Committee reports: SA Revenue Services, & National Treasury Annual Reports 2009; oversight report on SARS Customs Border Control

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Finance Standing Committee

16 March 2010
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The Committee debated and subsequently adopted, with amendments, its report on the 2009 Annual Reports of South African Revenue Services, and its report on the oversight visit to the South African Revenue Services Customs Border Control in Durban. The Committee report on the 2009 Annual Report of National Treasury was sent back for redrafting and would be circulated again.

In relation to the Committee Report on the SARS 2009 Annual Report, Members felt it should be clearly reflected that the Committee wished to recommend that the tax system had to be critically re-examined, and that education and outreach programmes on who was obliged to pay tax, and the reasons why, should be conducted. Members also stressed the need for this Committee to confer with the Department of Trade and Industry in relation to customs, tariffs and import duties, illicit trade and the future of the regional economy. The Committee should also recommend that something be done about environmental tax, instead of merely making reference to it. The report was adopted, with the necessary changes.

Members disagreed with the way in which the Committee Report on the 2009 Report of National Treasury had been drafted, as it seemed to repeat the presentation made by the National Treasury without attempting to analyse it. The Committee pointed out that it had the tools at its disposal to do so, and that more research was needed when the Committee took presentations from any entities. The reports should make it quite clear what was the view of the presenters, and what was the view of the Committee, and needed to note whether annual reports matched strategic plans. The Committee also noted that it should have a separate session with National Treasury around fraud issues, funding of State Owned Enterprises and municipalities, and this might even extend to holding monthly meetings. A Member suggested that the Committee should also, in future, set aside specific time, perhaps weekly, to deal with reports and prepare for Parliamentary presentations.

In discussing the oversight report on the site visit to the SARS Customs Border Control in Durban, in August 2009, Members noted the need to co-ordinate Committee’s work so that the visits were not about policing, but were broader and achieved maximum impact.

Meeting report

Consideration of draft Committee Reports
Draft report on the 2009 Annual Report of South African Revenue Services (SARS)
The Chairperson tabled the draft report, and allowed Members a few minutes to review it.

Dr D George (DA) proposed amendments on the first bullet point of the Committee Deliberations. The deliberations were not captured elegantly and accurately. The report was very vague. He reminded the Members that they had not said that they had a problem with taxes, as such, but the Committee was making recommendations that the tax system, and how it was applied to the economy, must be critically examined. Tax practitioners believed that the tax system was too complex and complicated for South African society, and this should have been captured in this point.

Ms B Dlamini (ANC) raised a concern that the majority of people were not aware about tax systems. She recalled the Committee making recommendations for educational programmes on taxation. The report did not cover this point.

Dr George proposed that there should be reference to an outreach programme being contemplated, which would take cognisance of the social contract. He noted that some people were not paying tax because they fell outside the tax brackets. The outreach programme should cover aspects of who should pay tax, and why. A culture of tax payment could be tied to the outreach programme.
Ms Dlamini sought clarity as to what refinement on tax laws were.

Ms N Sibhidla (ANC) felt that the clarity was based on the issues raised by Dr George.

Dr George clarified the various aspects of the South African tax system, and proposed that the bullet point dealing with the Personal Income Tax, VAT and Corporate Tax to be left as a question.

Dr George also proposed that the Committee to pursue investigating the tax system, attempt to understand its complexity and consider whether it should remain, otherwise what else should be done. A Commission could be established or a conversation could be initiated by the Committee.

Dr George further alluded to the Southern Africa Customs Union (SACU), acknowledging the flow of goods between countries, and urged the Committee to consider its appropriateness in the light of global changes.

Ms Dlamini also proposed that the Committee should include, in its recommendations, the issue of Environmental Tax that was so often mentioned, yet nothing was being done about it.

Dr Z Luyenge (ANC) proposed that the issue of public participation should be considered as a critical component of an outreach programme in order to refine the tax laws, and that this and education should be viewed as a joint effort. He said that stakeholders in the business sector and the public must be included.

The Chairperson highlighted point 9.1, which made reference to all eligible taxpayers that were in the tax net, and the fact that non compliance was minimised in order to close the gap of revenue shortfall. He appealed to Committee members to consider two factors that led to tax evasion. Firstly he acknowledged that some people were ignorant and failed to pay tax. Secondly, some consciously avoided paying tax. He stressed the seriousness of the crime of failing to pay tax. SARS’s capacity to combat tax evasion, by both corporates and individuals, should be strengthened. The tax base could also be broadened by educating people on the importance of paying tax. He also referred to counterfeit transactions as linked to an illicit economy, falling outside the tax brackets. He argued that the role of the Committee would be to capacitate SARS to deal with that. It should include all matters such as poaching of abalone, counterfeit cigarettes, drug trafficking and other illicit activities. He urged that the Committee to be specific and focused in its recommendations to SARS.

