Double Taxation / Tax Information Exchange Agreements: Seychelles, Malaysia, Austria, Guernsey, Cayman Islands, Jersey, San Marino, Bahamas, Bermuda & others; Combined Border Control Posts with Mozambique; Tax Matters Multilateral Convention

Meeting report

Introduction
In the absence of Mr T Mufamadi (ANC), Chairperson, who was on an official visit to China, Ms N Sibhidla (ANC) was elected Acting Chairperson.

Double Taxation Agreements briefing
Introduction
Mr Ron van der Merwe, Senior Manager: International Treaties, Legal and Policy Division, South African Revenue Service (SARS), began the briefing. The first block of double taxation agreements to be dealt with would be those with Seychelles, Malaysia and Austria.

The agreements with Malaysia and Austria were merely exchange of information updates.

The second block comprised the six tax information exchange agreements (TIEAs) with Guernsey, Cayman Islands, Jersey, San Marino - that group, because they are all virtually the same. Those were all for formal ratification.

The third block comprised agreements with Costa Rica, Dominica, and Argentina, which were tax information exchange agreements, also the same.

The fourth block comprised agreements with Norway and Turkey, which were just for exchange of information.

The fifth block was an agreement with Senegal, and was a full double taxation agreement which National Treasury and SARS had just finished negotiating, and which was hereby presented to the Committee for a preliminary hearing.

The sixth block was the Convention on Mutual Administrative Assistance in Tax Matters which was a multilateral agreement, and on which Members would receive a fuller presentation.

Seychelles and Senegal: introduction
Mr Lutando Mvovo, Director: International Tax and Tax Treaties, National Treasury, briefed the Committee on the ratification of the double taxation agreement with Seychelles. National Treasury had only two presentations. The first was the ratification of the double taxation agreement with Seychelles. The second and last was the preliminary presentation on the ratification of the double taxation agreement with Senegal. National Treasury preferred to deliver these two presentations together. National Treasury was not directly involved in the Convention on Mutual Administrative Assistance in Tax Matters and the other merely administrative agreements between revenue authorities which would be presented by SARS.

Seychelles
This double taxation agreement was one of those that had had to be renegotiated before the Minister of Finance could implement the new Dividends Tax. If the treaty had been left unchanged, it would have opened a big loophole for tax avoidance.

The other tax treaties that had been renegotiated were firstly with the United Kingdom, Sweden, Australia and the Netherlands. These had already been ratified. The treaties with Australia and the Netherlands were already in operation.

The outstanding treaties included those with Oman and Malta which were now in a process of being signed.

The Seychelles protocol was signed on 04 April 2011. The Minister in his budget speech had indicated that he would like to implement the Dividends Tax on 01 April 2012.

[Please see National Treasury. Double Taxation Agreement briefing: Seychelles and Senegal. Slides 3-4]

Senegal (Preliminary hearing)
Mr Mvovo said that this was a preliminary hearing on a proposed full double taxation agreement. This new treaty was negotiated to expand South Africa's tax treaties into West Africa. Currently there were two treaties with countries in the West African region.

Senegal was the fifth largest trading partner of South Africa in the African region.

Mr Charles Makola, Director: International Tax, National Treasury, explained further. South Africa and Senegal were joint members of the NEPAD steering committee. There existed a bilateral investment protection agreement that had been signed but not ratified. This fell within the jurisdiction of the Department of Trade and Industry (DTI). The trade and investment relationship between the two countries was, according to DTI data, productive of a favourable trade balance, and the flows between the period of 2005/10 indicated a steady increase, of which figures National Treasury had taken note.

Mr Makola noted that the South African Reserve Bank (SARB) kept data on investment flows. However, the South African Embassy in Senegal had indicated that South African companies investing in Senegal included South African Airways, which had flights to that country, Nando's, Eskom, and SAB Miller. South Africa also had an increasing investment in the mining sector. This had been taken into account in negotiating this double taxation agreement.

