Agreement on Establishment of African Tax Administration Forum (ATAF): South African Revenue Service briefing; adoption by Finance Standing Committee
Finance Standing Committee
07 June 2011
Chairperson: Mr T Mufamadi (ANC) [Finance Standing Committee] and Mr C de Beer (Northern Cape, ANC) [Finance Select Committee]
Meeting Summary
The South African Revenue Service briefed a joint meeting of the Standing Committee and Select Committee on Finance on the Agreement on the Establishment of the African Tax Administration Forum.
The establishment of the Forum was, on the initiative of the present Minister of Finance, who was then the South African Revenue Service Commissioner, mooted at the International Conference on Taxation,
Members sought clarity on the financial implications for
‘The Standing Committee on Finance having considered the desirability of approval by Parliament of the Agreement on the Establishment of the African Tax Administration Forum recommends that the House, in terms of Section 231 (Subsection 2) of the Constitution of the
Meeting report
Introductory Remarks
The Chairperson welcomed the delegation from the South African Revenue Service (SARS) and Members of both the Standing Committee on Finance and the Select Committee on Finance. The briefing and discussion would concern both Committees. However, consideration, deliberation and adoption at this stage of the process would concern only the Standing Committee.
Agreement on the Establishment of the African Tax Administration Forum (ATAF): South African Revenue Service briefing
The South African Revenue Service (SARS) briefed both Committees on the ratification of the South African Tax Administration Forum Agreement (ATAF). The briefing was given by Mr Logan Wort, General Manager: Corporate Relations and Comunications, South African Revenue Service (SARS) and ATAF Executive Secretary, and Ms Varsha Singh, Senior Manager: International Relations, SARS.
Mr Wort was pleased to brief Members, since he knew that since 2009 they had been taking a keen interest in ATAF. He hoped that there would be an opportunity in future for a more detailed briefing. A strategic plan and a work plan had been sent to the Standing Committee.
Ms Singh said that the purpose of the briefing was to consider
•The Agreement had been adopted in November 2010 by the ATAF Council.
•It was open for signature by African states.
•
•The Agreement had not yet entered into force.
•
Background
Ms Singh said that African countries did not need to be convinced of the vital role of tax administrations, not only for funding vital services but for state-building, good governance and economic development.
On the initiative of the Hon Pravin Gordhan, now Minister of Finance, but then the SARS Commissioner, the establishment of ATAF was mooted at the International Conference on Taxation,
The ATAF Inaugural Conference was held on 19 November 2009 in
31 countries had pledged membership to ATAF.
A Council of 10 Members was elected, namely,
The permanent seat of the ATAF Secretariat was in
ATAF had been endorsed during its formative years by the Group of 20 (G20), the Group of 8 (G8), the African Union (AU) finance ministers, the Organisation for Economic Cooperation and Development, and the Tax World and Donor Partners.
Current status of the ATAF Agreement
On 15 November 2010 the ATAF Council had adopted the Agreement at the Council’s second meeting held in
The Agreement was now open for member states to proceed with the procedures for domestic ratification.
The State Law Advisors of the Department of International Relations and Cooperation (DIRCO) and the Department of Justice and Constitutional Development (DoJ&CD) had given an opinion that the Agreement was consistent with
The Cabinet Working Committee had adopted the ATAF Cabinet Memorandum No. 2 of 2011 dated 31 January 2011 on 16 February 2011.
Why it was important to establish an organisation such as ATAF
Ms Singh said that many countries, but not all African countries had low tax revenues. The
•Laying a strong basis for a new approach to African taxation, state building and capacity development;
•Establishing and developing bilateral and continental networks regularly to exchange ideas on the lessons learned and good practice on all issues of taxation;
•Examining ways to improve systems and mechanisms in African tax administrations through the sharing of experiences and developing relevant best practices;
•Engaging in an ongoing dialogue with African tax administrations’ counterparts from member countries of the Organisation of Economic Cooperation and Development (OECD), other multilateral organisations and other relevant organisations on sustainable partnerships in support and development of African tax administrations, systems and institutional capacity; and
•Ensuring greater synergy and cooperation in capacity development among all relevant stakeholders in order to reduce duplication and give greater support to African tax administrations.
The establishment of ATAF fell within
Mobilising domestic resources would provide African states with the relevant fiscal space to determine their own spending priorities in line with their own national objectives and socio-economic needs and reduce the reliance on developmental aid.
Mr Wort said that SARS was fulfilling the role of ATAF Interim Secretariat until such time as ATAF became a legally established and an independent entity. The SARS Commissioner had seconded seven SARS officials to the Secretariat office on a full-time basis. The aim of the Interim Secretariat was to establish an independent, legal entity of ATAF and also an independent Secretariat. Hopefully next year, SARS would hand over the functions of the Secretariat to an independently-run body for ATAF.
Financial implications for South Africa
•Potential long-term financial implications covering membership fees as well as costs associated in the participation in ATAF events and meetings.
•Membership fees for Category 1 members had been calculated at
•Development partners (donor agencies) had committed approximately R16.6 million to the development of ATAF over a period of three years. This went towards the funding of research and projects, while ATAF membership fees went towards the cost of the administration.