The Chairperson recommended that alignment was key to customs issues. He acknowledged that there had been no interaction between the Committee and Department of Trade and Industry (dti) to determine the future of the regional economy. He pointed that the Committee’s recommendations would have to speak to those discussions, and that in order to be effective, further research was needed.

The Chairperson asked the Committee Secretary to note the proposed recommendations and insert the necessary changes, then circulate the document to the Committee, so that further concerns could be raised directly to him

Members agreed to adopt the report, as amended.
Draft Committee Report on 2009 Annual Report of National Treasury (NT)
Mr M Motimele (ANC) urged Members to avoid using unscientific expressions. He also felt that that they should not use apologetic language. He cited a reference to South Africa “not being hard hit by recession” and asked how the Committee would explain this to someone who had been hard-hit by losing a job. He urged that the report must be more factual. He reiterated that the recession had affected South Africa. There was a need to identify all indicators of recession. He was unhappy with the expression and said that there should be some differentiation between what had been reported by National Treasury, and the Committee’s own view.  

Dr N Koornhof (COPE) stated it was a known fact that South Africa was hit hard by the recession, although not to the extent of other countries. There had been a significant impact in terms of job losses. There had been some contractions in some areas of the economy. He attributed South Africa’s economic survival of the global recession to the manner in which it had been run.

Ms Sibhidla clarified that this statement was made by the Minister during the presentation. It was therefore captured within that period.

Mr Motimele said that Members were supposed to be deal with the Committee’s report, not what the Minister had said. The Committee should not apologise on behalf of the Department. He reiterated the difficulty of explaining this kind of statement to those who were unemployed.

Dr George requested that the Committee’s report be separated into two parts. He agreed that South Africa was miraculously spared from the full effects of the recession; although it had been hit on the financial side, at least it did not have to bail out banks. Secondly, he suggested that the Committee must, in its report, make it clear that it was capturing the Department’s views about the impact of global recession.

Mr Motimele drew attention to page 5 of the report, which dealt with the achievement of the programme: Economic Policy and International Financial Relations.  He disapproved of the claims being made without stated benchmarks against which they could be measured. He said that the basis of his argument was that the Committee was dealing with the National Treasury Annual Report, and could not report on that without having access to and dealing with the strategic planning of National Treasury (NT). This Committee report should be an analysis of the Annual Report. He asked whether the Committee was satisfied with the stated achievements that were not supported by targets.

Ms Dlamini agreed with Mr Motimele that the achievements were based on targets. She suggested that the phrase “achieve: should be changed.

Ms Sibhidla indicated that the way that reports were written confused Members. She recommended that, at the end of the Committee Report, the Committee needed to state that it was not happy with NT’s report, because its strategic plan did not match the areas of achievement. The Committee report must say what National Treasury had reported to the Committee. Feedback on it would be based on the research conducted by the Committee, and thus reasons for disagreement would be provided.
Ms Dlamini noted that although the report was written as having come from the Committee, it contained the analysis of National Treasury.

The Chairperson indicated that the Committee should have interrogated the plans and made submissions during the presentation by the National Treasury. What was encapsulated in this draft report was the presentation. Disagreeing with the report would appear to run contrary to the spirit of the Report.

Mr Motimele agreed with the Chairperson and said that the Committee was not only dependent on the NT’s own presentation, since it had access to the strategic plan and Annual report. The researchers would have to compare these documents. The researchers would not have made these statements on their own.

The Chairperson agreed and advised the Committee members to take heed of Mr Motimele’s recommendations about researchers. The recommendations would improve the quality of the Committee’s reporting, which should not merely reproduce the presentations by departments. More in-depth analysis must be done.

Dr Luyenge asked that the phrase “per annum” be replaced with “during the financial year”, on page 7, paragraph 2 of the report. The report should refer to the financial year with which it was concerned, as it implied currently that the Committee had a broad arrangement with the audit committee to meet annually.

Dr George sought clarity on the possible fraud allegations that appeared in the report. He did not remember when the fraud allegations discussion took place.

The Chairperson clarified that the statement was made in a vacuum.

Mr M Mthethwa (ANC) reminded the Committee that the statement was made in the context of the unqualified reports given by the National Treasury. At the time, the investigation by the Special Investigations Unit had not been completed, and an opinion was given.

Ms Dlamini thought the opinion was expressed by the Auditor General, when he was giving a report to Parliament about the auditing of different municipalities.

Dr George indicated if there was an issue about possible fraud, the Committee needed to apply its mind and ascertain its implications.
Mr Motimele spoke to the role of the oversight role of the Committees, which was not confined to physical inspections, but also to how the Committee understood policy issues. He gave the example of a decision to accelerate service delivery. Policies should speak to that vision, internally and externally. It was the duty of the Committee to see whether policies passed in Parliament talked to that vision. He had not seen that in the recommendations of the report.
Ms Sibhidla noted that she did not understand the context of the sentence, on page 9, point 8.1, reading “The Committee wanted to know how far National Treasury had come regarding the parliamentary office.

