Taxation Laws Amendment Bill [B39-2013] and Tax Administration Laws Amendment Bill [B40-2013]: public hearings (day 2)

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Finance Standing Committee

21 August 2013
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The South African Institute of Chartered Accountants briefed the Committee on its concerns with the Draft Taxation Laws and Tax Administration Laws Amendment Bills. Retrospective legislation made it impossible for a taxpayer to comply with the relevant legislation. It recommended that the rule of law be observed and that changes to tax legislation should in general not have retrospective effect.

Relief from understatement penalties for bona fide errors should apply from the effective date of the Tax Administration Act (No. 28 of 2011). In regard to tax practitioners, it expressed concern at the interpretation of the term “direct supervision”.

The proposed amendments to Section 23 might not eliminate or reduce the risks of disguised personal consumption or might operate as an entry point for fraudulent value-added tax refund claims. These risks could only be reduced by more efficient value-added tax refund claims refund audit procedures. The South African Revenue Service’s value-added tax refund claims registration procedures and policies should rather be reviewed to streamline the process. Value-added tax refund claims refund requirements proposals went against the scheme of the Value-Added Tax Act (No. 89 of 1991) and the general principles of taxing value added at each level of production. The recovery of value-added tax refund claims incurred prior to registration was also a concern. Where input tax credit refunds were deferred as a result of insufficient levels of taxable supplies, interest should be payable when the input tax was ultimately refunded. The definition of e-commerce services was very broad and a whole plethora of non-resident suppliers would be liable to register for value-added tax refund claims. Guidance could be taken from global best practice dealings with business to business and business to consumer supplies.

Section 8A should not be repealed and taxpayers’ rights in terms of their existing participation in Section 8A should be maintained. Regarding the proposal to tax dividends from share schemes as ordinary income, dividends paid to participants from share schemes linked to listed shares should retain their exempt status. A review of all provisions related to employee-related share schemes, should be undertaken to provide effective and clear tax laws and should include a revamp of Section 8B to provide legislation that gave real benefit and value for broad-based employee participation. It appeared that this change had not been carried through to the Dividend Withholding Tax legislation. It was unclear how Strate would distinguish between dividends paid, which were subjected to dividend tax, and dividends paid in terms of shares awarded through employee share schemes, which would be subjected to income tax. The matching deduction for the company should be for the employer company, not the company that declared the dividend. It suggested that these changes not be made.

A number of fundamental changes to the nature of the existing legislation (Section 11D) were introduced. This was therefore not a streamlining as noted in the explanatory memorandum. New rules added unnecessary subjectivity with the Minister of Science and Technology. The term “innovative” was not defined. The new requirement of “sale to, or for use by the general public” limited the application of the legislation. The Institute suggested that changes to Section 11D should be applied to pre-approval applications that were received by the Department of Science and Technology after the date of promulgation of the Taxation Laws Amendment Act.

Section 23K (10) as well as section 23N made reference to transactions “entered into” on or after 1 July 2013. The denial of the interest deduction for all intra-group acquisitions for historic transactions was problematic. It would have an adverse effect on standard commercial debt financing. Some sort of safe harbour should exist for debt with no equity features. The word “subject to tax” caused confusion. The definition of “creditor” should be expanded in order to define clearly the circumstances in which the provisions of Section 23M would apply. It should also focus on the relevant income streams for Sections 23M and 23P, rather than to require the creditor as a person or entity not to be “subject to tax”.

Ernst & Young, referring to the proposal that share scheme dividends to employees be deductible for paying company dividend and taxable for employees, commented that it would be problematic if such dividends were to be declared by Johannesburg Stock Exchange-listed or foreign entities to employees of underlying South African group companies. Employers should qualify for a deduction to address the concern.

The draft law proposed relief from transfer pricing for South African taxpayers that advanced loans to offshore companies. The loan must have a term of at least 30 years and should not have preference over any other debts. The rules were too narrow and would apply only in very rare circumstances

As to acquisition debt, the proposal under Section 23N curtailed interest deduction on loans advanced by tax-exempt entities (e.g. foreign companies) to local South African entities to fund the acquisition of South African businesses. Ernst & Young commented that the 1 July effective date was problematic and should be adjusted so as not to be retrospective. Also, interest disallowed in South Africa in terms of the proposed rule, would, in many instances, still be taxable at comparable rates in the foreign investor’s jurisdiction, effectively resulting in double taxation.

The cross-border interest proposal provided more general limitation on deductions claimed by South African companies on interest paid to exempt related persons (e.g. foreign group companies). A formula had been applied to limit the deduction, with disallowed deductions allowed to be carried forward for 10 years. Ernst & Young submitted that the 10-year period was not appropriate for long-term capital projects. The period should be extended to 20 years. Interest disallowed in South Africa in terms of the proposed rule, would, in many instances, still be taxable at comparable rates in the foreign investor’s jurisdiction, effectively resulting in double tax.

