Chair, hon Minister of Finance, Deputy Minister of Finance, hon members, the Minister of Finance, hon Trevor Manuel, upon his presentation of the national Budget Speech for 2007 and reiterating the pronouncements made earlier by the President, made critical announcements on the anticipated taxation law reforms for 2007.
The main thrust for these tax reforms has been as a result of the fiscal stance that South Africa has taken with regard to the direction and the path that our economy should take. These efforts are driven by the country's historical circumstances which required the exerted implementation of our developmental goals dictated by the Freedom Charter and the Reconstruction and Development Policy Document.
In short, our economic stance has placed a clear directive that we should strike a balance between increasing spending on services and providing infrastructure development together with tax relief in order to raise household income and savings. On top of that the intention was to lower the cost of doing business in South Africa while increasing government savings.
Hon members, it is of importance to note that since 2004 we have seen and appreciated the huge growth in tax revenue, with tax collection figures rising to 17% per year. This collection has far exceeded the targeted range of economic growth. The robustness of revenue collection was a direct consequence of strong economic growth, together with improved tax compliance and other factors which are cyclical in nature.
In the past three years, government expenditure has increased by more than 9,2%. The strong revenue patterns have also allowed us to have a reduced budget debt service cost which has also allowed us to get the physical space to spend more on services and infrastructure.
This allows us to add further to our spending plans, raising public expenditure to 7,7% for the past three years. This has been effectively done and has been part of our programmes and new initiatives that government continues to fund, and has been able to be implemented quite effectively. The positive outlook presented will continue to produce some socioeconomic and developmental benefits for future generations in the coming years without necessarily exposing them to the new debt burden.
In terms of the amendment to the revenue laws, we have noted that some of the amendments do support the growth of the economy. Firstly, we have to appreciate the fact that the SA Revenue Service has been very effective and has been approaching matters positively through broadened tax outreach, and it has given proper support services to big businesses, some of which were not tax compliant.
At present, we have experienced a rather unexpected response from corporate South Africa, and the Portfolio Committee on Finance commends corporate South Africa for the active role it has taken in terms of ensuring that it contributes towards the finalisation of these amendments and to ensure that everybody in the business sector becomes tax compliant, thereby contributing towards the positive growth of our economy.
We have to acknowledge that South Africa has a very competitive tax legislation regime, whose main intention is to promote investment, local and foreign, to encourage job creation and to bring confidence to business and also to further reaffirm the ANC position on building small business.
I would like to go straight into specific issues that relate to taxation law amendments, especially the secondary tax on companies, STC. We have noted that this proposal recommends the gradual abolition of STC which, at the moment, stands at 12,5%. Finally, it has been reduced to 10%.
We have taken that route deliberately as the ANC. It is not something that we were pressured to do. It is not something that the DA called for. It was deliberate action at the right time that we should lift the burden from corporates and reduce double taxation. [Interjections.]
The intention of this amendment has been eventually to do away with STC and replace it with the shareholder dividends tax. In the long run, the positive effects of this will be the expansion of the tax net to more businesses which were never tax compliant.
Another amendment that promotes business investment in infrastructure is the depreciation allowance for commercial buildings, including dams, railways and ports. This amendment allows for the depreciation of a building at 5% per annum, which is intended to cover the cost of the building to the taxpayer. However, this depreciation allowance does not cover businesses that are residential properties or that are bought or leased. It does cover buildings that are new, that were improved or that have remained unused for a long time.
In terms of tax relief for corporate banks, the purpose of the amendment is to provide relief for financial services, co-operatives - particularly the corporate banks - by extending small business tax relief. In this case, an income of R300 000 and below will attract a taxable rate of 10%, whereas when the income is beyond R300 000, the threshold would be 29%. The ANC supports the Bill. Thank you, Chairperson. [Time expired.] [Applause.]