Dr George agreed that this was not clear. The Committee never asked NT to set up an office, as this was the duty of the Committee. The Committee had been enquiring about the interaction process, and when, in the budgetary process, an issue would be handled.

Dr George sought clarity on the reference to targets of State Owned Enterprises.

The Chairperson said that there was a lack of communication between the Committee and NT. He proposed that the Committee must make a follow-up on funding of State Owned Enterprises. The report dated back to October 2009, and there had been developments since then. He requested the Committee Secretary to revisit all documents and prepare a proper report making sense of the matters.

Mr Motimele asked whether the nine cases mentioned under the report on Labour Relations were taken to the Commission for Conciliation, Mediation and Arbitration (CCMA).

The Chairperson stated that the sentence reported on nine cases that were concluded.

Ms Sibhidla requested that the Committee should improve upon how it dealt with reports from any entity. The Committee did not give itself sufficient time to deal with, engage and discuss reports. She proposed that one day a week needed to be put aside to discuss, and agree on reports..

The Chairperson agreed and suggested that an in-house process would have to be developed.

Dr George acknowledged what had been done and recommended that more needed to be done by National Treasury on funding of State Owned Enterprises and municipalities. He suggested that there must be guidelines on processes or interventions which Treasury must follow with those municipalities who did not manage their funds well, thus affecting service delivery, or State Owned Enterprises, who got bail-outs using taxpayer money. These should be discussed by the Committee.

Ms Dlamini drew attention to the losses incurred by South Africa through Economic Partnership Agreements. South Africa was shouldering much responsibility for goods entering through its harbours. Other countries like Zimbabwe seemed to be generating more income than South Africa. She suggested that the Committee and dti would have to discuss this. Ms Dlamini also questioned the absence of reference in the report to the disposal policy. She suggested that the SACU policy and disposal policy be considered together.

Ms Dlamini raised a concern about special pensions, which was to be launched when National Treasury met, and asked if there were offices established at various levels, and whether these were operating at national or provincial level.

Ms Sibhidla thought that the concerns raised by Ms Dlamini were covered in the SARS report. She said that the Committee agreed to meet with dti to discuss these issues.

Ms Sibhidla added to the proposals by Dr George by proposing that the Committee should meet monthly with NT to discuss allocations to municipalities. This would enable the Committee to detect matters and assist better than it could if it dealt with reports once a year.

The Chairperson suggested that the Committee would have to deal with each item thoroughly and interact vigorously with each presentation. Very little assistance had been received from the Committee’s researcher, who had passed away around this time. The Committee needed to research matters when it took presentations. In the absence of research, the Committee reports would merely reproduce what the entities had said.

The Chairperson proposed that the Committee not adopt this report, but work on it again and circulate it for further discussion.

Oversight report on site inspection to SARS Customs Border Control in Durban: 11and 12 August 2009
The Chairperson tabled the report, but acknowledged that there could be limited discussion, because some Members who were part of the inspection team were not present.

Dr George observed that the report mentioned areas that were never actually visited, including La Mercy and Durban Airports. However, the reference to the harbour visit was correct. He proposed that the reference to the airports be deleted. He also recommended that the Committee should visit Oliver Tambo Airport, to learn more about its operations.

Mr Koornhof agreed. He said that the information pack obtained from SARS about the Durban Airport could  be used for information purposes only.

The Chairperson said that there was a need to co-ordinate the Committee’s work so that the visits were not about policing, and the reports were compiled by those who visited. He agreed with the concept of site visits, but suggested that they should be broadened to achieve maximum impact.

Dr George alerted the Committee to the omission of any reference to the stolen copper, from page 10 of the report, saying that this was part of the deliberations.

Dr George also recalled that Ms Dlamini had asked SARS about the cost and benefit analysis of the machine that it proposed to purchase. That was an important question and should be reflected in the report.

Ms Sibhidla proposed that this be included under point 14.4 of the report, which dealt with the Customs mobile cargo scanner.

Ms Dlamini referred to the wording of page 12 of the report, which seemed to suggest that SAS suggested that human trafficking was not a crime.

Ms Sibhidla explained that this statement had been made in the context of what crimes were currently recognised; the crime of “human trafficking” in those terms did not exist. The challenge was therefore what charges to bring against a person who had effectively done this. She asked that this statement be substantiated in the report.

Ms Sibhidla proposed that under point 16.2, dealing with proposed recommendations, reference should be added in to the marine transport system. She also proposed that the Committee should do oversight visits in the week after recess, if possible.

The Committee Secretary noted that after the recess the Committee would be dealing with budget votes and suggested that instead the Committee should look at setting aside some days in May.

The Chairperson asked the Members to consider possible dates in May, and also to consider how best to capacitate the Committee before the next cycle.

Members agreed to adopt the report, as amended.

The meeting was adjourned.



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