Hon Speaker, hon executives present, hon members, sanibonani [good afternoon]. Firstly, I think I need to assist hon Mufamadi to educate the so-called learned people, but they are living in the shadow of people who seem not to be educated. Hon Harris ... Yebo, ngiyaqala. [Yes, I'm starting.] Hon Harris, hon Mufamadi tried so hard to educate you in the committee, but you seem not to be educable. The problem is that when it is a draft, you cannot expect the draft to be promulgated. There's no way that the DA can take the glory for changing the deadline and having it postponed. That is just not correct.
Secondly, hon Oriani-Ambrosini, your absenteeism from the committee makes you to be so empty and incapable of debating. As a result you are busy assessing the committee instead of giving the hon members input about the debate on the two amending Bills. Hon Speaker, as we move towards the end of the ANC centenary celebrations the ANC unstoppably continues to provide the caring and the brighter hope for the citizenry.
Hon Speaker, indeed we are debating the two tax-related amending Bills today. I would like to clarify this, and not according to the definition previously given by hon Harris. The Taxation Laws Amendment Bill deals with the substantive aspects of the tax proposals made in the 2012 Budget Review, while the Tax Administration Amendment Bill, hon Harris, incorporates the common administrative elements of the current tax law into one piece of legislation, dealing with changes to the administrative provisions of the Tax Acts administered by the SA Revenue Service. I'm sure that is clear, and you are not going to need a repetition.
In his 2012 state of the nation address, His Excellency President Jacob Zuma said, and I quote:
We will begin to write a new story about South Africa - the story of how, working together, we drove back unemployment and reduce economic inequality and poverty.
Hon Speaker, job creation must go hand in hand with faster economic growth and increased tax revenue that enables this ANC-led government to pursue progressive developmental policies. To achieve its developmental mandate, government requires sufficient tax revenue. The 2012 Budget tax proposals implemented in terms of the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill improve the fairness of the tax system.
The 2012 Budget proposals, as accommodated in the Taxation Laws Amendment Bill, support a sustainable fiscal framework over the medium term while facilitating economic growth and a more competitive economy. It improves the fairness of the tax system to all South African taxpayers and confronts the domestic economic and fiscal challenges head-on.
Based on what I have mentioned above, the ANC-led government has proposed the following measures to encourage household savings for retirement and other needs: firstly, personal income tax brackets are adjusted to take account of inflation; secondly, tax relieve is provided for small business; thirdly, reforms to the tax treatment of contributions to retirement savings; and, lastly, further reforms to the tax treatment of medical scheme contributions. South Africa has, over several years, introduced a variety of initiatives to reduce potential double tax costs when investing in Africa. Management services have been an issue, especially the question of whether foreign withholding taxes on these services are eligible for foreign tax credits. Besides clarifying further anomalies in this area, active South African management over controlled foreign subsidiaries may trigger dual residence tax status even though day-to-day operational activities are conducted abroad.
Many South African loans to foreign African subsidiaries essentially operate as additional share capital contributions. Their purpose is to provide for a more flexible use of capital and not to avoid South African tax. However, the formal use of a loan often gives rise to transfer pricing concerns because these loans do not generate annual interest. In terms of the Tax Laws Amendment Bill these loans will be treated as shares in line with the decisions to treat certain forms of debt as shares.
Foreign investment funds often rely on active managers in South Africa for direction regarding African fund assets. However, this form of guidance often raises tax risks, especially the risk that this form of management will be viewed as South African effective management in tax terms, giving rise to a worldwide tax on all fund assets. This risk has deprived local fund managers of foreign investment fund business and has even forced certain local fund managers to relocate abroad. As a result of this, the ANC-led government then proposed a legislative carve out, which will be for foreign investment funds so that these funds are not inadvertently subjected to worldwide taxation.
In 2011 government introduced roll-over rules for some offshore reorganisations. The purpose was to give South African multinationals more flexibility when restructuring offshore subsidiaries and to curtail the use of the offshore participation exemption to avoid tax. Now that steps have been taken to bring misuse of section 45 under control, an offshore section 45 provision will be introduced. The participation exemption will be curtailed if the transaction indirectly strips value from a South African multinational.
International investors are subject to a final withholding tax when receiving royalties unless a tax treaty provides otherwise. They will also be subject to a final withholding tax on interest income as from 2013, subject to tax treaty exemptions. The ANC-led government proposes to co- ordinate and streamline the procedures, rates and times for all of these withholding tax regimes, including the adoption of a uniform rate of 15%.
A carbon tax will contribute to the global response to mitigate the climate change. A modest carbon tax will begin to price carbon dioxide emissions so that the external costs resulting from such emissions start to be incorporated into production costs and consumer prices. This will also create incentives for changes in behaviour and encourage the uptake of cleaner energy technologies, energy efficiency measures, and research and development of low carbon options.
Customs transformation is starting to gain momentum with additional ... With this, hon Speaker, I'm just doing the reinforcement since our chair has indicated on it. The Republic of South Africa and the Republic of Mozambique have also entered into an agreement on combined border control posts on the Mozambique-South African border. The aim of the agreement is to provide for the implementation of one-stop post between South Africa and Mozambique, which was defined in the agreement. This means the joint control and management of border crossing activities by officers of the parties using shared facilities. The SA Revenue Service and other organs of state will implement and administer the agreement in terms of the Tax Administration Laws Amendment Bill.
Hon Speaker, let me take this moment and say that next time we would request that hon Oriani-Ambrosini, if he is still in the House, attend committee meetings, so that we are able to inform the House correctly at the end of the day. The ANC supports the Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill.
I thank you. [Applause.]