Thank you, hon Speaker, hon members, Ministers and Deputy Ministers present in the House. As we have congratulated Kosie Louw for his appointed to an international forum, let me also take this opportunity to recognise two of his colleagues who are amongst us today, Mr Frans Tomaseck and Keith Engel.
These gentlemen have been with us while we were dealing with taxation laws, and they have spent a lot of time with us trying to explain technical issues. I want to say upfront, thank you very much for the number of hours that you have spent in the committee to ensure that we do succeed in our work on behalf of Parliament. [Applause.]
The state's ability to finance and advance its programmes to improve the wellbeing of its citizens lies with an establishment, as well as with the functioning of taxation systems that directs both tax liability and tax administration provisions. Clearly, the task of ensuring that the state meets both its constitutional obligation and the electoral mandate is dependant upon the taxation regime it chooses to follow.
Any state that chooses not to address this runs the risk of becoming detached from its base, its human resource, since it would be unable to address the needs of its people financially, and to put into practice policy decisions that would result in improving the quality of life of its citizens.
The evolution of taxation laws and policies in South Africa relates to the progressive nature of the taxation laws that the democratic government has chosen to pursue since the advent of democracy. This is a tax system that seeks to promote and protect the most vulnerable and the poor, whilst, ensuring that the wealthy contribute accordingly to underpin the redistributive nature of our economic policies.
The evolution of our taxation laws and taxation system has continued to underpin this redistributive trajectory of our economy over the years. The Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill before us seek to promote effectiveness and efficiency to strengthen the countercyclical fiscal policies which have sustained our growth path over the past few years.
These are the pillars that inform any legislative changes to a taxation regime. The Bills before this House today specifically bring about further taxation reform that is necessary to ensure a fiscus that can assist in bringing the vision of a national democratic society into reality.
Once again, as this House, we are called upon as the legislative arm of the state to give due consideration to money Bills, particularly the Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill. These two Bills give effect to the greater part of the 2012 Budget Review tax proposals as outlined in February in the tabling of 2012-13 Budget.
The Taxation Laws Amendment Bill deals with the substantive aspects of the tax proposals made in the Budget earlier this year and, in the Rates and Monetary Amounts, and Amendment of Revenue Laws Bill of 2012, which you will recall we passed in this House on 20 September 2012. This will address a number of changes in the Act as it exists. The Tax Administration Amendment Bill of 2012 deals with changes to the administrative provisions of tax Acts administered by SA Revenue Services, Sars, including the Tax Administration Act.
As the Standing Committee on Finance, we convened public hearings for both Bills on 22 August 2012. For technical reasons, the draft tax amendments continue to be split into two Bills - a money Bill, in terms of section 77 of the Constitution, covering issues relating to rates and the tax base, and an ordinary Bill covering tax administration, in terms of section 75 of the Constitution.
Let me take this opportunity to highlight the main features of these Bills. In terms of the Tax Administration Laws Amendment Bill, the Bill largely deals with amendments that underpin the Taxation Laws Amendment Bill. It also deals with clarification that has been identified for effective implementation and the significant issues that have been identified in the Act.
In terms of the first aspect of the Bill, we have also identified the implementation of the one-stop border post, which is actually aimed at supporting bilateral agreements to improve trade on border posts, particularly between Mozambique and South Africa at Lembombo-Resano Garcia that had been raised in June 2011. The one-stop border post, in terms of this agreement and others in future, will speed up legitimate passenger and trade flows across our borders with neighbouring countries.
The second aspect of the Bill currently looks into the establishment of the Tax Ombud. The current Tax Ombud that has been created by the Tax Administration Act of 2011 does not have the mandate to consider customs and excise matters. Since those taxes are not covered by the Act, the current Bill, rather than waiting for the process of rewriting the Customs and Excise Act of 1964, is identifying the importantance of this Bill to give effect to extending the mandate of the Tax Ombud to customs and excise matters in terms of its provision.
Thirdly, one of the key aspects of this Bill is relating to the promotion of equity of the provisional tax system, which will, amongst others, have the following effects: provisional taxpayers will not be penalised if they underestimate their taxable income for provisional tax purposes but have nevertheless paid the tax required; and retirement lump sum benefits, retirement lump sum withdrawals, benefits, and severance benefits will be excluded from the provisional tax system since these benefits are subject to a separate tax table.
