Yes, hon Chairperson, I'd like to address the House on the Taxation Laws Amendment Bills before us and the use of revenue as an instrument of redistribution for a better life. Within the framework of our developmental state, the Bill seeks to encourage savings and so enable all sectors of society, business and other organisations and individuals to share with the state the responsibility for themselves and their workers.
I shall focus on two of the Bill's objectives: retirement funds and lump sums and tax avoidance related to secondary tax on companies. It is useful to note that this Bill had widespread support in the House but there is a reservation by the ACDP on the drawn-out process related to retirement funds and not the completion. The reality is this, that debt requires a very complex set, a whole suitcase of legislation. We now have to unpack it and try to make sense of what was previously drawn up 15, 20 or 40 years ago.
It is very complicated and we do not want, in any way, to deprive elderly people in the future or now of what should rightfully be theirs, so let us look at it more carefully and cautiously.
Tax incentives have been used to encourage local skills development and infrastructure upgrades for local research and development. This does not extend to foreign businesses, which frankly, do not contribute to these two developmental imperatives.
Significant savings are realised with the repeal of the Tax on Retirements Funds as we've heard from everyone. This means long-term savings for pension and provident funds, and individual retirement annuities can now grow tax free. The harder you work, the greater the benefit in the future. Just a couple of points to underline the silver lining provided for those who retire in the future under the new taxation lump sum's payout - I think the Deputy Minister has already pointed out the R300 000 tax free, etc. You can now reinvest this, pay off your house and settle your debts. Only 18% on the next R300 000 will be taxed. For those who have the good fortune to have amounts of over R900 000, a mere 36% tax is all that that will be subjected to.
Indeed, everyone who is enjoying capital gains gets to benefit, but this has been increased for those over the age of 65.
There is also another area I just want to mention, and that is the Diamond Export Levy Act, which is still to be promulgated. To prevent a vacuum being created prior to the promulgation of the Diamond Export Levy Bill, this particular Bill amends sections 63 and 59 of the Diamonds Act.
To get back to the main part of the speech, you can see that what Sars has set out to do is to ensure that all employees have affordable access to appropriate retirement funding, that there is protection for pension resources against corrosion that is caused and the promotion of the adequacy of retirement fund provision.
What is interesting for all of us, even those South Africans who only have to pay a R100 on tax, is that everyone who pays all of the taxes have contributed to a fiscal space. What does fiscal space mean? In short, it means you have bought bricks to build houses for our people. [Interjections.] Yes, you have paid for some of our children to get an education.
You have paid for some of the babies, pregnant mothers and children under the age of seven to get free primary health care. You have paid towards the treatment and support of those with HIV/Aids. Indeed, you have paid for some social grants and you have paid towards providing free basic water and other services. Yes, by paying all the tax that you have been paying, you've shared in the reduction of poverty and helped to grow the economy and to create jobs.
Small businesses will be able to grow even bigger once they have legitimised their status. Corporate SA can indeed reach phenomenal heights in headline earnings, balance sheet profits and optimal after-tax profits in a politically stable, economically sound country and a socially robust nation.
However, despite significant increases in tax collection between 7% and 12% a year due to the efficiencies - we heard the DA so eloquently put across to the House - and structural improvements, Sars continues to grapple with the reduction of the tax gap. This tax gap, we may have forgotten, is in a region of R15 billion to R25 billion; roughly 40% of government revenue remains uncollected largely through the vigorous pursuit of tax avoidance schemes. This translates into between 50% and 100% of the total provincial spending on education in the 2006-07 financial year. Imagine what we could do with this money, fighting even the HIV/Aids challenge!
We wish to urge the private sector to desist, to stop these practices preventing them from full compliance with tax measures. We urge them to recognise their role in reducing poverty and building a nation of South Africans in which all share legitimately in the wealth of their paid and unpaid work.
Government can no longer tolerate the reckless disregard of some companies to wriggle through the gaps in the secondary tax on companies legislation. Those that have been using amalgamations to strip out the profits, free of the secondary tax on companies will have to find other waters to swim in. The ANC supports this Bill, which will encourage savings and also free up more fiscal space for increased social expenditure. I thank you.