Hon House Chair, hon Minister, Deputy Ministers present, hon members, comrades and honoured guests, sanibonani [good afternoon].
Taxation is an important element of the economy and the country's fiscal framework. Through taxation, the ANC-led government is able to execute some of its core policies. In general, government depends on taxes to provide basic services and ensure the welfare of its citizenry to the greatest possible extent.
The main purpose of the Taxation Laws Amendment Bill is to give effect to changes in rates and thresholds so that these items can formally go into effect at the start of the tax year or as provided in the 2011 Budget Review.
I will focus on some of these changes. To support inclusive growth and development, the Tax Laws Amendment Bill provides for further personal income tax relief through adjustments to personal income tax brackets and rebates amounting to R8,1 billion. It increases the tax-free interest- income annual threshold from R22 300 to R22 800 for individuals below 65 years and for individuals aged 65 and older from R32 000 to R33 000. A third rebate of R2 000 per year for taxpayers who are 70 or older is being introduced.
Even though the income tax system does not generally allow for deductions in respect of personal consumption, medical expenses still remain a notable deviation. The Bill gives effect to the 2011 Budget proposal to convert expenditures associated with medical aid contributions into tax credits. However, in view of comments received - that credits will adversely affect the elderly and the disabled who are currently eligible for an unlimited deduction for all medical expenses - taxpayers aged 65 years and older will continue to receive the unlimited deductions, irrespective of medical expenses for the next two years. The possibility of converting deductions relating to out-of-pocket expenses into a credit for those aged 65 years and older and for those with disabilities will be explored next year.
A need has also been identified to accommodate situations where a taxpayer is incurring medical expenditure in respect of immediate family for whom he or she is liable for care and support. This accommodation is especially prevalent where a member of the taxpayer's immediate family is disabled or elderly.
Extensive work has been done in the health sector, informed by the ANC's 10- point plan, which has been adopted by the government. These beneficial medical amendments is another achievement of the social transformation agenda of the ANC, based on the fundamental objective of building a fair and more equal, humane, people-centred, people-driven and caring society.
The basic philosophy for permitted transfers between retirement savings funds is to permit the transfer of less restrictive funds to equal or more restrictive funds. The amendments accordingly permit pension preservation funds to be additionally transferred from provident and provident preservation funds, as opposed to transfers solely from the pension and pension preservation funds.
Small businesses under the turnover tax system are subject to a low rate of tax on a gross basis without deductions. However, two years after the introduction of the turnover tax system - which seeks to encourage the informal sector and other small businesses to enter the tax system by lowering the barriers of entry associated with the normal income tax system - the objectives have not been realised. Only a small number of taxpayers have registered for the turnover tax, most of whom have migrated from the pre-existed registration under the normal income tax.
All of the reasons associated with these difficulties are still under examination. Certain design aspects of the turnover tax appear to be problematic. Most notably, the rate structure may be too high for many informal businesses.
The proposed de-linkage of the microbusiness turnover tax from the value- added tax is welcomed as vendors registered under the value-added tax may now freely register under the turnover tax. If these taxpayers believe that it is in their best interests to do so, they may just as well do that.
In this negative economic climate, many retrenched workers will try to start small businesses to survive. Many of these start-up businesses will be of the survivalist type and need the support of the government. The ANC government has therefore introduced the policies that will assist small businesses, which have been provided for in the new Companies Act as well as in the Taxation Laws Amendment Bill that I have alluded to earlier on. These provisions will also help to ensure that small, medium and micro enterprises, SMMEs, in distress are saved before they reach a state of insolvency and, ultimately, liquidation. The reason for the amendment to this incentive is that the government seeks to renew efforts to enhance the Industrial Development Zone regime. We realised that creating decent work, reducing inequality, and defeating poverty can only happen through a new growth path founded on the restructuring of the South African economy to improve its performance in respect of labour absorption as well as the composition and rate of growth. The ANC-led government is committed to forging systemic changes to mobilise domestic investment around activities that can encourage growth in employment-creating activities and create sustainable employment.
Broadening the tax base in support of inclusive growth; raising sufficient revenue to finance government; tax relief for individuals; tax breaks to support employment creation and skills development, including changes in personal income tax brackets and rebates - the so-called fiscal drag relief - as well as changes in some monetary thresholds; and the closure of tax loopholes, which was mentioned by my chairperson; and adjustments in specific excise taxes to address environmental and health concerns are the key objectives of the Taxation Laws Amendment Bill, which comes during a difficult economic period.
In conclusion, I wish to concur with the statement of the ANC Veterans League to the National General Council that high levels of unemployment, deepening poverty and growing inequality are acknowledged as the biggest challenges that we must confront as a collective. Our people can no longer stand the pain of poverty that has no end in sight. As we approach our centenary, we must do so with a sense of urgency and purpose. It also means that we must be decisive in dealing with our present challenges.
With these amendments, we are facing and dealing with the need for a special focus on those among us who, over the last 17 years, have not benefited from progress by experiencing an improved quality of life on a sustainable basis. Still, in closing, it is also surprising that the DA, without having reached the stage of discussing the Medium-Term Budget Policy Statement, MTBPS, and without even reaching the stage of listening to the national Budget Speech, have already declared that they will not support this Bill. It is indeed surprising and interesting that they already have first-hand information that is neither valid nor true.