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.]