The core purpose of the agreement was to enhance trade and investment between South Africa and Senegal. As Members would be aware, such treaties provided fiscal stability by means of capping withholding taxes. Such agreements facilitated investment by creating certainty. There was also an assurance of non-discrimination.

Such treaties also provided for cooperation in tax matters and reduced opportunities for tax avoidance. Such treaties provided the framework for Mr Van der Merwe to fulfil his role.

Most importantly, from a National Treasury point of view, was the Gateway into Africa Initiative. South Africa was, because of its physical and financial infrastructure, the natural gateway into the continent. For the past several years, South Africa had been trying to align its tax provisions with that particular goal. Mechanisms had been established to enable the setting up of headquarters companies in South Africa that would manage investment into the continent. The double taxation agreement with Senegal represented an expansion of those provisions.

Mr Makola remarked that most South African fund managers were located in London, and it was hoped that the National Treasury's new regional investment regime would encourage them to return home to South Africa and manage their funds from South Africa into the rest of the continent.

Mr Makola said that South Africa's existing network of treaties included Nigeria and Ghana, both gateways into the continent, and it hoped to add Senegal to this network.

Tax was an item of business expenditure, and, if a country lacked a competitive advantage, business was likely to divert to other countries with better treaty regimes. Businesses would always look to lower their costs. In order for South Africa to be a true gateway into the continent, South Africa must not be disadvantaged, and would review its position on Senegal.

Senegal was reviewing the double taxation agreement and would advise on the outcome of that review. National Treasury might consider either recommending delaying the ratification or the signing of the double taxation agreement pending that review by Senegal.

Mr Makola pointed out that South Africa was not promoting itself as a tax haven.

(Please see National Treasury. Double Taxation Agreement briefing: Seychelles and Senegal. Slides 5-8, map, slide [9], table, slide [10], and slide 13.)

Discussion
Mr D Van Rooyen (ANC) asked if the general situation of a contracting economy and the obvious need to review our projections of our gross domestic product (GDP) had been taken into account in considering these double taxation agreements. How did National Treasury relate the determination of tax rates to our disappointing rate of growth?

Ms Z Dlamini-Dubazana (ANC) referred to a court case between SARS and Mobile Telephone Network (MTN), which SARS had lost. The court had ruled that it was wrong for the Commissioner to disallow MTN's tax deduction. Did the double taxation agreement with Seychelles take into consideration the loopholes of the double taxation as against the dividends that the National Treasury had proposed?

Mr Makola replied that South Africa had migrated from the Secondary Tax on Companies into the new Dividends Tax regime. In the past, we taxed companies, now we would tax the shareholders instead. It was still relatively the same rate, but since we would now be taxing the shareholders, it would no longer be a business expense. It was precisely because of the previous zero dividend tax rate that we had to renegotiate some of the strategic double taxation agreements in order to close the loopholes; because with the zero rate on dividends tax we were going to have all the dividends leaving South Africa tax free. In the renegotiation, some of the rates were 5%. So it was thought that it would be better to have 5% of the dividends going outside rather than receiving nothing at all. So the renegotiation was indeed intended to close those loopholes.

Unfortunately some loopholes remained on the interest articles of the other agreement, and these loopholes were under review. National Treasury was indeed committed to closing any loopholes either through domestic legislation or through our double taxation agreement.

However, one obviously needed to take into account that most of these double taxation agreements were negotiated when the fiscal policy was in a particular manner for instance, as regards interest. At the dawn of the democratic dispensation, South Africa wanted an inflow of foreign money, and to entice investors, had not taxed the interest. However, South Africa had since moved away from that position and was relatively comfortable as a country; moreover, most international investors had shown confidence in South Africa's markets. Hence, from 2013, South Africa might impose tax on the interest.

