Of course, if you want to contribute to the fiscus, please do go and gamble so that we can get that 15%! [Laughter.] Despite the obvious merits of this argument, I expect vigorous debate during the parliamentary process, just not today, please!
National health insurance
Proposals are under review for a national health insurance system, as part of the broader restructuring and enhancement of health services. There will be substantial cost implications. We will consider and consult - let me repeat; we will consider and consult - on options for meeting the funding requirements, including a payroll tax payable by employers, an increase in the VAT rate and a surcharge on individuals' taxable income.
Now let me repeat before you all get anxious about this. These are all options. We will have to consider the pros and the cons of each of these options. We do require more money to get this scheme going but ultimately it will benefit all South Africans. The question is: Where do we get it from and what is the best form in which to do it?
The fiscal and financial implications of health system reform, and alternative revenue sources, will be examined in the year ahead.
Tax proposals - businesses
For businesses, the following is proposed:
. As indicated in previous years, a dividends tax will take effect on 1 April 2012, replacing the secondary tax on companies. . Dividend schemes that undermine the tax base will be closed by treating the dividends at issue as ordinary revenue. These include dividend cessions, where taxpayers effectively purchase tax free dividends without any stake in the underlying shares. . Government introduced the concept of a venture capital company into the Income Tax Act in 2009, but the response to it was poor. The approach will be refined so as to facilitate greater access to equity finance by small and medium businesses and junior mining companies. . From March 2011, the turnover tax for micro businesses with an annual turnover up to R1 million will be adjusted so that tax will be payable only if turnover exceeds R150 000 a year. In other words, below that, you pay no tax. The rate structure will also be reviewed. . Also, from 1 March 2012, micro businesses that register for VAT will no longer be barred from registering for turnover tax. . The learnership tax incentive, designed to support youth employment, will expire in September 2011. Government proposes to extend this for a further five years, but subject to an analysis of its effectiveness with all stakeholders. The take-up until now has been low. . A youth employment subsidy is proposed. Subject to completion of consultations, it will take the form of a tax credit costing R5 billion over three years to be administered by the South African Revenue Service through the PAYE system. This is subject to further consultations. . To support the objectives of the Industrial Policy Action Plan and the New Growth Path, certain investments qualify for tax relief. Consideration will be given to expanding such incentives for labour intensive projects in industrial development zones.
Indirect taxes
. The transfer duty exemption threshold will be increased from R500 000 to R600 000. . Excise duties on alcoholic beverages will be increased by between 4,5% and 10,3% - an increase of 6,4 cents ... [Interjections.] ... wait a minute, this is the part you need to consider before you go and have a drink... for a 340ml can of beer, 13,5 cents per bottle of wine, or R2,86 for a bottle of spirits - now, Mr President, I must get this one right - izinyembezi zika-Queen. [Queen's tears.] It comes from his territory. [Laughter.] . Taxes on tobacco products will increase between 6% and 10,2%; it will be 80 cents more for a packet of cigarettes. [Applause.] . Currently there is an ad valorem excise tax on motor vehicles. The rate increases as the price of the vehicle increases. These rates will remain unchanged below a purchase price of R900 000. For vehicles above R900 000, the tax rate will increase to a maximum of 25%, from 20% at present. [Applause.] . The general fuel levy will increase by 10 cents a litre on both petrol and diesel on 6 April 2011. . The Road Accident Fund levy will be increased by 8 cents to 80 cents a litre. . Increases will take effect on 1 October 2011 in the air passenger departure tax on flights to international destinations. . The levy on electricity generated from nonrenewable and nuclear energy sources will increase by 0,5c/kWh to 2,5c/kWh from April 2011. The increase should not impact on electricity tariffs, as it has already been taken into account in the National Energy Regulator's approved tariff structure.
Tax administration
Mr Speaker, allow me to pay tribute again to the continued support that all of us received from millions of honest taxpayers. Can we applaud them, please? [Applause.] Their contributions are reflected in the recovery of tax revenue this year. We have been able to expand spending where other nations have been forced into austerity adjustments. Even those who have not contributed fully to date have begun to come forward to take advantage of the Reserve Bank and Sars' voluntary disclosure programmes. Others who wish to do so have until the end of October this year to join the 1 200 applicants so far.
Administrative reforms will continue to focus on ensuring that all those who earn an income through employment or other economic activity pay what is due to the fiscus.
This year, Sars will turn its attention to enhancements to the business tax process, including corporate income tax, VAT and the enhanced turnover tax for emerging businesses. As with personal income tax, a prerequisite for these improvements is an accurate picture of all business entities no matter their size or tax liability. Sars, in partnership with other state institutions, will make significant improvements to the business registration process this year, including conducting a door-to-door drive in all sectors of our economy to complete the picture.