Fourthly, the Tax Administration Bill seeks to introduce a six-monthly filing system for employees in terms of tax and value-added tax, VAT, returns for micro businesses. This will be very important. As announced in the Budget, qualifying micro businesses will be able to reduce their compliance costs further by electing to file the employees' tax and VAT returns on a six-monthly basis. They will also enjoy a cash flow benefit by only making payments of these taxes on a six-monthly basis. This will require a degree of self-discipline to ensure that funds are available when they are supposed to be paid to SA Revenue Services, Sars. It is important to send this message to small and emerging entrepreneurs out there, but also to ourselves as tax contributors.
Fifthly, the Bill will also seek to regulate the conduct of tax practitioners. The regulation of tax practitioners is a long standing issue. It was first raised in 2002. Currently, taxpayers have little practical recourse against tax practitioners who are incompetent or, worse, who are not members of a professional association, or otherwise regulated by anybody.
Although steps were taken to have tax practitioners registered with Sars from 2005, so that details of who was active in the field and their qualifications were available, this did not address the underlying issue. It did, however, highlight that just over half of registered tax practitioners are not members of a professional association or otherwise regulated bodies.
Therefore, Phase one of the regulation of tax practitioners will require tax practitioners to fall under the control of the existing statutory regulatory body or a controlling body that maintains acceptable minimum standards and has been recognised by Sars. This large self-regulatory model is uncommon amongst countries that regulate tax practitioners.
The more common model is practised in Malaysia and the USA, or is a tax practitioner's board as in the case of Australia. Phase two, which involves the creation of an independent regulatory body for tax practitioners, is anticipated to begin in the next 18 months, with a review of the success or otherwise of phase one. It is important that tax practitioners take cognisance of and begin to prepare for this.
The sixth point that the Bill seeks to address is in respect of the modernisation of the tax clearance certificate system. This amendment is intended to underpin the announcement that was made by the Minister in the Medium-Term Budget Policy Statement with regard to Sars developing an electronic mechanism for taxpayers to provide real-time, up-to-date and continuous tax statuses to authorised parties. These changes will be implemented at the start of the next financial year. This will help businesses and entrepreneurs that are doing business with the state in respect of making sure that their tax clearance certificates are in order and on time.
Regarding the Taxation Laws Amendment Bill, in as far as income tax and variable cash remuneration are concerned, a recurring problem has been identified over the years, that is the mismatch of the payment of variable cash remuneration - such as overtime pay, leave pay, commission, bonuses, and travel reimbursement - and the tax payments thereon. The amendment proposes the deduction of applicable taxes and the payment of these to Sars be done at the same time as the variable cash remuneration is paid to an employee. This will simplify the payroll management and employee tax issues.
One of the key aspects of these laws that we are talking about today is the post-tax contribution relief for compulsory annuities. The current dispensation allows a taxpayer to take tax free a portion of their annuity at retirement, with the remaining annuity portion being subject to income tax. It is proposed that taxpayers who do not take out their tax free portion on retirement be taxed only on that portion of their retirement annuity income that would have been taxed had they opted for the tax-free lump sum on retirement.
With regard our international obligations in 2011, the rules for the reorganisation of businesses operating across borders extended to cover cross-border transfers. The Bill streamlines these rules so that the rules are more co-ordinated conceptually and allow for section 45 to be applicable in order to transfer assets offshore as part of the reorganisation. As a result, the rules will allow for the transfer of assets from abroad into South Africa, or from a South African company to a foreign-based company under its control, without these transfers being deemed a disposal and therefore triggering a capital gains tax liability.
The proposed model in the first phase of the regulation of tax practitioners will use existing bodies and provide a framework to ensure that tax practitioners are appropriately qualified and, that a mechanism for dealing with misconduct is available both to taxpayers and Sars.
With regard to our public participation process, submissions would also reflect a mix of policy issues which fall in the domain of the executive and technical issues. We have given due to consideration to these and the debate today therefore reflects in particular on the Tax Administration Laws Amendment Bill and the Taxation Laws Amendment Bill. Given the nature of these Bills and given the time before me, I will not be able to go into detail with all the Bills that we are presenting today. I will leave the details of these Bills to colleagues and comrades who are going to speak after me.
In conclusion, the Standing Committee on Finance, having considered and examined the Tax Administration Laws Amendment Bill and the Taxation Laws Amendment Bill referred to it, reports that we have effected amendments to the Bills and places the amending Bills before this House for consideration. The ANC supports these Bills as amended. I thank you. [Applause.]
