure that we expand the reach of tax policy as one of the potential forms of redistribution mechanisms. Hon members, the concept of royalty in relation to taxation is defined as a payment to the owners of natural resources such as minerals and petroleum by the party licensed to extract such. Royalties, or, as commonly known, resource rent, is paid for the exclusive or nonexclusive licence granted to the operator to extract the minerals which they sell for profit.
This debate, therefore, happens at an opportune time in our history when there is much public debate about our mineral resources, the mining industry and its ownership, as well as the role of the state. The difficulties relating to the system of issuing mineral rights licences experienced by our government is that these rights are open to abuse for a quick profit in the private sector. This is a fact close to logical necessity, but also at the centre of this topical issue is the enormous wealth that can be accrued from such royalties.
Our taxation system classifies royalty as indirect tax. Currently, in addition to our taxation laws, royalty payments are governed by the Minerals and Petroleum Resources Royalty Act of 2008. The state holds the custodianship of our natural resources, including minerals, through the Mineral and Petroleum Resources Development Act of 2002. This is important in the context of royalty because the owners of natural resources are usually sovereign states.
The policy of the people's movement, the African National Congress, articulates that the use of natural resources, including the minerals, must be undertaken in the interest of sustainable economic development. This policy has informed one of the priorities of the ANC government, which is the promotion of industrialisation through, among others, beneficiation. The ANC policy states:
Our programme must also deepen the linkages of the mineral sector to the national economy through beneficiation of these resources and creating supplier service industries around the mineral sector.
The essence of this Bill is to remove any impediments embedded in the current rules and regulations which act as obstructions to minerals beneficiation. Royalties are often governed by agreements which may specify the determination of royalties in relation to the amounts per unit extracted, or as a percentage of revenue.
Included in the Taxation Laws Amendment Bill are a number of proposals to refine some of the mineral resources royalty provisions. During the tabling of the Budget in February this year, the Budget Review indicated that the Royalty Act has a number of technical anomalies that need correction. These included, inter alia, issues on how unincorporated joint ventures are to be treated, how information is to be stored between Sars and the Department of Mineral Resources, co-ordination with the Income Tax Act as applied within the context of the Royalty Act, and clarifying the specified conditions of determination for certain minerals where there is a range of specified conditions.
Most of the proposals mentioned were further outlined in detail in the draft Bill submitted to the Standing Committee on Finance in May to facilitate public hearings. The process of public hearings brought very important contributions which have enriched the final draft of the Bill. Most of the comments from the public and experts in the field were accepted and resulted in changes being made. For this, we must give credit to all those who gave inputs and to the Ministry for its consideration of the positive comments that were received.
Credit should also be given to the Standing Committee for the robust interrogation of the Bill and all the submissions, which was done despite the existence of the Budget Office. Hon Oriani-Ambrosini, I hope that you will join the committee in deliberations because it sometimes becomes difficult for us to follow on your submissions when you make them from this podium. We have more time in our committee engagements to listen to you attentively. [Applause.] In conclusion, I wish to reiterate my initial emphasis on the importance of mineral resources to our economy. We must accept that this Bill takes us a step further towards the goal of embarking on a new economic growth path that we have debated in this House, the growth path that is sustainable and focused on growth and job creation through industrialisation. An important element of this, as defined in the Industrial Policy Plan, is the beneficiation of our minerals.
We must therefore welcome the proposals contained in this Bill as they are specifically meant to eradicate any rules that have historically acted as impediments to minerals beneficiation. The changes that are being introduced will assist in the promotion of beneficiation and, thereby, propel us to greater heights of industrialisation, economic growth and employment creation. Hence, the tried and tested, glorious movement of the ANC supports the Taxation Laws Amendment Bill. Ke a leboha. [Thank you.] [Applause.]
Chairperson and hon members, good afternoon. Let me start with some good news. The Governor of the Reserve Bank has decreased interest rates by 0,5%. [Applause.] So, you can go and borrow some money if you can afford to pay it back. That is the key thing. Interestingly, the Reserve Bank also says that inflation is going to be fairly tame for the rest of this year and not expected to rise above 5% for next year, that food prices will remain fairly benign, and that the issue of growth is slightly less optimistic than what we have been talking about before, because now they say that the rest of this year might produce growth of 2,8%, whereas everybody else was talking about moving towards 3%.
Let me firstly thank the chair of the standing committee, Mr Mufamadi, and members from all of the parties for their participation and for their support. It looks like, although everyone has said how complex this legislation is, they all understood it well enough to come and speak here. So, that is a good sign. Am I right? [Laughter.] Let me also thank the members of the public and the various constituencies who made submissions to the committee and for the officials from Treasury and the SA Revenue Service, Sars, who processed these.
