Hon Chairperson, allow me to take this opportunity to agree with the Minister and the chairperson of the Portfolio Committee on Finance that our tax laws are indeed one of the most important contributors to our competitiveness. If we get it wrong, it will hurt our growth; and if we get it right it will enhance our growth. So we agree on that point.
Please allow me to touch on a few of the key issues that were raised in the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill.
With regard to our tax laws governing research and development goals, it is noted that South Africa operates in a competitive global economy. Therefore, any incentive that is implemented locally must be evaluated in terms of the extent to which it offers the country a competitive advantage.
Several countries across the globe currently offer a tax relief incentive promoting research and development. Based on the presentations made to the Standing Committee on Finance, there seems to be a general welcoming of the amendment reassigning the power to determine which activities qualify as research and development, from the SA Revenue Service to the Department of Science and Technology.
Objections to the proposed amendments centre on the wording of the new provisions. The fact that these terms are vague in the Bill will hamper implementation and ultimately detract from the intention of the incentive, which is to encourage innovation. The DA is of the opinion that the current framework need not be changed. Tax incentives must enhance, and should not restrict, research and development.
The second point that we would like to address is with regard to the retrospective application of legislation. We agree that the tax legislation in this regard - retrospective tax legislation - to counteract avoidance has become necessary. In essence, however, the legislation in this regard - tax matters - is being used to attempt to give tax authorities an upper hand in the race between themselves and the agents who practice avoidance behaviour.
The practice, however, is the exception and not the norm. There are very few examples of tax provisions whose effect is backdated prior to being announced. It should therefore be viewed as a weapon of last resort. The extent of retrospective legislation dealt with in the Tax Laws Amendment Bill should be questioned.
Retrospective legislation signals the intention to apply the amendments retrospectively from 1 October 2012. The retrospective amendments that pertain to the research and development incentive have failed to ensure that a fair balance is being struck between the interests of the country and the rights of the individual companies to equality, certainty and convenience.
The last point that I would like to allude to is value-added tax on e- commerce transactions. Value-added tax, as we all know, is an indirect broad-based consumption tax, the intention being that the tax is levied in the place where the product or service is consumed.
It is on this understanding that the National Treasury is proposing to level the playing fields by forcing multinational corporations who engage in e-commerce activities with customers in South Africa also to register as VAT vendors. In doing so, it is hoped that National Treasury will collect VAT from both these companies and domestic e-commerce businesses, thus affording the opportunity to domestic e-commerce businesses to compete with their global counterparts. We have no problem with this, as we know that there should be competition on an equal footing.
Whilst the proposed amendments are laudable, concerns centred on the practicality of such provisions have been raised.
May I just conclude by saying that the administrative burden may be too cumbersome and we have to look at the costs with regard to this? The costs of the new tax structure are likely to exceed the tax revenue gain in this regard.
Given South Africa's straight deficit problems we, however, also have to consider the other side of the coin. The DA is of the opinion that the deficit problems might be affected, so international companies should be encouraged to invest in South Africa. We have to look at that possibility and the fact that South African consumers could perhaps also reap the fruits with regard to reasonable pricing. Those are a few points that we need to consider. Thank you very much. [Applause.]