Mr Speaker, we have two Bills before us today because the annual Bill to amend the tax laws was split into the Tax Laws Amendment Bill, which is a money Bill, and the Tax Administration Amendment Bill, which contains the policy clauses. They do not actually impose or amend actual taxes. So together these two Bills amend at least 13 separate pieces of legislation that are enormously complex and the chairperson has asked us to give you some detail from the Bills. So let me do that.
Amongst other things, the Taxation Laws Amendment Bill provides for the conversion of additional medical expenses to medical tax credits, and introduces retirement reforms and a new system of taxing real estate investment trusts.
The DA's main concern with the Tax Laws Amendment Bill is that Treasury had to issue a substantially revised version of the Bill in July, after unintended consequences were identified in the version released in March. The revised version closes a loophole in the change from secondary tax on companies, STC, to dividends tax, which until the Bill was amended by Treasury at the last minute, could have cost South Africa around R3 billion in lost tax revenue. Following these revisions, there is now a significant tax preference for derivatives over equity holdings. So clearly, it seems to us Treasury has started to become a little too hasty in tabling ambitious draft tax legislation.
Generally, there seems to be a tendency to pass the law and fix it later, but there is a problem with this. Despite the generous consultation processes around the Tax Bills, they continue to have significant errors when they get released and our businesses need to operate in this environment. They need to know what is coming down the line in terms of tax proposals. Increasingly, there is uncertainty around whether the proposals tabled by Treasury earlier in the year might be changed later in the year. This has a risk of potentially damaging the reputation of the SA Revenue Service, the Sars, and Treasury concerning transparency and predictability in a tax environment. So that is our major concern about the Taxation Laws Amendment Bill.
Regarding the Tax Administration Amendment Bill, this Bill sets out to introduce or begin to introduce a regulatory framework for tax practitioners. Currently, the framework is relatively light touch. So it requires practitioners simply to be members of a controlling body, which maintains qualification and ethical requirements.
The DA had several concerns with regard to this Bill. All of them were raised by one or more presenters in the public hearings. Firstly, was the concern that provisions in the Bill that apply to tax practitioners should also apply to Sars officials. It simply makes sense that the taxman should have to comply with the same qualification and the regulatory criteria in respect of their competence as tax advisers. This proposal was firmly rejected by the committee. So we left with something of a double standard, which is a great disappointment to us.
Secondly, because we are now beginning to subject tax practitioners to a regulatory framework, it seems obvious that we should have tackled the issue of statutory privilege for tax advice from tax advisers. Buttressed by defensive arguments by Sars, the committee rejected this proposal. The committee said they will rather revisit it again in a year and half's time. That was Sars' argument.
We do not think that it is acceptable. Nevertheless, the DA put forward a proposal in the committee that rather the addition of some kind of priviledge for tax practitioners should be considered by the committee itself instead of simply outsourcing to Sars. Nevertheless, it is disappointing that it is not taking place under this current review.
Thirdly, there was this purportedly reasonable request that the qualification requirements imposed on tax practitioners be tax-specific. Right now, they are general. One needs to be generally qualified not tax qualified. This is the problem, and our proposals to amend it were rejected by the committee.
Lastly, and this is the "one silver lining", we have 34 000 tax practitioners registered with Sars, but only 50% of them are registered with controlling bodies. So it was clear to the DA that we needed quite a long period for these controlling bodies to be able to sign up members. This is one small victory for the DA because the effective date for membership of a recognised controlling body was extended from 01 April to 01 July 2013.
Nevertheless, it might have something to do with the complexity of tax laws or National Treasury simply being used to getting their way on the tax laws, but there is a general resistance of the committee to accept perfectly reasonable suggestions. Because of this, while we support the Tax Laws Amendment Bill, we are unable to support the Tax Administration Bill. I thank you. [Applause.]
Hon Speaker, the Tax Administration Law Amendment Bill makes provision for the enactment of an international agreement into law, and further amends various laws dealing with the administration of tax in South Africa.
The aim of the international agreement is to provide for the implementation of the one-stop border post between South Africa and Mozambique, which will allow joint control and management of border crossing, making the whole process more public friendly and contributing to the flow of tourism between the two countries.
For the first time, this Bill also regulates the compulsory registrations of tax practitioners with a recognised controlling body and the establishment of an independent regulatory board for tax practitioners. This will be done in two phases and will definitely enhance the effectiveness of the tax practitioners' industry.
Finally, there has been a plea from the industry, following the regulatory approach, that limited statutory privilege must be extended to tax advice provided by tax advisors who are not lawyers.