Ms Dlamini-Dubazana pointed out that the above case pertained to the same loophole that National Treasury wanted to close. Double taxation included the interest. MTN operated all over Africa, in particular in the Southern African Development Community (SADC) region. Now we were seeing SAB Miller and Nando's entering Senegal. We had to close that gap, yet we still believed that 5% was good enough for the country. But this percentage was questionable. That case indicated how much SARS had lost because of the court's ruling that the Commissioner's disallowing of a 50% deduction on tax audit was wrong.

The Acting Chairperson wanted discussion on this particular point to be postponed. The Committee should first finish its discussion of the double taxation agreement with Seychelles. She asked if Members had anything further to say on the proposed amendments to the protocol on the double taxation agreement with the Seychelles.

Members were silent.

The Acting Chairperson inferred that Members were in agreement.

Ms Dlamini-Dubazana moved the proposal based on the renegotiation that needed to be done and receiving the time frames for those renegotiations.

The Acting Chairperson accepted Ms Dlamini-Dubazana's proposal.

National Treasury might wish to reply further on the double taxation agreement with the Seychelles. However, the Committee would later deliberate alone on the agreement and respond to National Treasury though the Office of the Speaker.

Mr Mvovo clarified that the renegotiation had been done and completed. The only outstanding issue was the signature. The Minister had delayed bringing into operation the Dividends Tax because the tax treaties that had a zero rate had to be renegotiated so that there remained no loopholes. By the time that the Minister would implement the Dividends Tax, the treaties that had been renegotiated would, hopefully, be in operation. So the possibility of a loophole in the Dividends Tax would not exist by then.

Mr Makola replied to Mr Van Rooyen that National Treasury had not drawn that link between GDP and the double taxation agreements. The lower rates took into account the fact that these taxes were taxes on growth so if a taxpayer received 100 the SARS would take five or 10. So it was not saying that if the taxpayer received 100 it could deduct the expenses, and then be taxed on the net remaining. Otherwise the cost of investment would be unbearable for business - hence this rate, and that standard rate that one found internationally. Mr Mvolo had already clarified the aspect of the deductions of, possibly, audit fees.

Mr Makola added that we did not allow companies to deduct in South Africa the cost of their doing business overseas. The South African economy from a tax perspective was ring-fenced. One could not take foreign losses and bring them over to South Africa and thereby wipe out one's taxable income in South Africa. There would be a residual tax that would be payable in South Africa.

Mr Van der Merwe stressed that these double taxation agreements existed to put South Africa in a better position relative to other countries, which in some cases were competing to invest in South Africa. When you were competitive, and looking at inward flows, it would create more foreign direct investment. Such foreign direct investment helped the South African economy to grow. If it was the right kind of investment, there was the potential to grow jobs. Thereafter, one could increase the tax base.

The whole double taxation agreement was an instrument that sought to develop South Africa as a more favourable investment destination.

The MTN case was about deduction. Domestic law dealt with that. The treaties dealt only with taxing rights. Nothing in the treaties stopped a country from applying its domestic law.

Moreover, it was a focus of National Treasury policy to encourage South Africa's own countries to increase their own investment into the African continent - not by way of their leaving South Africa, but by doing business in other countries through their subsidiaries whereby South Africa would benefit from the inward flow of dividends back to the holding companies in South Africa.

The Chairperson thanked National Treasury for its brief presentation. The Committee would meet on its own to engage on these matters. Its report would be forwarded to National Treasury through the normal processes of Parliament.

Double Taxation Conventions / Agreements: Formal ratification: SARS briefing
Seychelles
Mr Van der Merwe said that the relevant articles that had been changed in this protocol were, firstly, to update the definition of resident of a contracting state. This was an important definition because the benefits of a treaty would apply only to tax residents.

The first treaty with Seychelles was negotiated when South Africa still had the source system of taxation and did not have a proper definition of resident. This situation had changed since 2000. Now, as a residence-based taxation state, South Africa was in a position to follow the international position in these treaties.

