Chairperson, in March last year, the DA supported the revenue proposals for 2010-11 and said that we would very closely monitor the direction of the numbers on the fiscal framework and the policies that influence them. The taxation laws cannot be viewed in isolation. They give effect to the revenue proposals of national government as set out in the national Budget tabled in February, and any adjustments tabled in the Medium-Term Budget Policy Statement in October.
In October last year, the DA said that government intervention was required to increase economic activity, rather than the size and influence of government and its associated cronies. The very clear difference between the incoherent national government economic policy that claims to be in pursuit of the so-called developmental state and that of the DA lies in our fundamental belief in the individual's freedom to choose. In an open- opportunity society for all, everyone can walk along a path to become everything that they are capable of being. For this to happen, we need a society centred on people, where fiscal policy is designed to lift our people out of poverty along a path of increasing prosperity over successive generations.
The Taxation Laws Amendment Bill amends 10 tax laws in a fairly hefty and complex Bill with a large number of cross-references. The DA has long held the view that our taxation laws are overly complex and complicated and that a simplification process is required. We are pleased that this process has begun with the Tax Administration Bill and believe that this programme should be accelerated and be given a specific deadline for completion.
This year's deliberations on the taxation laws before the Standing Committee on Finance started off on the wrong foot with the poorly thought- through intention of the National Treasury to implement a so-called suspension of section 45 of the Income Tax Act. The DA was and is of a view that a law cannot be suspended at the whim of any government department, especially not when the unintended consequence has a significant impact on regular economic activity. It is the role of Parliament to repeal laws that don't work properly. The outcome of the so-called suspension was that merger and acquisition corporate activity ground to a halt and sent out a signal across the world that doing business in South Africa is risky and uncertain.
There is no doubt that the good intention of the National Treasury was to plug the massive leakage from abuse of section 45. Although its approach was wrong, its response to the massive outcry from innocent bystanders was appropriate and it is pleasing to see that the amendment to section 23(k) of the Income Tax Act appears to have solved the problem.
The Taxation Laws Amendment Bill makes several amendments to income tax from employment, individuals and savings, income tax on international activities, value added tax, transfer tax and securities transfer tax. Our view is that amendments to the tax tables to provide partial relief for bracket creep don't go far enough and should have fully compensated, given the very difficult financial circumstances of many South African households.
The conversion of medical scheme contribution deductions to tax credits, apparently in preparation for the introduction of a national health insurance scheme, requires further clarification. We agree that a credit is probably more equitable, but there is uncertainty on how the current unlimited deductions for taxpayers aged over 65 and the disabled will be accommodated after the two-year period where this will continue to be an allowable deduction. Given the current uncertainty over the funding model for the looming national health insurance and the financial implications for the most vulnerable members of our society, a more detailed explanation is required.
It also appears that tax-free transfers from provident funds, provident preservation funds and retirement annuity funds to pension preservation funds is a preparatory step in the seemingly never-ending process of retirement fund reform. Several amendments have been made over time to the taxation regime applicable to pension funds and clarity is required on intentions to introduce compulsory preservation. Fringe benefit taxation on employer contributions to retirement funds contradicts the development of a savings culture.
The Taxation Laws Amendment Bill falls short of content that we believe is necessary to resolve the problems of poverty and unemployment. It should have included a wage subsidy incentive to encourage entrepreneurial activity and the development of small and medium enterprises, changes to funding for the acquisition of skills, zero-rating VAT on books, and incentives for domestic savings.
Given the low-growth fiscal policy structure that underlies the revenue proposals now reflected in the Taxation Laws Amendment Bill, the DA will not support this Bill. We will, however, support the Taxation Laws Second Amendment Bill that amends two Acts and provides for a committee to be appointed to approve research and development under subsection 9 of the Income Tax Act. We also support the appropriate protection of company information as detailed in the Bill.
The DA did not support the fiscal framework because the policies underlying the numbers were not sustainable, especially now that government is the largest so-called job creator in our economy. As its size in the economy grows, government crowds out real and sustainable growth-generating activity. There is no fiscal space available for government patronage in a bloated bureaucracy under any circumstances, and especially not when it expects hardworking taxpayers to pay for it.
There is much that government can do about our economic woes that won't cost any money. It can stop the noise on nationalisation and expropriation without compensation, and it can stem the haemorrhage in the public financial system that now costs our people R30 billion per annum. But political will is required to do this, and our national government doesn't seem to have any.
The DA believes that government can unlock the enormous potential of our economy and our people through appropriate economic policy. We hope to see evidence of this when the national Budget is tabled in February 2012. This appears to be increasingly unlikely, but we do remain hopeful. [Applause.]