Tax and customs evasion remains a serious threat. Working together, the Police, the prosecuting authority, the Financial Intelligence Centre and Sars ensured that more than 200 taxpayers were convicted of fraud and tax evasion during the last six months alone.
Recently, customs officers with the support of the police impounded nearly 3 000 illegally imported second-hand vehicles, two significant tobacco smuggling rings have been snuffed out ... [Laughter.] ... and a tobacco manufacturer has been shut down in the past month. We are also, in conjunction with the tobacco industry, investigating a new method of marking and authenticating legal cigarettes with a counterfeit-proof digital system to replace the current diamond mark.
Mr Speaker, the sector most visibly affected by the illicit economy in recent years has been the clothing and textile industry, resulting in significant loss of jobs in local manufacturing plants. In the coming months a multidisciplinary task team comprising representatives of the manufacturing, importing and retail industries and a range of public sector stakeholders, will begin interventions across the entire value chain to clamp down on illicit clothing and textile imports.
Measures to combat fraud and corruption
Mr Speaker, public procurement plays a significant part in the economy and is central to government services. However, citizens and taxpayers do not get full value for money, as we have said repeatedly, because this is an area vulnerable to waste and corruption. This compromises the integrity of governance and frustrates the pace of service delivery.
Alongside the work of the competition authorities in addressing supplier collusion and tender-rigging, a strong procurement framework is critical to boosting jobs and service delivery. The first round of measures announced in October will come into effect this year:
. Government departments will be required to establish rigorous demand management procedures, including submission of advance tender programmes for the next financial year to the relevant Treasury authority. This will be so throughout government. . Limits will be prescribed for variation orders, to restrict significant changes to procurement orders and bring our system in line with international standards. . Companies bidding for tenders will be required to disclose the identity of all directors ... [Interjections.] [Applause.] ... to determine whether any of the directors are government officials and to establish whether they are tax compliant.
There are currently 53 investigations involving procurement irregularities - there are many more irregularities - involving contracts worth about R3 billion. Minister Radebe recently reported that 65 people linked to some of these investigations have been arrested and brought before the courts. More than R250 million has been seized by the state.
Sars is investigating another nine cases of tender fraud, with a total value of approximately R1,7 billion. Sars has also increased its analytical capacity with the aim of ensuring that vendors winning state contracts satisfy their tax obligations fully. As at the end of January 2011 Sars had identified some 13 000 vendors who have won state contracts and who owe taxes amounting to over R1 billion.
Mr Speaker, as we have said, we have a shared responsibility to prevent corruption and we call on all citizens to blow the whistle on corruption and to report any procurement irregularities to the relevant authorities. [Applause.]
In this regard, we welcome the announcement from Business Leadership South Africa that it intends to name and shame or expel members who offer or accept bribes, or break laws while doing business. Let's applaud their gesture. [Applause.]
Equally important is the call of this government to its managers to ensure that our communities and our taxpayers get full value for their money. Poor delivery and stealing from the fiscus are never acceptable. Senior managers of our institutions and municipalities are expected to work actively to improve their procurement processes and oversight.
Infrastructure investment, city planning and development finance
Public sector infrastructure spending Mr Speaker, government and state-owned enterprises will spend more than R800 billion over the next three years on new power stations, road networks, dams and water supply pipelines, rail and port facilities, schools, hospitals and government buildings. This builds on the steady progress made over the past decade, which saw the contribution of government and public enterprises to gross fixed capital formation rise from 4% of GDP in 2000 to 8,6% in 2009. These are long-term investments in the future of our country, and in the capacity of the economy to grow and create jobs for generations to come.
Major projects under way include, as you know:
. the Medupi Power Station; . the Transnet multiproduct pipeline; and . the freeway improvement scheme.
These investments are largely financed through borrowing, with costs recovered from future electricity consumers and road users.
As part of a long-term strategy for modernising public transport in metropolitan areas, the Passenger Rail Agency of South Africa is embarking on an 18-year programme to replace its coach and locomotive fleet at an estimated cost of R86 billion.
While infrastructure spending in the lead-up to the Soccer World Cup assisted in moderating the impact of the recession on South Africa, there has been an apparent deterioration in government construction spending over the past year.
The challenge of intensifying infrastructure spending over the period ahead will require attention to planning, budgeting and contract management in national and provincial departments and municipalities.
Planning and financing cities for inclusive growth
It is time for special initiatives to accelerate growth and development in South Africa's cities, which have immense potential for inclusive growth and are home to many millions of poor people. The public finance challenge is to balance investment in expanding urban capacity while also providing key public services - electricity, refuse removal and public transport, amongst others.