Treasury correctly pointed out that there are limited examples in the world where this is allowed, and it is a highly contested issue. We should remain on the conservative side and not allow this fairly easily. Cope supports this Bill.
Concerning the second Bill, the Taxation Amendment Bill, that is before this House, its purpose is basically to amend, delete and insert certain definitions as well as effect technical corrections in various taxation laws. It will, of course, be supported by Cope.
The Bill deals with the aspects of tax proposals that were made in the 2012 Budget, and addresses the changes to rates and thresholds.
We have had extensive hearings as a committee on this Bill, as the chair has already indicated. It is never fun to pay tax, but, like death, it is an aspect of life that you cannot dodge.
The spending of tax must always be underpinned by the effectiveness of the state to provide services and not to waste. In doing so, it keeps the tax fraternity happy so that the contributors can do so with a better mind.
Tax spending and collection are always about a fair business and trust. Both partners must be happy and make the process a win-win situation. Again, as I have indicated, Cope is supporting the Taxation Amendment Bill. I thank you. [Applause.]
Thank you, Mr Speaker. Through you, Speaker, the chairman of our committee, the hon Mufamadi, opened his address by thanking the government officials who, as he has indicated, have been with us in the committee all the time, and have given us great assistance. Being in that committee, one would feel that, perhaps, given the fact that one is receiving more assistance one would need to adopt proper deliberations.
I was not in attendance during the public hearings on the Tax Law Amendment Bill, and I chose not to participate in the deliberations. The reason for this is that the last time I participated in the deliberations on the Tax Law Amendment Bill, our committee laboured under the prescripts of a legal opinion received from the parliamentary law advisers that we could not amend the Bill, because it was a Money Bill - in spite of the fact that this Parliament had passed the Money Bills Amendment Procedure and Related Matters Act. These anomalies were justified in terms of the fact that the budget office had not yet been established, according to the legal opinion received, when in fact, as a matter of law, the budget office was established, but was not being implemented. This really makes one wonder what our purpose is.
The last time, I moved a few amendments to the last Bill amending our taxation laws. They were declared impermissible, and so they would have been declared impermissible even on this occasion.
We are still not in a situation where our committee - in this Parliament- exercises the measure of deliberation on these tax laws that it should under the Constitution and in line with the expectations of the people of South Africa. What we usually witness is a ping-pong game between large businesses represented by the five major firms of chartered accountants on the one side and Sars on the other.
When Sars agrees that the Bill gets amended, correctly speaking, it is not the Bill itself which gets amended, but the draft Bill. That is another anomaly of this committee. We do not deliberate on a Bill; we deliberate on a draft Bill. Only when the draft Bill is finalised, it is actually introduced and becomes a Bill before Parliament. As a consequence, we are holding public hearings on a Bill that is not before Parliament, but is in fact a Bill in the executive. That is the flip side of the fact that we cannot amend it. The committee does not have either the capability or willingness to amend it. Therefore, the amendments need to be made by government and, because they have to be made by government, the Bill cannot be formally tabled in Parliament until it is finalised by government. Once it is finalised by government, it becomes what we have before us, and, usually, it has not been changed. When our chairman is saying that the committee has amended the Bill, it means the committee has convinced Sars and government to amend the Bill before it is tabled. That is what has happened technically and formally.
Through you, Mr Speaker, to the hon Mufumadi, my friend whom I admire and respect, I will be convinced that your committee can indeed perform the role it is called to perform in terms of the Constitution the day on which your committee passes an amendment that the government does not want. That will be the day on which I see you at odds with your own Minister representing the interests of the people and not that of the sovereign.
Why is that? Through you, Mr Speaker, our chairman in the committee gave us the answer when I expressed a great sense of discomfort with the fact that all the big businesses were represented in our public hearings. Whereas people like me, people like all of you - ordinary taxpayers - were not represented by those who appeared before our committee to make the voice heard of the ordinary person - the ordinary taxpayer.
On that occasion, our chairman reminded me and said, well, hon Ambrosini, we are the representatives of the people. It is for us to make the voice heard of the ordinary people or the ordinary taxpayer. But where is that "heard"?
When we had the opportunity to make a difference, as the hon Harris had just reminded us, by strengthening the role and the capability of those who are representing the ordinary people - those who do not have the big accounting firms behind them - we passed on that possibility, because the government did not want it, and Sars did not give us the green light to do it.
We could have strengthened the role of the tax practitioners in relation to privilege, and having similar qualifications as their counterparts, because having qualified counterparts, helps qualified people to maintain discussions and engage in a productive discourse or process. It is very difficult to talk when there is somebody on the other side who is less qualified than you are. However, we have passed on that opportunity. I thank you. [Time expired.]