In Article 5, there was a definition of permanent establishment, which was a threshold which must be crossed before business profits could be taxed within a state. The definition had been extended to include the performance of professional services and other activities of an independent character by individuals - such as doctors, engineers, or lawyers - who were not residents, when they were in our country for any period of 183 days in any period of 12 months. When such professionals were in South Africa and performing such services for more than 183 days in any period of 12 months, then South Africa had the right to tax them. This was a bilateral treaty, so it applied equally to our professionals going to the other country that was party to the treaty.

Article 10, dealing with dividends, was the one that his colleagues from National Treasury had focused upon. That took away the zero rate present in the old treaty, and replaced it with 'the South African position which we currently follow'. This position was that dividends leaving the country, in other words from a company resident in one's country, would be taxed at 5% if the shareholding was at least 10% and in respect of portfolio, 10% of all other dividends.

Article 13 dealing with capital gains had also been modernised. When the original treaty had been negotiated, there was no capital gains tax in South Africa. So National Treasury and SARS had followed the international approach by making moveable business assets completely taxable in the state in which those moveable business assets were situated, such as when they formed part of a permanent establishment within one's state. Also a new paragraph 4 had been included to say that gains derived by a resident of a contracting state from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other contracting state might be taxed in that other state. The capital gain in respect of immovable property should always be taxable in the state in which the immovable property was situated. This was the principle that we all followed. If the immovable property was owned by a company, all one had to do was sell the shares. This provision said that if the value of those shares was created more than 50% by immovable property in one's state then one had the right to impose tax on the sale of the shares. This could be called an anti-abuse provision.

Article 14 of the old treaty had been deleted. This had dealt with independent personal services. This was now dealt with under the enlarged definition in Article 5. Now these individuals were considered to earn business income, which should be taxable immediately the individual had a permanent establishment in that country. This was why the definition of permanent establishment had been extended in Article 5.

Seychelles was one of the jurisdictions where South Africa was especially interested in obtaining proper access to information. Seychelles had agreed to include a new article on the exchange of information which was absolutely in line with the Organisation of Economic Cooperation and Development model. This article ensured that the other party could not use bank secrecy or the absence of a domestic tax interest to deny South Africa access to information. This article was a really big improvement in facilitating access to information on some of South Africa's taxpayers.

(Please see South African Revenue Services. Double Taxation Conventions / Agreements: Formal Ratification 2011. Presentation. Slides [2-9].)

Malaysia and Austria
The other two protocols ready for formal ratification and which National Treasury had not handled, since these agreements were solely to do with the exchange of information, were those amending the existing protocols with Malaysia and Austria.

Agreement had been reached with both Malaysia and Austria on provisions similar to those agreed with Seychelles - that we should have a fully updated article on exchange of information. This put us in line with the very latest approach internationally and hopefully would provide SARS with a better tool in cross-border matters.

(Please see South African Revenue Services. Double Taxation Conventions / Agreements: Formal Ratification 2011. Presentation. Slides [10-16].)

Discussion
Ms Dlamini-Dubazana agreed with the greater part of the amendments in the treaties for formal ratification but asked for clarity, since the presentation was a summary, on Article 10.

Mr Van der Merwe apologised for being unnecessarily brief in his presentation. With Article 10 there was a dual rate of withholding tax limitation imposed in the source state - the country in which the company paying the dividends was a resident. In case of ownership of more than 10% of the shares of a company, withholding tax would be reduced to 5% of the gross amount of the dividends. However, if the shareholding was less than 10%, the revenue service concerned would take 10% gross of all the dividends earned.

Ms Dlamini-Dubazana asked for clarity on Article 13, bullet 2 and for the response to be applied to her question on Article 10.

