Hon Chairperson, hon Deputy President of the Republic, hon Ministers and Deputy Ministers, in particular Minister Pravin Gordhan and Deputy Minister Nhlanhla Nene; hon members, comrades and distinguished guests, the Rates and Monetary Amounts and Amendment of Revenue Laws Bill 2012 was introduced in Parliament on 13 March, together with the rest of the taxation laws amendment Bills for 2012. This legislation gives effect to the tax proposals announced by the Minister of Finance in the Budget Review of 2012, tabled in this House on 22 February this year. It is therefore my great honour and pleasure to stand before this House to deliberate and report back, as well as make recommendations on the Bill.
When the Minister tabled the budget and tax proposals earlier this year, he also reminded this august House that the global economic uncertainty will remain with us for a longer time to come. He also said that tax proposals before us seek to strike a balance between protecting the fiscus and raising revenue so that we can realise our social and economic infrastructure spend, to grow our economy, create decent jobs and narrow the growing distance between the poor and the rich.
Hon Minister, your predictions remain true and relevant to this day because, as matters stand at the moment throughout the world, large and small economies have come to realise that taxation or revenue collection is but the key and critical element that determines the independence or sovereignty of every state because it is through the budget that the aspirations of every citizen can be realised. Therefore, as we always say, a budget is nothing other than an expression of a political will and commitment to address the challenges of society at hand. It is through taxes that governments are able to meet their co-objectives and to promote the welfare of each nation.
The Bill, in a way, hon members, continues to tell a remarkable story of revenue collections under constraint and economic global conditions not of our own choice, since 2008. It is a remarkable story of good and extraordinary performance by the SA Revenue Service, Sars, a story of economic resilience that continues to weather the storm buffeting major nations - some of which are our own trading partners and major trading partners for that matter, such as Europe and the entire globe.
It is the proud story of our government's careful approach and implementation of a prudent fiscal policy supported by a strong and emerging culture of tax compliance by many South Africans who continue to pay their dues to support the nation. Chairperson and hon members, these, to me, should be compelling reasons for us to appreciate the proposed changes in the Bill.
The Deputy Minister of Finance always reminds us that almost every single South African makes a contribution to the fiscus; be it through income tax or earnings; capital gains or interest; value-added tax when a child buys sweets; the fuel levy when we fill up our vehicles; or many other tax instruments designed to ensure that we all share the responsibility of our country's future. It is the shared responsibility that contributes to our fiscal strength and stability, year after year.
Hon members, revenue correlates strongly with shifts in gross domestic product, GDP, and economic activity. Therefore, with this Bill, we seek to strike the balance between the fiscus and revenue, to achieve a better life for all, working together with the masses of our country to improve service delivery, eradicate poverty and eliminate socioeconomic inequalities in our society.
The tax statistics show that the impact of global recession on the South African fiscus amounted to an estimated R255 billion for the period 2008 to 2011. As Commissioner Magashula would always say to us in our committee, and I quote, "It is said that the definition of statistics is a science of producing unreliable facts from reliable figures."
Therefore, I would not want to bore you with the statistics. Let me return to the Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Bill, whose main thrust is the upward adjustment in personal income tax. Hon members, when we think of taxation in most instances, we think it is a very terrible, mundane subject. In reality, it is like life, and that is what makes it fascinating because life is complex and exciting.
If you know the position that a person assumes on taxes, you can tell their whole philosophy of life. Once you get to know the tax code - it embodies all the life of either great politics or goodness or charity - you would realise that everything is covered in the code. That is why it is so hard to get a simplified tax code because, just like life, it is not simple.
Chairperson, we must commend Commissioner Magashule and his team for steadily turning around the negative attitude of taxpayers, which has now resulted in tremendous growth in tax compliance in this country.
Statistics also reveal that there is growing gender equality in the workplace. The number of female taxpayers assessed grew by 163 000, or 9,5%, between 2007 and 2010 compared to an increase of only 44 000, or 1,5% of males. I think it shows that there is some economic progress in the field of gender transformation.