Hon Speaker, hon executives present, hon members, sanibonani [good afternoon]. Firstly, I think I need to assist hon Mufamadi to educate the so-called learned people, but they are living in the shadow of people who seem not to be educated. Hon Harris ... Yebo, ngiyaqala. [Yes, I'm starting.] Hon Harris, hon Mufamadi tried so hard to educate you in the committee, but you seem not to be educable. The problem is that when it is a draft, you cannot expect the draft to be promulgated. There's no way that the DA can take the glory for changing the deadline and having it postponed. That is just not correct.
Secondly, hon Oriani-Ambrosini, your absenteeism from the committee makes you to be so empty and incapable of debating. As a result you are busy assessing the committee instead of giving the hon members input about the debate on the two amending Bills. Hon Speaker, as we move towards the end of the ANC centenary celebrations the ANC unstoppably continues to provide the caring and the brighter hope for the citizenry.
Hon Speaker, indeed we are debating the two tax-related amending Bills today. I would like to clarify this, and not according to the definition previously given by hon Harris. The Taxation Laws Amendment Bill deals with the substantive aspects of the tax proposals made in the 2012 Budget Review, while the Tax Administration Amendment Bill, hon Harris, incorporates the common administrative elements of the current tax law into one piece of legislation, dealing with changes to the administrative provisions of the Tax Acts administered by the SA Revenue Service. I'm sure that is clear, and you are not going to need a repetition.
In his 2012 state of the nation address, His Excellency President Jacob Zuma said, and I quote:
We will begin to write a new story about South Africa - the story of how, working together, we drove back unemployment and reduce economic inequality and poverty.
Hon Speaker, job creation must go hand in hand with faster economic growth and increased tax revenue that enables this ANC-led government to pursue progressive developmental policies. To achieve its developmental mandate, government requires sufficient tax revenue. The 2012 Budget tax proposals implemented in terms of the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill improve the fairness of the tax system.
The 2012 Budget proposals, as accommodated in the Taxation Laws Amendment Bill, support a sustainable fiscal framework over the medium term while facilitating economic growth and a more competitive economy. It improves the fairness of the tax system to all South African taxpayers and confronts the domestic economic and fiscal challenges head-on.
Based on what I have mentioned above, the ANC-led government has proposed the following measures to encourage household savings for retirement and other needs: firstly, personal income tax brackets are adjusted to take account of inflation; secondly, tax relieve is provided for small business; thirdly, reforms to the tax treatment of contributions to retirement savings; and, lastly, further reforms to the tax treatment of medical scheme contributions. South Africa has, over several years, introduced a variety of initiatives to reduce potential double tax costs when investing in Africa. Management services have been an issue, especially the question of whether foreign withholding taxes on these services are eligible for foreign tax credits. Besides clarifying further anomalies in this area, active South African management over controlled foreign subsidiaries may trigger dual residence tax status even though day-to-day operational activities are conducted abroad.
Many South African loans to foreign African subsidiaries essentially operate as additional share capital contributions. Their purpose is to provide for a more flexible use of capital and not to avoid South African tax. However, the formal use of a loan often gives rise to transfer pricing concerns because these loans do not generate annual interest. In terms of the Tax Laws Amendment Bill these loans will be treated as shares in line with the decisions to treat certain forms of debt as shares.
Foreign investment funds often rely on active managers in South Africa for direction regarding African fund assets. However, this form of guidance often raises tax risks, especially the risk that this form of management will be viewed as South African effective management in tax terms, giving rise to a worldwide tax on all fund assets. This risk has deprived local fund managers of foreign investment fund business and has even forced certain local fund managers to relocate abroad. As a result of this, the ANC-led government then proposed a legislative carve out, which will be for foreign investment funds so that these funds are not inadvertently subjected to worldwide taxation.
In 2011 government introduced roll-over rules for some offshore reorganisations. The purpose was to give South African multinationals more flexibility when restructuring offshore subsidiaries and to curtail the use of the offshore participation exemption to avoid tax. Now that steps have been taken to bring misuse of section 45 under control, an offshore section 45 provision will be introduced. The participation exemption will be curtailed if the transaction indirectly strips value from a South African multinational.
International investors are subject to a final withholding tax when receiving royalties unless a tax treaty provides otherwise. They will also be subject to a final withholding tax on interest income as from 2013, subject to tax treaty exemptions. The ANC-led government proposes to co- ordinate and streamline the procedures, rates and times for all of these withholding tax regimes, including the adoption of a uniform rate of 15%.