Mr Van der Merwe replied that it was necessary to do a calculation as to what created the value of those shares. If the value of the shares was created more than 50% by immovable property in a particular country then the revenue service concerned would want to be able to tax the profit, since more than 50% of the value was created by immovable property in that country. The international principle was that the revenue authority should have the right to tax immovable property. Tax lawyers had not yet been able to get around that, though Mr Van der Merwe guessed that they were working on it. In many cases, however, companies did not sell their immovable property but sold the shares. So the test was what created the value of the shares. If it was more than 50%, then the revenue authority had the right of taxation.

Mr Van der Merwe mentioned that the treaties provided South Africa with the right to go beyond domestic law - which talked about 80% as the value that immovable property must give to shares before the profit could be taxed. The treaty did not impose taxation. SARS would only impose taxation on the basis of domestic law. However, if the domestic law changed, SARS could follow it as far as 50% was concerned.

Dr D George (DA) asked if there was any possibility of South Africa being denied information, for example, by provisions of the domestic law of the other party, if South Africa requested it.

Mr Van der Merwe replied that the Article looked at a situation where information was not available or obtainable in South Africa's jurisdiction. The Seychelles agreement contained the essence of the full OECD / United Nations (UN) article, which made it very clear that if a country entered into this agreement, it had an obligation to share all the information that it was able to obtain under its laws. States were required to meet this standard of exchange. In the peer review now in progress in the global forum on exchange of information, the parties had to ensure that their domestic law was such that they were able to obtain all the information required and exchange it. If they did not do so, Mr Van der Merwe could assure Dr George that such parties were 'roasted in their peer reviews'. So their had been a positive change to this whole approach.

Ms Dlamini-Dubazana asked for further clarity on immovable property as part and parcel of the business.

Mr Van der Merwe replied that in the previous treaty this situation had not been addressed. Under the old treaty, any gain on the sale of shares would have been taxable only in the state of residence of the seller of those shares. South Africa wanted the right to tax on the profit (made by a company in the other country party to the treaty) on the sale of shares based on the value of immovable property in South Africa.

Ms Z Dlamini-Dubazana (ANC) was satisfied.

The Chairperson asked for the next group of protocols to be presented.

South African Revenue Service. Tax Information Exchange Agreements: formal ratification
Mr Van der Merwe said that the Tax Information Exchange Agreements (TIEAs) had nothing to say on taxing rights at all. South Africa entered into TIEAs with countries with whom there was no need to have a double taxation agreement. Their purpose was to obtain information from countries which had bank secrecy provisions in the past, and in which South African taxpayers might invest income, and from which SARS had previously little chance of obtaining information. Unlike the double taxation agreements, the TIEAs allowed the exchange of information on request. Despite this limitation, the TIEAs were a major step forward. All six agreements were similar. SARS was happy with the progress in bringing these TIEAs to ratification.

Guernsey
Mr Van der Merwe gave Members a refresher briefing on the TIEA with Guernsey. The same information had been presented to Members in the meeting held on 04 August 2010. The Agreement with Guernsey, together with the Agreements with the five countries listed below, were now ready for formal ratification.

Mr Van der Merwe commended Guernsey for being the first of these jurisdictions which had agreed to a multi party negotiation with the SADC member states.
(Please see South African Revenue Service. Tax Information Exchange Agreements: formal ratification. Presentation. Slides [1-15]

Cayman Islands
(Please see South African Revenue Service. Tax Information Exchange Agreements: formal ratification. Presentation. Slides [16-27]

Jersey
(Please see South African Revenue Service. Tax Information Exchange Agreements: formal ratification. Presentation. Slides [28-39]

San Marino
(Please see South African Revenue Service. Tax Information Exchange Agreements: formal ratification. Presentation. Slides [40-51]

Bahamas
(Please see South African Revenue Service. Tax Information Exchange Agreements: formal ratification. Presentation. Slides [52-63]

Bermuda
(Please see South African Revenue Service. Tax Information Exchange Agreements: formal ratification. Presentation. Slides [64-75]

Discussion
Mr Van Rooyen asked how direct and indirect costs of requesting and providing information were determined and distinguished.