The issue of simplicity and complexity in tax legislation is a perennial one. It is one that we talk about every single time we get here, and even the Minister of Justice and Constitutional Development can't help us to simplify this legislation, I am afraid. The more complex, as I have explained many times, the tax schemes become to either evade or avoid tax - whatever you think is the right and more polite word - the more complex legislation becomes throughout the world. I am sure my colleagues from Treasury and Sars are listening carefully to work out ways of simplifying this complexity. Perhaps the one step is removing the administrative elements from tax legislation, which we now do in the Tax Administration Bill, so once that is processed, that will be the first major step towards simplifying tax legislation.
I am afraid that as long as there are stunts for pricing and there are all sorts of schemes that are developed by batteries of people far larger, both in terms of the resources that they have access to and the numbers that they can actually command, than governments anywhere else in the world, we are not going to be able to cure the problem of complex tax legislation.
Several of the hon members, and in particular hon Luyenge, has talked about the importance of collecting tax, of increasing the tax base, of ensuring that the state plays a key role in enhancing what we call our caring society. Those who, I am afraid, engage in evading tax and who deliberately use avoidance techniques as well don't help us in this particular respect. Much of the complexity in this legislation is, in fact, directed to them.
The hon George also referred to complexity and what we can do in this particular regard. I am not sure that we are required to spend millions of rands on a commission. Perhaps between Parliament and ourselves we can have more dialogue about tax policy issues and whether some new tweaking is required in respect of tax policies. So, I make that offer that we have a workshop of some sort where contributions from each of us will, I am sure, add some value in this regard. You say that you are awaiting reports from us on procurement and other issues. There is good progress being made in that particular regard.
However, where you are wrong, hon George, is that transfer pricing is not related to the corporate tax regime. Transfer pricing is, in the context of globalisation, in the context of distributive production and operations of multinational companies, a feature that will grow increasingly. These are arbitrage opportunities that companies around the world have, which they utilise, and the world, through the tax administration and tax policy side, is constantly upgrading, if you like, the tools that it has in order to make sure that the country concerned doesn't actually lose money. What we see in the Act at the moment is in fact an attempt to once again up the stakes, if you like, in terms of transfer pricing by introducing new criteria which would assist in stemming the flow of monies lost to the fiscus.
The hon Koornhof - I am not sure if the headline should read: Cope wants higher fuel levies. It sounded like that a little bit, but I understand where you are coming from, that you actually want to redirect some of the fuel levies to regional roads. Thank you for that idea. The Tobin tax is perhaps one of those things we could debate when we have this workshop that I am talking about. You accurately described the balance between creating jobs, more taxation and some cuts in expenditure, and that is what our fiscal framework attempts to do. It attempts to create that balance between taxation, expenditure and borrowing, in particular.
The hon Oriani-Ambrosini has been invited by the hon Van Rooyen to committee meetings, it looks like, to raise some of the issues that he has, but once again he never fails to entertain us with the latest thoughts that he's actually had, and we thank him for his contributions in that regard. The same answers that I've given until now about simplification on tax legislation apply to him as well.
The one we need to be careful of, as we talk about simplicity, is that we do not create an environment - in this instance and something that other colleagues have mentioned as well - of being part of the race to the bottom. When we talk about foreign companies investing in South Africa, when we open up new regimes for headquarters to be established in this country as well, we should not compete in a way in which we want to beat everybody else and in the end, when we turn around, we find that we have nothing in our pockets. That is what the race to the bottom is about at this point in time. So, at some stage we will have to ask ourselves what would be in our national interest and where the limit would be where we would go to in order protect our own tax base as well.
I think the hon Oriani-Ambrosini needs to also, perhaps, visit the Treasury, let alone the committee, in order to enable us to give him some evidence about the connection between carbon tax and behaviour. That connection is certainly there, and we will want to make it available to him.
I want to thank the hon Dubazana for her contribution and her plea to us to make sure that the tax system links to our aspirations to build a developmental state, to support the growth path and to support the creation of jobs and growth in South Africa, as well.
The hon Swart also makes the plea about complexity. I have given the answer to that. Thank you for your support for the voluntary disclosure regime, and you asked me to commit myself on the budget deficit. I hope, like you, that it will be lower as well, but 27 October is around the corner. Let's wait for that date, and we will all know what it might look like for the foreseeable future.
Let me thank the hon Van Rooyen for his excellent research into mining royalties, the importance of co-ordinating various aspects of tax policy, and for his insight into the link between mining, industrialisation and the beneficiation processes. Of course, our challenge in South Africa is to stop talking about some of these things and attempt to concretely do the things that will enable us to create jobs and grow the economy. Once again, thank you to all of the parties for their support and for their participation in this process. [Applause.]
Debate concluded.
Taxation Laws Amendment Bill read a first time.
Voluntary Disclosure Programme and Taxation Laws Second Amendment Bill read a second time.
The Bills will be sent to the National Council of Provinces for concurrence.