A carbon tax will contribute to the global response to mitigate the climate change. A modest carbon tax will begin to price carbon dioxide emissions so that the external costs resulting from such emissions start to be incorporated into production costs and consumer prices. This will also create incentives for changes in behaviour and encourage the uptake of cleaner energy technologies, energy efficiency measures, and research and development of low carbon options.
Customs transformation is starting to gain momentum with additional ... With this, hon Speaker, I'm just doing the reinforcement since our chair has indicated on it. The Republic of South Africa and the Republic of Mozambique have also entered into an agreement on combined border control posts on the Mozambique-South African border. The aim of the agreement is to provide for the implementation of one-stop post between South Africa and Mozambique, which was defined in the agreement. This means the joint control and management of border crossing activities by officers of the parties using shared facilities. The SA Revenue Service and other organs of state will implement and administer the agreement in terms of the Tax Administration Laws Amendment Bill.
Hon Speaker, let me take this moment and say that next time we would request that hon Oriani-Ambrosini, if he is still in the House, attend committee meetings, so that we are able to inform the House correctly at the end of the day. The ANC supports the Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill.
I thank you. [Applause.]
Hon Speaker, may I just reflect on the unfortunate remarks made by the hon Dubazana with regard to the hon Harris. I think, if my memory serves me well, it was the hon Harris who made several good proposals with regard to stopping the steamrolling of the accepted draft resolutions in the committee. But, ultimately, we have to work together in this committee to see to it that we achieve the correct results.
Hon Speaker, the two Bills to be considered today are the Tax Laws Amendment Bill and Tax Administration Laws Amendment Bill . The first one, the Tax Laws Amendment Bill, gives effect to the majority of the changes to the tax legislation announced by the Minister in the 2012 Budget Speech. As is normal for such a Bill, it also includes other unannounced changes. Whilst the other Bill, the Tax Administration Laws Amendment Bill will consolidate the common administrative provisions currently contained in a number of the tax Acts.
It will essentially eliminate duplications, remove redundant requirements and align existing disparate requirements in different tax Acts, ranging in age from four to 63-years-old. The Bill will therefore, intend to streamline tax administration in this country.
For those taxpayers who are complaint, this is important, the Bill should ensure better service and, of course, lower compliance costs. For the tax evaders, the Act should serve to discipline them whilst maintaining compliant taxpayers' confidence in the integrity of the tax system.
The net effect is a positive one for the business. By introducing greater certainty and simplifying tax collection processes, the Act will lower the administration costs for business, which is very important. This is also a move in the right direction given that the World Bank's latest Ease of Doing Business report shows that South African businesses are ranked 32 out of 185 economies with regard to the ease of paying taxes.
Therefore, the DA welcomes the following improvements in respect of the administration: a move to a single registration process and number across taxes to reduce red tape; clear requirements and timelines for issuing tax clearance certificates; and feedback on audit progress and findings to engage more fully with taxpayers, and, of course, to ensure that they understand the reasons for any adjustments.
Following on from the announcement by Minister Pravin Gordhan in his 2012 Budget Speech with regard to the appointment of a tax ombud, the DA is however concerned about the lack of progress in this regard.
The DA welcomes the key provisions in the new Tax Administration Laws Amendment Bill to regulate tax practitioners by requiring that they belong to a professional body. This enables these professional bodies to gain a firmer grip on the conduct of tax practitioners.
Tax practitioners partaking in illegal activities will now run the risk of losing their licences. This essentially encourages compliance, not only to the law but to a minimum set of standards as determined by the professional body's code of conduct. Further clarification is required in respect of the disciplinary procedures to be followed in the case of noncompliant tax practitioners.
The DA advocates that tax practitioners acting in contravention of the profession body's code of conduct should be disciplined through that body's disciplinary processes. In addition, we welcome the amendment that transitional period should be provided to allow for tax practitioners not associated with a professional body to register with one.
Finally, tax practitioners must be professionalised in the true sense of the word. This should include the right for tax practitioners to extend legal professional privilege to their clients in instances where the practitioner is asked to give advice. This affords the tax practitioner the protection required in order to best serve the taxpayer in accordance with the law. I thank you, Mr Speaker. [Time expired.] [Applause.]
