Hon Chair, Ministers and Deputy Ministers present, hon members and comrades, the point of departure for the ANC in approaching this debate on the Taxation Laws Amendment Bill must start with ANC policies. The ANC regards the amending Bill as a valuable contribution in the ongoing reform of the taxation legislation regime.
In 1994, the Reconstruction and Development Programme, commonly known as the RDP, proposed the reform of the financial sector and ongoing transformation of the financial system. This RDP proposal was in recognition of the fact that the ANC government inherited a distorted financial system. The RDP notes that assets and taxation practices contributed very little to the development of new sectors of the economy.
This Bill seeks to regulate our tax relationships with foreign countries. Underpinning this tax relationship is our developmental agenda at home, on the continent and with the rest of the world. Such a developmental agenda must inform the nature and the content of the taxation regime and its impact upon trade. Therefore, in crafting the Bill, consideration has been given as to where the Industrial Policy Action Plan, Ipap 2, seeks to steer our trading relations and how this is informed by our new economic growth path, a subject that we have recently debated in this House.
The Bill will bring about the application of best international practice and ensure the most modern methods of determining compliance on tax collection by foreign and domestic companies. At this point in time, the ANC recognises that our economy is export-led, in the main, with its focus on raw material and commodities. The Bill recognises this current scenario, but is crafted in such a manner to allow for further amendment. This will ensure progress on the new growth path and have future implications on the taxation regime.
The Bill further seeks to encourage foreign investment. Any tax regime must be based on a scientific appreciation of the global environment. Within the context of economic globalisation, we are increasingly conscious of insistent demands for the free movement of commodities, finance and capital across the globe. This Bill has, in content, been crafted to appreciate this reality, one which we will still be engaged with in the longer term.
In this regard, our taxation system is not merely about the creation of a foreign investor-friendly environment in order to do business. While recognising the importance of foreign investment, such an approach will negate the nature of the economy we are trying to build. However, tax legislation must be informed by the ANC's policy approach on industrial strategy, international co-operation and our continental focus. Importantly, as we enter into a new trade bloc agreement with Brazil, Russia, India and China, the structure of our tax regime is going to be critical.
A developmental state ensures that its tax regime speaks to the objectives of what that state seeks to achieve, both nationally and internationally. Therefore one of the key focuses of this Bill must be that it seeks to ensure that both local and foreign investment generate a significant amount of capital. That capital is then steered in such a manner that it contributes towards the creation of decent jobs and the reduction of poverty so as to achieve the national priorities.
The matter of global competitiveness and the nature of the new economic bloc that we enter into will always pose fundamental questions on how we structure our taxation regime and for what objective. The ANC does not enter into this debate on the basis of seeking competitiveness as an end in itself, but rather how the taxation regime leads to greater equity and fairness in local and global trade. Greater equity must lead to a better sharing of basic and natural resources, thus resulting in distribution of wealth to the poor.
The Bill recognises that we operate in a highly regulated environment which, globally, seeks to structure a particular outcome, one which the ANC may not necessarily agree with. Equality, solidarity and sound governance are principles we strive for, and this must influence how we structure changes to the tax regime. The complexity that faces a developmental state such as ours is to ensure that our influence and a more progressive world outlook are achieved and how this must impact upon the nature and the structure of our tax regime.
We are deeply conscious that many industrialised countries in Europe and North America would want to extend their access to the market through a system of greater tax liberalisation. The ANC believes that the international tax system needs to be regulated appropriately in order to protect developing countries and reflect the principles of equity, solidarity and sound governance that were mentioned earlier on. We, of course, desire to protect our fiscus through the adoption of new amendments to the tax regime. These amendments should be viewed in the ongoing restructuring of our economy, the new growth path and the developmental state's capacity to drive economic transformation.
The need for this amending Bill to address certain specifics is reflected in the tax on cross-border trade finance exemptions, which are defined more clearly, and interests associated with letters of credit agency. The Bill seeks to realign the definition of foreign dividends in line with the international law of the country under which foreign companies are established. Here, a direct tax credit or a participation exemption is encouraged. We are conscious that some foreign companies get into an excessive amount of debt while remaining free from capitalisation restrictions even when the main operations of the company in question are contained within a local South African branch.
In this regard, the ANC therefore requests the hon Minister Mr Gordhan and the Deputy Minister to ensure that transfer pricing is efficiently implemented and a monitoring tool is designed. Thank you. The ANC supports the Taxation Laws Amendment Bill. [Time expired.][Applause.]