Chairperson, the National Treasury and SA Revenue Service briefed the Select Committee on Finance about the proposed amendments to the protocols between South Africa and Sweden, and between South Africa and Ireland. The protocol between South Africa and Sweden is a double taxation convention, while the protocol between South Africa and Ireland is on the avoidance of double taxation and also the prevention of fiscal evasion with respect to taxes on income and capital gains.
Double taxation refers to a situation where the same income is taxed twice: first as profit for the corporation and, secondly, as dividends paid to its shareholders. The rationale for double taxation for corporations is based on the fact that the corporate form of business is separate from owners of the corporations. Both shareholders and corporations benefit individually from the public goods supplied by the government.
Shareholders need to pay tax as individuals for the benefit derived from the public goods and services rendered by government to them as individuals. Corporations enjoy the same benefits, as separate entities from the shareholders. For this reason, double taxation will not only ensure that shareholders and corporations, as separate legal entities, will be paying their own share of benefits, but will also ensure that each country receives its share of tax revenue.
The South Africa-Ireland Tax Treaty Protocol was signed on 17 March 2010, and the South Africa-Sweden Tax Treaty Protocol was signed on 7 July 2010. The implementation of the proposed conversions is subject to renegotiation of the nine tax treaties that have a zero rate, withholding tax on dividends. These include Australia, Cyprus, Ireland, Malta, Netherlands, Oman, Seychelles, Sweden and the United Kingdom. The renegotiation also addressed certain aspects that are not present in the old treaties.
The committee was further briefed on dividend flows, trade flows and general investment flows between South Africa and the two countries over the period from 2005 to 2009. Having considered the presentations on the proposed amendments by the National Treasury and the SA Revenue Service, the Select Committee on Finance recommends that the National Council of Provinces considers approval of the proposed amendments to the protocol between South Africa and Sweden, and the protocol between South Africa and Ireland. I thank you.
Debate concluded.
Question put: That the Report on the Protocol amending Convention between RSA and Kingdom of Sweden be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report on the Protocol amending Convention between RSA and Kingdom of Sweden accordingly adopted in accordance with section 65 of the Constitution.
Question put: That the Report on the Protocol amending Convention between RSA and Government of Ireland be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report on the Protocol amending Convention between RSA and Government of Ireland accordingly adopted in accordance with section 65 of the Constitution.