Hon Speaker, maybe I should start by expressing my shock at the way we handle aspects of collectivism. You know, in the committee we work as a team, and we appreciate efforts and value that is added by the individual members of our team. I find it extremely disturbing that when we come here, all of a sudden, it is this member or this party that must be praised more than other parties. To me, that is not in the good spirit of collectivism that is prevailing in the committee.
I would urge members to learn a lesson from this and avoid any effort of discouraging the collectivism that is currently prevailing in our committee. It is not correct, hon Harris and hon Ross, to come here and claim that all these changes are attributed to the contributions made by the DA, as if there are no changes that have been effected by other members of the committee. It is not correct for you to come here and claim that you are the drivers of these changes.
Hon Speaker, we, as the committee, have become accustomed to a very high level of engagement in our hearings and submissions, both, of course, on policy issues and technical matters. As the ANC, it will be correct for us to thank all those who participated in the hearings and those who made written submissions.
Why didn't you listen, then?
We have given due consideration to this and the debate today, hon Harris, has reflected concerns about both the submissions and perceived omissions. Amongst other things, the move to convert additional medical expenses to medical tax credit came under a lot of scrutiny during public submissions. There were those who felt that by removing the unlimited medical deduction and the static interest exemption, they were being dealt a double blow.
The reality as it emerged from our deliberation is that the vast majority of taxpayers, particularly those who fall in the income tax bracket below 70%, will be better off. I must indicate, hon Speaker, that only taxpayers who are taxed at the rate exceeding 33,3% will receive less relief. More importantly, the relief will be more equitable and the marginal benefit will no longer be linked to income. This amendment, hon members, will enhance the progressive nature of our tax system.
In addition, there was the view that people with disabilities and taxpayers aged 65 and older are particularly vulnerable and have less control than other individuals over medical costs, especially out-of-pocket expenses. In line with our principle of caring for the most vulnerable sectors of our society, this Bill, hon Harris, as an indication that we have listened to the submissions made, proposes changes regarding out-of-pocket expenses that will only take effect in the 2015 tax year. Moreover, only taxpayers taxed at a rate exceeding 33,3% will be negatively affected. The concern that the proposed medical credit will not benefit taxpayers falling below the tax threshold, because the credit is not refundable, is dealt with, appropriately and thoroughly, by the public health system which benefits those below the income tax threshold.
Whilst as a committee - I reiterate - we accept the proposal that the definition of variable remuneration must be extended to include other sources of income so as to eliminate identified payroll intricacies, we have agreed that the proposed amendment in respect of variable remuneration must be extended to ease some of the common difficulties that employers are experiencing in respect of the employees' tax. We have not accepted a generic description because our belief is that this could extend the regime to unintended items and, of course, this might create space for noncompliance and avoidance, and this might undermine our collection efforts.
Hon Speaker and the House, contrary to the existing legislation that allows for the transfer of insurance policies by an employer to an approved retirement fund to be taxed, the Bill is bringing to light an amendment that will allow for such a transfer not to be taxed - what a relief, hon Harris.
In addition, as we have all alluded to, we have deliberately made amendments in the draft Bill that relate to business tax and, in particular, our financial institutions, with reference to specific products that have to do with marketing as well as incentives as they relate to specific projects like learnerships and government subsidies. We dealt with our responsibility in relation international practice and taxation as cited by our chairperson. We, as a committee, also think that this will ensure that our tax system remains globally competitive. All of us know that it is a prerequisite for participating in the global market.
Finally, and of importance to this House, we agreed to exempt from value- added tax, as it relates to relief for political parties - I must expand on this as instructed by my chairperson - membership income and donations made to political parties as from the next financial year. This amendment is Inter alia, intended to encourage support for political parties, in order to bolster our constitutional democracy. We need strong political parties.
Hon members, it is a norm that tax policy will always be challenged at a time when draft tax legislation is being deliberated upon. So, the temptations are very high. Temptations are normally high to promote individual and sector interests, and hence you find some of our members agreeing with us in the committees but when they come here they play to the gallery. It is not surprising; the stakes are very high. However, what is our role as parliamentarians? Our role as parliamentarians is to create a balance between shallow sectoral interests and far-sighted national interests. This role becomes extremely important at this juncture. At the centre of our mandate is the need to ensure that our policy-making processes prioritise national interests at the expense of any other myopic ambition - please, hon Harris.
We do not begin to adopt an approach that entrusts the market with policy determination. It is our domain; we cannot be seen outsourcing it to the market. It is our domain, as Members of Parliament. The consequence of outsourcing it will lead to great instability to which markets are prone. The world is in an economic mess at the moment, because the markets were allowed to determine policy. [Interjections.] We cannot allow this to happen.