Mr Van der Merwe replied that the competent authorities had a simple memorandum of understanding (MOU) giving examples of direct costs, for example, engaging outside assistance for translation of documents, or photocopying a batch of documents. Those kind of practical issues would be dealt with on a case-to-case basis.

Ms Dlamini-Dubazana questioned the cost of negotiating all these TIEAs.

Mr Van der Merwe replied that the work of negotiation was done electronically, and the cost involved was therefore minimal. However, the benefit was possibly immeasurable, since it was essential to anticipate future needs for information. To delay making arrangements for securing such information until the time when the need for that information arose would mean that opportunities to obtain such information in such time as it could be of effective use would be lost. So the approach was to have a foundation of such TIEAs with as many of the likely jurisdictions as possible, so that when South Africa needed their help on tax matters it could obtain such help.

In a recent case, SARS had succeeded in recovering billions of rands. The benefit of this tool was in how effectively one used it. One ignored the exchange of information at one's peril. There had been a newspaper report this week of a United States senator who had called for his country to establish a similar foundation for exchange of tax information in order to keep track of its residents who ''were putting money away'.

The Acting Chairperson observed that there were no further comments.

She noted that the above two sets of presentations [counting 'National Treasury. Double Taxation Agreement briefing: Seychelles and Senegal' and 'South African Revenue Services. Double Taxation Conventions / Agreements: Formal Ratification 2011' as one presentation] were not new to the Committee. From her perspective, there were no fundamental changes.

Mr E Mthethwa (ANC) asked how many more TIEAs were outstanding.

Mr Van der Merwe replied that there were the above six for formal ratification. There were a further three which were exactly the same. These would be tabled for preliminary hearing later in the meeting. There were some five or six in the process of negotiation. They would most likely be brought to the Committee next year.

The Acting Chairperson adjourned the meeting for a coffee break.

Annexes to Agreement on Combined Border Control Posts with Mozambique: Preliminary hearing
Mr Mark van den Broek, Senior Specialist: International Customs (Acting), SARS, in a preliminary briefing, said that the purpose of the agreement to be supplemented by the Annexes was to provide for the implementation of combined border control posts (also referred to as one-stop border posts) between Mozambique and South Africa in order to expedite rail and road traffic across their common borders.

The annexes had been developed through a comprehensive and consultative interdepartmental (including the Departments of Home Affairs, Public Works, Transport, Health, Environmental Affairs, the South African Police Service (SAPS), SARS, and Agriculture, Forestry and Fisheries) and bilateral process. Also the state law advisors at the Departments of International Cooperation and Development (DIRCO) and Justice and Constitutional Development (DoJ&CD) had been consulted to ensure alignment.

An agreement on combined border control posts had been signed in 2007. That agreement had provided for annexes to be developed to facilitate the implementation of that agreement. Such annexes were now being presented.

Annex I concerned the designation and delimitation of all areas to constitute a combined border control post, to establish a basis of the application of relevant legislation.

Mr Van den Broek explained the differences between a conventional border crossing and the combined border control post. In the latter, the exit processes from the one country were undertaken in the same facility as the entry processes to the neighbouring country.

Annex II concerned the joint control and management of all border-crossing activities in respect of persons, goods and conveyances, to support effective and efficient border control.

Annex III dealt with establishing, owning, managing and maintaining relevant infrastructure, facilities, assets and amenities.
(Please see South African Revenue Services. Annexes to the Agreement on the Combined Border Control Posts on the Mozambique-South African Border: Preliminary hearing 2011. Presentation. Slides [1-23]; and South African Revenue Service. Explanatory Memorandum on Annex III to the Combined Border Control Post Agreement between the Government of the Republic of South Africa and the Government of the Republic of Mozambique.)

Discussion
Mr Van Rooyen felt that the subject matter of this presentation was more appropriate to the Portfolio Committee on Home Affairs. He could not understand why SARS was championing this process, since he understood that SARS' mandate was customs.