The ATAF Interim Secretariat’s functions and responsibilities
•Providing logistical and human resource assistance;
•Preparing the ATAF Agreement, ATAF Rules and Procedures, ATAF Strategic Plan and Work Programme;
•Performing the administrative and technical functions of ATAF – implementing the Strategic Plan and Work Programme;
•Managing the relationships between ATAF and donors and other international organisations; and
•Acting as a depository of all ATAF’s records, of procedures adopted for ATAF, and of all instruments of ratification and accession. Mr Singh said that once the Interim Secretariat had received five instruments of ratification, ATAF would become a legal entity, and the process of handing over to an independently-run ATAF would commence. Part of that process was the negotiation of a host country agreement with the Department of International Relations and Cooperation (DIRCO), depending on the Standing Committee on Finance’s recommendation.
The ATAF Agreement
Mr Singh said that the Agreement had been drafted by international legal experts at the
ATAF’s objectives
Mr Singh said that although ATAF was not yet a legal entity, it had already arranged 22 training events in about 10 different countries on the continent. These programmes ranged from transfer pricing, the taxation of natural resources, the management and organisation of revenue authorities, risk management, tax treaties, to compliance and enforcement. At these events, ATAF brought in professionals from the OECD, the International Monetary Fund (IMF), and increasingly from African revenue authorities - where ATAF trained tax officials in best practice from African countries: this had been very successful. Also as part of its objectives ATAF engaged in pioneering research. Mr Singh summarised the objectives:
•Strengthen African tax administrations to improve domestic resource mobilisation for economic development;
•Enhance the professionalism of African tax administrations through capacity development, international dialogue and interaction;
•Innovate, develop, share and implement best practices in African revenue administration;
•Combat tax evasion and avoidance through mutual cooperation between African administrations and international institutions;
•Develop key relations with civil society, and improve good governance and accountability between state and citizens;
•Ensure greater synergy and cooperation in capacity development among all relevant stakeholders in order to reduce duplication and give greater support to African tax administrations; and
•Provide a mechanism for African perspectives on tax issues to inform and influence the global dialogue on tax issues.
Membership fee structure
ATAF had a four-tier annual membership fee structure which was aimed at acknowledging the differences between members in terms of their ability to pay.
The ATAF membership cost structure was as follows:
•Category 1: US$32 000 (countries with a gross domestic product (GDP) of more than US$12 billion;
•Category 2: US$18 000 (countries with a GDP of between US$5 billion and US$12 billion;
•Category 3: US$10 000 (countries with a GDP of between US$1 billion and US$05 billion; and
•Category 4: US$05 000 (countries with a GDP of less than US$1 billion.
Membership
31 African countries had joined:
ATAF members were currently:
•Contributing membership fees;
•Seconding staff to the ATAF Secretariat (
•Participating in technical events and working groups.
Benefits to
•Strengthening the continent’s tax administrations through capacity building and cooperation to mobilise its own revenues and outgrow aid;
•It was intrinsic to development, economic growth and poverty reduction – building strong and capable states and accountability to citizens;
•Enabling African tax administrations to deal better with tax collection challenges;
•Pooling resources, information and research, sharing best practices and assisting with the training of staff from African tax administrations; and
•Coordinating donor aid aimed at the development of tax and revenue administrations to the benefit of member countries.
Specific benefits to
•Strengthening the capacity of SARS and South African institutions involved in tax policy and development through influencing, leveraging, supporting and coordinating delivery on SARS’s mandate;
•Delivering on
•Building the capacity of revenue administrations in
•Defending and extending
•Enhancing the technical capacity and knowledge of SARS officials and that of African revenue administrations through
•Securing the supply chain for licit trade and prohibiting the entry of illicit goods; and
•SARS profile had significantly increased in the tax and development arena.
Mr Wort pointed out that SARS had attended all the capacity-building exercises and had hosted many of them; it had learned from the experience of other tax administrations in
Mr Wort pointed out that, through
Mr Wort called on Members of Parliament (MPs) to ratify the Agreement.
Discussion and consideration
Dr D George (DA) believed that ATAF could add considerable value for
Mr Wort replied that the financial implications of running the Secretariat and the administration were being borne currently by SARS. Just as for any other cost centre within SARS at the moment, SARS made a bid in the SARS budget for an allocation. In the last financial year, because SARS became the secretariat in July 2010, the amount from the SARS budget was R2.5 million. For a full year for 2011 it would go up to R8.7 million, which would include the payment of salaries, travel, the cost of SARS people working there, the cost of printing, meetings, and the cost of running the organisation. In addition to that the contribution in 2011 from
Mr B Mashile (ANC;
Mr Wort replied that ATAF was a technical organisation. It was not the extension of a ministry of finance. Therefore it was not associated with the regional economic organisations or the African Union (AU). Revenue authority commissioners were very practical, technical people, and did not engage in tax policy but rather in administration. They found it to be far more functional just to have a body of revenue people to consider how best to run revenue administrations. The domestic tax laws remained sovereign. This was the meaning of ‘independence’ in this context. However, ATAF did work with organisations such as the AU and the Southern African Development Community (SADC) in the training that it provided. ATAF had run four training programmes with SADC, for example, over the past year. So ‘independence’ was simply a reference to ATAF being a technical organisation and not an arm of a multi-lateral organisation in which one had to obtain the approval of the Minister concerned for every decision made. The organisation was therefore highly mobile but was non-political, so in that sense it was quite safe.