Hon Speaker, for all considered reasons cited - forget about the hogwash that was cited by other members - the ANC supports these amending Bills. Ke a leboga. [Thank you.]
Mr Speaker, let me also take this opportunity to thank all the members that have participated in the debate, but also the committee for the work they have done in deliberating on this and the net effect of which is the product that is before us today, contrary to what hon Ambrosini thought was perhaps a waste of time. He seems not to understand how democracy works.
Given the uncertainty of the overall global economic market, these Bills, particularly the money Bill, seek to deal with revenue neutrality in respect of our tax base. An increase in taxes could adversely impact the economy, whilst a decrease could also have the effect that would lead to unsustainable fiscal deficits.
In particular, the two Bills before us have three main objectives: firstly, to reduce tax anomalies that hinder business activities that can be removed without any significant loss of revenue; secondly, to eliminate costly loopholes; and thirdly, to find win-wins between SA Revenue Services, Sars, and the taxpayers that reduce the administration and compliance costs.
As all the members that have spoken have indicated, particularly those that are in support of both the Bills, I do not want to go into all the details except to note that the shadow Minister of Finance, Mr Harris, criticised National Treasury at the beginning of his speech for making too many changes. However, at the end of his speech, he also criticised National Treasury for not making enough changes. Complemented by Mr Ross, who also raised the issue of a delay, they all lament the issue of creating an uncertain environment by overdeliberating on the issues.
The Bill that comes before the House, as Mr Ambrosini said, is a draft and it is the task of the committee of Parliament to deal with it and make sure that we come up with the product that we came up with. Once again, we thank members for the work that they have done. It is your product that we are about today. One of the highlights of the Tax Administration Laws Amendment Bill is the issue of the implementation of the one-stop border posts, which seeks to give effect to the agreement which was concluded in September 2007, and the issue has since been confirmed by the committee. This provision will give effect to the agreement and its annexures in domestic law for all border functions once the requirements of section 231 of the Constitution have been complied with, and the agreement binds South Africa. One-stop border posts in terms of this agreement and other future agreements will speed up legitimate passenger and trade flows across our borders with the neighbouring countries.
Amongst other changes, is the issue of the introduction of the six-monthly filing of employee tax and VAT returns for micro businesses. I think this will be a relief to the small businesses, but it will require a degree of self-discipline to which members have also alluded.
Mr Speaker, the issue of the professionalising of tax practitioners is critical, and I agree with Mr Ross that they need to be professionalised. We also need to make sure that they are not allowed to behave in an unscrupulous manner, which would be to the detriment of taxpayers without recourse.
One of the win-win initiatives is the proposed legislation that triggers mark-to-market taxation for banks and brokers in respect of financial instruments. The proposed regime seeks to impose tax for annual increases and decreases in value, even if the financial instruments are fully retained. The proposed rules seek to merge financial accounting so as to simplify compliance and administration. The effective date of the regime has been deferred until 2014 in order to ensure that the new regime does not give rise to unintended avoidance and anomalies.
Mr Ross raised a point with regard to professional privilege. Accountants and others who are not lawyers take the position that, since the regulation of tax practitioners has commenced, a limited statutory privilege should be granted to them as is the case in other countries like Germany, New Zealand, and the United States of America. The departure point in considering this request is the public policy that a court and an administration should have the broadest possible access to information when deciding a matter so that the correct decision can be taken.
An exception to this access to information relates to information that is covered by legal professional privilege, which is a rare absolute common law right that originated in the UK in the 16th century. It protects communication between lawyers and their clients while obtaining legal assistance, which briefly stated the rationale for privilege, and which is to permit honest communication between the client and the legal advisor.
Hon members, the foundation of this rule is not difficult to discover. It is out of regard for the interest of justice, which cannot be upheld, and the administration of justice, which cannot go on without the aid of man skilled in jurisprudence and the practice of the courts. No similar privilege exists for communication with accountants, doctors, priests, and others. Internationally, if privileges are extended outside the legal profession, even on a limited basis, this is done by statute.
So, the question of whether to extend privilege in respect of tax advice is a contentious one. While some countries have done so, many have not. In 2011, Australia released a discussion paper on the matter which set out the arguments both for and against the extension.
Mr Speaker, I do not want to belabour the point as I have heard that most members support the Bill. I would also like to thank members and the committee once more for the work they have done. The power of democracy is at work. Thank you very much. [Applause.]
Debate concluded.