Hon Deputy Speaker, may I just reflect briefly on the hon Khoza's remark with regard to members' aspiration to be in government. She is currently in the province that the DA is governing. That's the reality of it all. [Interjections.]
Our tax proposals should encourage economic growth, and our tax laws should reflect government's commitment to economic growth that will reduce inequality, poverty and unemployment. We note the following - and this is the reality, hon Khoza. We can ask whether the governing party is doing a great job or not, and we can find this out just by measuring growth. This has dwindled to 1,4% in terms of our forecast in growth. In 2011 we projected 3,6%.
We have also noted, with caution and concern, that in the Medium-Term Expenditure Framework we can expect a revenue shortfall of R60 billion over this period in the medium term. Per year this would be about R15 billion. We can ask whether this reality is a feather in the cap of the government.
The response from National Treasury to address the revenue shortfall is disappointing. It lacks confidence in respect of restoring our economy, assisting economic growth and accelerating job creation. National Treasury has simply proposed increasing taxes, the details of which, we are informed, will be revealed in the Davis Tax Committee.
These increases are expected to generate R44 billion over the medium term, and that gives you R15 billion per year that needs to be generated. The DA recommended to the Treasury - and the chairperson will remember that I also recommended this in the portfolio committee - that we should treat the tax issue carefully and address corruption and eradicate wasteful expenditure as a viable alternative to increasing taxes. It is with disappointment that I note in the report from the committee that that is not reflected in the report.
We note that according to the Special Investigating Unit we have R30 billion being lost to corruption and waste every year. This is a serious indictment of government.
The budget deficit is expected to be R153 billion in the 2014-15 financial year, and that is the reality in regard to our economic position. Government debt, as a proportion of GDP, is at 46%. But when you include the contingent liabilities, it is 57% and that makes it extremely problematic. We believe that this financial crisis would have been entirely avoidable if the issues of corruption and wasteful expenditure had been properly addressed.
It is clear that positioning the state at the centre of our economy is hampering meaningful growth. The deficit speaks for itself. It is the single biggest threat to our economic prosperity, and managing the deficit effectively has proven very problematic. I think it has been six years that we have been seeing deficits - budget deficits - and it is still continuing.
State-owned entities are bankrupting South Africa and we don't seem to be finding the right solutions and proposals for this in the committee. Eskom alone requires R270 billion to remain afloat. The dependency of the embattled state-owned entities is on the brink of collapse, and looking to National Treasury is doing more harm than good.
Confidence in the South African government's ability to pay back its debt is dwindling, more so with the recent downgrade by Moody's and other foreign investors. You will note that our debt-servicing cost is R114 billion per year. Government will now have to borrow money at higher interest rates, which will increase this number, placing more pressure on the state coffers.
Noting the weak economic growth, I would advise the Minister to focus on averting a tax increase that South African taxpayers simply cannot afford in these economically trying times. The DA will therefore not support the increase in taxes, as it will slow down the economy and further kill jobs.
Chairperson, allow me also to make some brief remarks about issues with regard to the Taxation Laws Amendment Bill which should have been addressed. The first is the uncertainty as to the income tax treatment of the unlisted immovable property entities. The purpose of the Real Estate Investment Trust, Reit, taxation is to provide investors with tax certainty, in order to incentivise the use of property investment companies in line with international best practice.
The former Minister proposed the following in the 2013 Budget Speech, and I am glad that the hon Gordhan is present. Thank you, Minister, for coming here to listen to me today! The Minister proposed in the 2013 Budget Speech that the Reit regime should be extended to unlisted entities as well. This has unfortunately yet to come into effect.
The DA has provided Treasury with submissions to address the problems regarding the Reit legislation, and decisive draft legislation, I believe, is urgently required.
The second issue is with regard to research and development. A recourse mechanism should be urgently introduced in instances where approval was not granted by the Department of Science and Technology. This is because the only recourse available at the moment, when there is a dispute in regard to nonallocation in the case of an innovation, is to launch a high court application. We believe this is too expensive and we should look at the recourse mechanisms.
A definition of innovation should also be included and I believe the committee has referred this to the Department of Science and Technology. It should be included and should acknowledge the intent of stimulating research and development in our developing economy.
In conclusion, I would just like to say that the DA did sterling work in regard to VAT proposals for farmers, that the zero rate be retained there. I thank the committee in that regard. [Time expired.] [Applause.]