Mr Van den Broek replied that SARS had the border control operational coordinating committee as one of its structures. It had been agreed that SARS should establish an interdepartmental team. So SARS had written to the various directors-general, and had requested a legal mandate to proceed with these annexes. Hence SARS presence before the Committee on this matter.

Mr Van Rooyen still argued that SARS' role was 'very minimal'. He believed that it was Home Affairs' responsibility to ensure approval of the process. SARS' role was supportive only. However, he understood why SARS was present, since it had a role to play in the peer process. He called for a joint committee sitting.

Mr Mthethwa agreed that many of the issues were Home Affairs' concerns. He recollected, at length, his adverse personal experiences on the borders with Mozambique, and anticipated difficulties in implementing an agreement.

Mr Van den Broek replied that the one-stop border concept, if established, might better allow South Africa to intervene in such cases as mentioned by Mr Mthethwa.

Dr George thought that the implementation of combined border control posts was a good idea in principle. Were there any other such agreements or arrangements in place? Who would pay for the present agreement, or was it a joint venture?

Mr Van den Broek replied that South Africa at present did not have any other such agreements or arrangements. However, there were examples of such arrangements, for example, between the United Kingdom and France via the Channel Tunnel, and proposed arrangements between Zambia and Zimbabwe, and between Kenya and Uganda. South Africa proposed to implement its agreement on a modular basis. The cost basis was that each country paid for the facilities that it had built unless agreed otherwise.

Ms Dlamini-Dubazana acknowledged that SARS had to be present at the border control posts because of its responsibility to administer the customs, but found some clauses unclear. It was difficult to trace the development from the original agreement to the annexes. She called for a full preliminary briefing.

Mr Van den Broek apologised that he had not provided the full background. He could not comment on any previous presentation. SARS had come into the process last year.

Ms Dlamini-Dubazana asked which geographical positioning systems (GPS) were referred to.

Mr Van den Broek replied that if one was going to apply the law in a particular place, it was necessary to define exactly the boundaries of that place. The area for a particular purpose would be defined by GPS coordinates and mapped appropriately.

The Acting Chairperson asked how the annexes related to Government's announcement in 2008 or 2009 of its intention to establish a Border Management Agency, how South Africa would interface with Mozambique if the latter's legal framework was different, and what the financial implications of the annexes to the agreement were.

Mr Van den Broek replied that whatever mechanism was applied to manage South Africa's borders, in terms of the agreement with Mozambique South Africa sought a legal basis to say that whatever agency, whether it was the Border Management Agency or another entity or department, that it had the authority to handle the relations with Mozambique.

Mr Van den Broek replied that SARS had an international role in the regulation of the movement of goods. Immigration was the other side of the border-crossing process. Both came together when people crossed our borders. It had been agreed that SARS should play its particular role. It did not assume this role by itself.

Mr Broek explained that the one-stop border was part of a bigger process of streamlining processing and eliminating redundancies. It would not, however, resolve all the challenges.

Mr Mthethwa asked if this was just the beginning. Would SARS do the same with all the border posts?

Mr Van den Broek replied that to answer might be beyond his mandate. However, within SADC and the Southern African Customs Union (SACU) this was on the agenda. SARS' aim was to establish such an arrangement with Mozambique since valuable lessons could be learnt.

Ms Dlamini-Dubazana asked about the legal aspects between Mozambique and South Africa.

Mr Van den Broek acknowledged that there were different legal frameworks in place in the two countries. However, he pointed out that South Africa was not ceding any territory to Mozambique by way of the combined border crossing.

The Chairperson said that the Committee would deliberate alone on the Annexes and give its views to SARS when it returned for the formal briefing.

Double Taxation Conventions / Agreements: SARS preliminary briefing
Ms Dlamini-Dubazana proposed that, since the agreements appeared to be essentially the same, the presentations should focus only on what was different or new.