However, it remains a matter of serious concern that, currently, the biggest burden of personal income is being placed on taxpayers with taxable income in excess of R400 000 per annum, which constitutes only less than 10% of taxpayers but ended up being liable for almost 54,2% of the assessed tax for the year 2010. Hon members, the statistics also tell a story of real tax relief for the South African taxpayers over the past few years. Of the R94 billion in tax relief for individuals granted over the past decade, the bigger portion of this tax relief has benefited the lower and middle income earners and has provided a major inflationary relief for the poor.
The Bill before us continues with being pro poor and lower income groups, in terms of taxation. The Bill also reflects, most importantly, on the small business corporation. It is an important amendment that we are supposed to support, for it is in the small business corporation that we can stimulate entrepreneurship, development and job-creation initiatives.
The dividend tax policy is separating the company financials from shareholders, and this separation of company tax from dividend tax falls in line with the international practices to enforce double taxation agreements we have entered into with other countries. Furthermore, the dividend tax is a true reflection of shareholders' profits. Hon members and Chairperson, the ANC supports the Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Bill 2012. I thank you. [Applause.]
Hon Chairperson, hon members, the Rates and Monetary Amounts and Amendment Revenue Laws Amendment Bill 2012 is an interesting piece of legislation. In his introduction to the Bill, Minister Pravin Gordhan suggested that the tax proposals before us - I think hon Mufamadi has also echoed that - should strike a balance between protecting the fiscus and raising revenue. Indeed, we agree that this will enable us to pay for the expansion of our economic activity.
The DA is largely in favour of the Bill, especially because of its attempts to offer relief to lower and middle income households on whose behalf the DA has been actively campaigning to bring down the most important issue of the cost of living.
Firstly, we are pleased to note that the tax thresholds have been adjusted to reflect inflation. The personal income tax rate and bracket adjustment, for instance, have moved from R59 000 in 2011-12 to R63 000 in 2012-13 for those under the age of 65. This is in fact slightly above official inflation.
Secondly, we were expecting the dividends tax to replace the secondary tax on companies from April this year. What we did not expect, however, was an increase in the rate from 10% to 15%. Research shows that the new tax could reduce your dividend income from a nonretirement investment by a total of 6,5%.
Treasury's justification for this increase points to complex and competing issues as it claims that the increase is necessary to compensate for the projected R1,9 billion in tax loss. Minister, we are, however, pleased that investors in retirement funds, living annuities and preservation funds are exempt from the tax. We are indeed very pleased with this development.
We are, however, strongly opposed to the proposed increases in capital gains tax to an effective 13,3% for individuals and 18,6% for companies. Such increases in taxation unfairly target savings and investments in a country with a chronically low savings rate. For instance, higher capital gains tax discourages reinvestment, especially for small and medium-sized enterprises.
Capital gains tax increases will place a burden on these companies that may undermine the critical national goal of job creation. Moreover, there are several tax increases coming down the line. New tolls and increases in administered prices - the old story of increases year in and year out on administrative prices - are already too much for our economy.
Imposing a carbon tax, a local business tax and VAT, and imposing a payroll or income tax increase to fund the National Health Insurance will push us over the edge and do serious damage to our culture of taxpaying. Instead of speculating around what new taxes to impose, the national Budget should have promoted potential tax revenue by doing more to drive growth in South Africa.
If we accelerate growth from the 2,7% forecast for this year, to the 8% targeted by the DA, we will double the size of our economy and our tax revenue in 10 years. Escalating up dividends tax and capital gains tax were probably the last loads that could add to the taxation scales without tipping South Africans from heavily taxed to totally overtaxed. That is the concern. If new taxes are added, we cannot safely keep that distinction.
Our tax regime needs to target strategic tax reductions in order to drive growth. We need to be looking at places where we can lower taxes to stimulate investment and lower costs, especially for the smaller businesses. I am very pleased because a lot of emphasis was placed on the smaller businesses. The Minister himself made the salient point that it is well recognised that growth is the best way for government to generate funds.
South Africa's tax as a proportion to GDP is now 25%. Let us compare it to other countries. Several countries with whom we are competing have rates well below that. As a point of interest, Zambia's ratio is at 16%; Kenya is at 18,4%; Chile is at 18,6%; China at 17%; and India is at 17,7%. In order to compete with these nations, especially our African counterparts, we will have to become more tax competitive. Finally, we have to be mindful of challenging economic conditions - your speech alluded to this, this morning - both globally and locally. Challenging conditions could weigh in on business confidence and discourage organisations from expanding production capacity. We have to be mindful to avoid tax shocks at a delicate stage of the business cycle.
