Chairperson, although South Africa and Kenya belong to different trade blocs - Kenya belonging to the Common Market for Eastern and Southern Africa, Comesa, while South Africa belongs to the Southern African Development Community, SADC - the two countries have entered into an agreement to enhance trade relations between themselves. The current balance of trade is strongly in favour of South Africa with a ratio of 20:1, meaning that the value of exports from South Africa to Kenya is 20 times that of Kenya to South Africa.
Kenya mainly sells flowers, handicraft and woven products to South Africa - and some of you drink Kenyan tea as well - while South Africa exports goods such as vehicles, machines and computers. The purpose of the agreement is to avoid double taxation and fiscal evasion with respect to taxes on income derived within the two countries.
It is a common practice in most countries for taxes to be imposed from worldwide income derived by residents of the country and on income derived by nonresidents who reside in the country. The effect of such a system is that income derived by a resident of one country from a source in another country is subjected to tax in both countries.
This practice clearly discourages foreign investment, and it is normal for countries that have trade relations to conclude double-taxation agreements. Such agreements commonly provide that income of a particular nature will either be taxed in only one of the countries, or may be taxed in both countries, with one of them allowing a credit for the tax imposed by the other. This agreement will apply to all taxes on income imposed by the two states, irrespective of the manner in which they are levied. This is a bilateral agreement and will apply to persons who are residents of one or both countries. For this reason, the agreement is therefore not applicable to citizens of each state who are residing in a third state.
The Select Committee on Finance, having considered the request for approval by Parliament of the Agreement between the Government of the RSA and the Government of the Republic of Kenya for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, recommends that the House, in terms of section 231(2) of the Constitution, approves said agreement.
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.