The Acting Chairperson and Mr Van der Merwe agreed.

The following were all preliminary briefings, and SARS would return to the Committee subsequently for a formal briefing.

The TIEAs with the following countries were the same in structure as the six TIEAs for formal ratification:
Costa Rica
Dominica
Argentina.
They were ready for signature, hence SARS was notifying the Committee.
(See SARS: Multilateral Convention as amended by the Protocol presentation [Slides 24-61]).

The TIEAs with the following were also just on the exchange of information, the same in structure as the Protocols amending the existing double taxation agreements with Malaysia and Austria above, and were ready for signature:
Norway
(Please see South African Revenue Service. Double Taxation Conventions / Agreements: preliminary hearing 2011. Presentation. Slides [16-18].)

Turkey
(Please see South African Revenue Service. Double Taxation Conventions / Agreements: preliminary hearing 2011. Presentation. Slides [19-21].)

Senegal
Mr Van der Merwe said that colleagues from National Treasury had already explained the various rates negotiated in that treaty. The one issue that was different was the most favoured nation clause.
(Please see South African Revenue Service. Double Taxation Conventions / Agreements: preliminary hearing 2011. Presentation. Slides [1-15].)

Multilateral Convention on Mutual Administrative Assistance in Tax Matters: preliminary briefing
Mr Van der Merwe said that this was due to be signed by ministers at the meeting of the Group of 20 (G20) next month in France. It had originated as a European Union convention on mutual assistance. However, this new convention was multilateral as the G20 had thought that the original idea should be adapted and extended to the rest of the world. The new convention had come into being in June 2011.

Mr Van der Merwe explained the provisions. Of especial benefit was that the Convention afforded the opportunity for South Africa to exchange information with a whole range of countries with which did not have double taxation agreements or TIEAs. The intention of the G20 was to make this Convention as user friendly for as many countries as possible and went far beyond the TIEAs.
(See Multilateral Convention and Explanatory Memorandum documents)

Discussion
The Acting Chairperson invited Members' comments and questions, but there were none.

The Acting Chairperson appealed to officials to submit their documents in electronic format to avoid wastage of paper and thereby contribute to the green economy.

The Acting Chairperson reaffirmed that the Committee would meet and engage on the above and make its conclusions and decisions available to National Treasury and SARS through the Office of the Speaker. She released the National Treasury and SARS but asked Members of the Committee to remain behind to deal especially with the first set of presentations, on which there had been no disagreement.

Protocols amending Double Taxation/Tax Information Exchange Agreements: adoption
The Acting Chairperson observed that National Treasury and SARS' requested the Committee to approve for formal ratification their proposals for double taxation agreements and the protocols for exchange of information. Members agreed that there were no further areas of disagreement between the Committee and National Treasury and SARS. She asked the Committee to adopt these proposals or reject them.

South Africa - Seychelles Protocol amending the Double Taxation Agreement: formal ratification
South Africa - Malaysia Protocol amending the Double Taxation Agreement: formal ratification
South Africa - Austria Protocol amending the Double Taxation Agreement: formal ratification
 
The above protocols were adopted and the Committee reported that it recommended formal ratification.

South Africa - Guernsey Tax Information Exchange Agreement: formal ratification
South Africa - Cayman Islands Tax Information Exchange Agreement: formal ratification
South Africa - Jersey Tax Information Exchange Agreement: formal ratification
South Africa - San Marino Tax Information Exchange Agreement: formal ratification
South Africa - Bahamas Tax Information Exchange Agreement: formal ratification
South Africa - Bermuda Tax Information Exchange Agreement: formal ratification
 
The above Agreements were adopted and the Committee reported that it recommended formal ratification.

The Acting Chairperson said that she would not read the formal report of the Committee to that effect, as was customary, but affirmed that the above Protocols and Agreements stood adopted.

Meeting adjourned.