The e-tolling debacle is such an example of increased costs to all South Africans. An update of the controversial e-toll project is awaited with a huge outcry in relation to cancelling the existing open road tolling contract, as well as further details on the funding options for the National Health Insurance scheme.
We have to be mindful of how to maintain a sound relationship between the increased welfare spend on the one hand and the limited tax base on the other. Not maintaining a sound relationship could tip the taxation scales in South Africa to totally overtaxed. Lower growth patterns in the world show that we need to spend money more effectively, as you indicated this morning. Thank you very much, hon Speaker, for the opportunity. [Applause.]
Madam Deputy Speaker, we cannot support this Bill because it is inherently unfair. Firstly, the Bill purports to correct the fiscal drag but does so on the basis of doctored inflation figures which are much lower than the actual cost of living. You all know very well that the cost of living is now at 6%.
All the rebates and adjustments provided for in the Bill should be increased by at least twice as much to ensure that people pay today the same amount in real-terms taxes as they paid before. By failing to do so, this Bill imposes an unfair hidden tax on real-terms inflation, especially for those who are in the lower income bracket.
Secondly, the Bill increases capital gains taxes. These taxes are on after- tax saved money. These are taxes made on investments made with whatever is left in the hands of the citizens after all the other taxes have been paid. Effectively, this becomes an unfair tax on saving. These taxes are also made unfair by a great portion of what is really being taxed being inflation, even being future inflation figures which are below the cost of living.
Thirdly, the Bill brings about a package of regressive indirect taxes by increasing levies such as the fuel levies and the taxes on alcohol and all the consumables. These taxes are not tied to income and they are proportionally paid for more by the poorer than the richer. In addition, this Bill is probably unconstitutional because of the manner in which it was processed at the committee stage. The committee refused to entertain and vote on any amendment, acting on the erroneous legal opinion stating that the Budget Office has not yet been established when, in fact, as a matter of law, it had been established albeit not yet resourced.
The acting chairman refused to rule on whether the proposed amendments were out of order or in order. Transcripts of the recordings of the deliberations of the meetings will reveal that what took place there cannot be described as the process of deliberation. Thank you. [Time expired.]
Hon House Chairperson, hon Deputy President, honourable executives who are present, hon members, "sanibonani". [I greet you.] The Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Bill of 2012, which was introduced in Parliament on 13 March 2012, deals with the rate changes and other numerical matters and not with the more substantive tax proposals. Together with the rest of the taxation laws amendment Bills for 2012, this legislation will give effect to the tax proposals that were announced by the Minister of Finance in the 2012 Budget.
It is important to make this clear, because I am sure you have listened to the IFP, the most learned so-called hon Dr Oriani-Ambrosini and hon Ross, where they failed to differentiate between what we are debating now, which is the Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Bill, and the tax proposals, which have been dealt with by the Minister during the Budget Speech.
I don't know what hon Dr Oriani-Ambrosini is talking about when referring to unfairness because the reforms are indeed intended to improve fairness in the tax system and ensure that the income from capital is taxed more appropriately. Proposals are advanced to support small businesses and to encourage household savings. Personal income tax provides a foundation for an equitable, progressive tax system to ensure that the direct personal income tax burden on individuals remains reasonable. Personal income tax brackets and rebates are adjusted to take account of inflation or "bracket creep", as well as to provide the limited real tax relief.
Studies have repeatedly shown that the best way to promote savings is to provide salary relief so that average workers have the discretionary funds to save. This relief for working employees has the added benefit of alleviating the wage burden on employers. Personal income tax relief should indirectly reduce the pressure on wage increases because taxpayers will have a greater level of after-tax income.
Governments all over the world recognise that small businesses are economically very important. The ANC-led government continues to recognise the importance of small business as an engine for wealth and job creation. To achieve the objectives of economic growth through competitiveness, on the one hand, and employment generation and income redistribution as a result of this growth on the other, South Africa's small, medium and micro enterprises, SMMEs, economy has been actively promoted since 1995. Over the last few years, the growth in employment by SMMEs in South Africa has exceeded the growth in their contribution to the gross domestic product,