Madam Deputy Speaker, the tax regime reflects economic policy choices. Included in the Revenue Laws Amendment Bill are several provisions pertaining to retirement funds. Although the retirement reform process has not clarified government's intentions regarding the compulsory preservation and compulsory annuitisation of retirement funds, the amendments have highlighted the issue.
Taxation of preretirement withdrawals from retirement funds is a complex matter. In principle, retirement funds are intended for a specific purpose - to provide funding in old age. If used for this purpose only, it would not be necessary to tax withdrawals from retirement funds. Under the current arrangement, individuals can remove their retirement assets from the system prior to retirement. The principal reason this occurs is to provide members with finance for immediate survival needs when they become unemployed.
Although an attempt has been made to develop a formula that does not punish an individual who must access retirement monies early through absolute necessity, the question is not resolved. Compulsory preservation, where a member can only access retirement assets at retirement, must be considered in the reform process within a framework that addresses the question of how an unemployed person can survive without accessing their retirement nest egg.
On transfer from a pension fund to a provident fund, tax will become payable on the member's contribution to the pension fund. This raises the question of what will happen with provident fund monies if compulsory annuitisation no longer permits lump sum payments.
Discussion on retirement reform has been on the table for several years. Although the tax regime applicable to retirement funds is evolving, the retirement reform process itself appears to have stalled. This has created uncertainty in the industry and uncertainty for members. Government must clarify its intentions regarding retirement reform and ensure that the applicable tax regime encourages members to provide for their old age.
During deliberations on this Bill, it was stated that our tax system is unstable because tax laws have been amended on a piecemeal basis. It was also stated that our tax laws have become complicated to the extent that even experts are unable to fully understand how they should be applied. Amendments on amendments result in unintentional breaches of tax laws. A law that cannot be implemented is not a good law and it is not helpful in the development of the social contract that includes financial contributions to society in the form of taxation. For this reason, an evaluation of our tax regime should be undertaken so that it can be simplified as far as possible to ensure that the rules are clear. This will ensure that noncompliance, inadvertent or otherwise, can be minimised to the benefit of us all.
The DA supports the amendments. Thank you.