An efficient and cost-effective public transport system is crucial because the majority of our people live too far from where work opportunities are.
In addition, through better land use management, we need to deliver integrated human settlements that break from the apartheid past. [Applause.]
A start is made in this Budget, in the allocation of funds directly to cities to upgrade informal settlements. Minister Sexwale will implement the accreditation of municipalities that have demonstrated their capacity to manage the low-income housing subsidy system. The public transport function, including the management of rail, has been delegated by Minister Ndebele to metropolitan municipalities in terms of the National Land Transport Act.
These are steps that create direct responsibilities for city councils, and open up opportunities for accelerating investment and change in the urban landscape and how cities promote their local economic development.
Conclusion
Mr Speaker, in conclusion, I extend my sincere appreciation to the President and Deputy President for their unwavering support and wise counsel. Keeping our country on a steady course through the Great Recession, as it is now called, has been a challenging task for all of us and the support of the Presidency has been both indispensable and inspirational. Let us applaud them, please. [Applause.]
I would like to thank my Cabinet colleagues for their support. The Budget is our collective statement. Your positive and encouraging contributions have been most helpful. Thank you very much. [Applause.]
The members of the Ministers' Committee on the Budget have shouldered an immense responsibility to restructure and reform our fiscal system and make bold recommendations to Cabinet. Theirs has been an excellent and enduring team effort. [Applause.]
Our thanks to my colleague, Deputy Minister Nene, who has offered wise insights and shared many responsibilities. He forms an invaluable part of a maturing Ministry. [Applause.]
Thanks also go to the MECs for finance, who play a vital role in managing over 40% of our national Budget.
Our collective thanks go to:
. Governor Gill Marcus and the staff of the South African Reserve Bank for their marvellous co-operation and assistance; [Applause.] . Commissioner Oupa Magashula and the South African Revenue Service. We hope they have produced the revenue we need by 31 March. [Applause.] . Jabu Moleketi, chair of the DBSA, and CEO Paul Baloyi, for their efforts; [Applause.] . the Financial and Fiscal Commission and its acting chair Bongani Khumalo; [Applause.] . Nedlac, its managing director, Herbert Mkhize, and representatives of the business, labour and community constituencies; [Applause.] . the hon Thaba Mufamadi and hon Charel de Beer, who chair the Standing and Select Committees on Finance respectively and to the two chairs of the Appropriations committees, the hon Eliot Sogoni and hon Teboho Chaane, whose work starts now. [Applause.] . the Director-General of the National Treasury, Lesetja Kganyago - who is now becoming a veteran - and the National Treasury team, who continue to surpass their own high standards and remain wonderful examples of loyal and professional public servants, and who are an invaluable asset to our democratic state; [Applause.] . the staff of the Ministry, who make life easier for me; and . to my family for their support and sacrifices so that I may serve our country.
Once again, my sincere appreciation to the wide range of South Africans who continuously provide positive feedback and ideas on how government could work better and differently.
Fellow South Africans, the President has stated very clearly that job creation is our number one priority. This Budget outlines what government's capabilities and finances can do to support the delivery of jobs. Now it is time for all of us to say "making South Africa work begins with you and me".
Giving every South African the dignity of a job, the security of an income, the prospect of training, the support to launch new businesses, the confidence to be an entrepreneur and the sheer passion and optimism to break the shackles of unemployment, is the best legacy this generation can leave for the next.
The world is full of opportunities. Ours is the task of transforming these opportunities into real, tangible outcomes which all of our people can experience and call their own.
I want to quote Mandisa Motha-Ngumla, who sent in a wise tip:
Government must teach its people to fish, not be suppliers of fish. The latter is not sustainable The government pond will never be able to supply more fish in 20 years than it is doing now to the ever-growing masses of people of this country. Let's work to reduce dependency and give back dignity that was eroded by our past.
[Applause.]
We repeat what we said last year: With jobs comes dignity; with dignity comes participation; and from participation emerges prosperity for all.
Mr Speaker, I have pleasure in tabling the Budget Review of 2011, the Division of Revenue Bill, and the Appropriation Bill for this House to consider.
Finally, let us be inspired by Madiba, who said:
In judging our progress as individuals we tend to concentrate on external factors, such as one's social position, influence and popularity, wealth and standard of education ... It is perfectly understandable if many people exert themselves mainly to achieve all these. But internal factors may be even more crucial ... honesty, sincerity, simplicity, humility, pure generosity, absence of vanity, readiness to serve others - qualities which are within easy reach of every soul.
Thank you. [Applause.]