Mr Wort indicated that the representational Council was based on five regions that had been identified in
Mr Wort explained that a member of the Council could withdraw their participation (Article 9). The heads of revenue authorities in
Mr D van Rooyen (ANC) welcomed the presentation. Tax administration efficiency and revenue collection enhancement was the epicentre of the country’s African agenda. As an African, he was very proud of this initiative. He could understand why other countries were willing to commit resources, even before ratification, since this was a long overdue intervention that took our beloved continent’s development agenda a step forward. He noted that the colonial masters’ languages had been given preference for reasons well-known; he agreed that English and French were widely spoken but noted that Swahili was the third dominant language in Africa, and asked why Swahili had not been chosen in preference to Portuguese (Article 7).
Mr Wort replied that ATAF had adopted the colonial languages for purposes of functionality (Article 7). He pointed out that there had been and continued to be a debate, which would probably be reopened at the Council’s next meeting in Mauritius; Arabic had been a contentious issue right from the beginning. One of the arguments concerning Arabic was that Swahili was spoken in more countries than Arabic, as Mr Van Rooyen had correctly pointed out. The choice of languages was again for purposes of functionality, and had to do with the cost of translation. In most countries it was the case that either a colonial language was spoken or an indigenous language; this was the line that the organisation had taken until further review, because of cost. The only argument which the organisation was considering at the moment was that in some Arabic-speaking countries there was no other language. This was probably something that would be raised in
Mr Van Rooyen asked about the annual voting powers of member countries. Positions of authority would be highly contested. If this was not clarified at an early stage there might be problems.
Ms Z Dlamini-Dubazana (ANC) asked how effective an MPs’ role was in relation to an agreement that had already been signed, even though it still had to come back Parliament in order for
Mr E Mthethwa (ANC) concurred with Ms Dlamini-Dubazana, and asked if this Agreement was still negotiable.
Mr Wort replied SARS did not have the authority to adopt the Agreement. This was the text as agreed to by the organisation and signed by the Council. This was also the text that ATAF was putting to the legislatures across
Ms Singh confirmed that SARS had received the opinions of the State Law Advisors from the Department of International Cooperation (DIRCO) and the Department of Justice and Constitutional Development (DoJ&CD) that the Agreement was in order to be taken forward for ratification. There was no conflict with South African domestic law. The Advisors had drawn attention to Section 231 of the Constitution with the intention of ensuring that SARS took the Agreement through the relevant parliamentary committees. The Agreement would enter into force when five states had ratified it. In accordance with Section 231 of the Constitution,
A Member was worried about what would happen if this organisation became insolvent. He asked this with reference to Article 6.
Ms Singh replied that the rules and procedures were still being developed (insolvency, Article 6). There would be provision in the rules and procedures for the resolution of disputes as well as to examine ad hoc commissions that the Secretariat might find needed to be settled in future. Those areas would be addressed in the rules, and these rules would form the working procedure for the ATAF Secretariat and Council.
Mr Mashile said that Members were in a difficult situation. Already
Mr Wort clarified that ‘independence’ in the context of ATAF was not a political statement of independence. There were a number of practical issues. Firstly, not all African countries were members of the AU. Secondly, not all African countries were members of the UN. Some states were recognised by others but not by others. However, the revenue authorities said that they must work with all these organisations in the interests of domestic resource mobilisation in
Mr Mashile asked what the problem would be if he were able to persuade all the Members present to refuse ratification.
Mr Wort replied that if Members refused ratification, then SARS could not be a member and would have to hand back the Secretariat and ask someone else to take it over.
Mr Mthethwa asked what SARS expected from Members. What must they do with the document? How would SARS want to engage Members in future?
Mr Wort replied that SARS was asking the Standing Committee to recommend ratification of
Mr T Chaane (ANC;
Adoption
Dr George said that it was disappointing that it was only now that the Standing Committee was involved; however, it was a good idea to have such a Forum and it would be exceptionally embarrassing for South Africa to refuse ratification. The Democratic Alliance supported ratification of the Agreement.
The Chairperson said that this document still had to go to the NCOP for ratification there, but the Standing Committee on Finance had received the presentation and request of SARS. The Standing Committee commended SARS for leading this effort for the continent of
The Chairperson noted that Dr George has moved for the ratification; Mr Mthethwa and Mr S Marais (DA) seconded.
The Chairperson read for record purposes and signed the motion of desirability:
‘The Standing Committee on Finance having considered the desirability of approval by Parliament of the Agreement on the Establishment of the African Tax Administration Forum recommends that the House, in terms of Section 231 (Subsection 2) of the Constitution of the
The meeting was adjourned.
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