The legislation proposed that distributions by non-property collective investment schemes should be taxable in the hands of investors, unless distribution was a local South African dividend distributed by collective investment schemes within 12 months, in which case the dividend should retain its nature and an exemption should apply. Ernst & Young commented that the provision should be expanded to include similar treatment for interest and foreign dividend distributions, so that investors might be able to access the exemptions otherwise available in respect of these investment income types.

Ernst & Young had various issues with the proposed refinements to the research and development incentive which ranged from the Department of Science and Technology’s approval process being too subjective and open to perceptions of bias to the 1 October 2012 effective date being too problematic for existing approvals and needed to be amended to a future date.

Regarding the proposal to withhold tax at a rate of 15% on cross-border services fees, Ernst & Young recommended that payments to foreign employees in South Africa not be subjected to withholding tax on services where the initial fee for the use of the employees was subjected to withholding tax.

Ernst & Young was concerned about the draft proposal that voluntary registration would be allowed for enterprises with R5 million of expenditure or a contractual commitment to incur this expenditure and value-added tax refunds would be fully accessible under this registration type. It felt that the R5 million capital investment did not allow for a situation where the taxpayer incurred a series of minor expenses over several years that initially failed to reach the R5 million threshold (via a single upfront commitment)

The proposed value-added tax registration rules that would apply to foreign entities selling products into the SA market via e-commerce, were too wide and caught intra-group supplies provided electronically, and it was questionable whether this should be the case.

Shell South Africa suggested that:

Section 165 (1) (h) and (i) should include onshore oil and gas as part of the definition and the current legislation should be left as it is, with no reference to offshore;

Section 165 (1) (b) and (c) should refer to the 10th schedule and not to the Mineral and Petroleum Resources Royalty Act (No. 28 of 2008);

Shell South Africa commented that:

Section 165 (1) (a) used the word reservoir in “exploration” to define the area of economic mineral accumulation.

Shell South Africa noted that Shale/tight gas and oil reserves were not confined to a specific reservoir, as was the case for conventional reserves, so the concept of reservoir was not readily applicable to them.

Shell South Africa required clarity to understand how the new “delegation” of fiscal stability authority to the Minister of Mineral Resources would work.

Dube TradePort questioned the approval process for the corporate income tax incentive as proposed and said it could result in additional red tape due to the fact that approval from two separate departments were required, The company suggested that the process be streamlined through the” one-stop-shop”. Clear timeframes needed to be stipulated around the decision related to the incentive. The training of zone operators should ensure clarity over who qualified for the incentive and who did not. The criteria for approval needed to be made very clear to operators and should be clearly stated in the legislation.

The South African Institute of Tax Practitioners observed that the South African Revenue Service was concerned that dividend schemes reduced executive tax from 40% to 15% but in fact the overall tax system came out +3% ahead, with dividends (15% - 12%). The Institute welcomed the proposed streamlining of the value-added tax registration process for small businesses but was concerned about the regulatory burdens imposed through the R1 million to R5 million expenditure limits, value-added tax recoverable on pre-R5 million expenses and the R100 000 limit which could affect cash flow. The proposed draft legislation to narrow the definition of research and development would not assist South Africa to become a world class leader in various sectors of the economy. The Section 9D limit should be reduced from 75% to 70%. The proposed deductible interest limitation (section 23N and 23P) would be a disincentive for foreign direct investment. The section should only be applicable if the ultimate recipient paid tax at a rate lower than 75% of the South African rate. The Institute expressed concern that the proposed amendments would increase compliance costs for, among others, goods imported for oil and gas production and payment and recovery of tax.

Members’ questions included:
● If a dividend received by an employee was reinvested would it also then be taxable?
● If an offshore company gave a bank guarantee and the South African bank then loaned the money to a South African company, would that interest then be tax deductible?
● Was it possible to enforce value-added tax on e-books on suppliers from outside South Africa?
● Would the value-added tax proposals support small businesses?
● Did Shell prefer that offshore should be deleted? Would it make a difference? How would it impact the environment?
● With whom did Shell think “fiscal stability” should rest?
● Would the South African Institute of Chartered Accountants step in to fill the vacancies at Treasury?
● What was the view of the presenters on Clause 34 of the Draft Tax Administration Laws Amendment Bill, which allowed assessments beyond the three-year period?
● Did presenters think that the system of employee share schemes was misused?
● Were tax practitioners registered to controlling bodies as required? How many were registered?
● What aspect of research and development did Ernst & Young want National Treasury to refine?
● What were the criminal issues on which the South African Institute of Tax Practitioners felt SARS was too harsh?
 

Meeting report

South African Institute of Chartered Accountants (SAICA) Presentation
Mr Piet Nel, SAICA Project Director: Tax, South African Institute of Chartered Accountants (SAICA), presented SAICA’s comments to the Committee.

Retrospective legislation
Retrospective legislation made it impossible for a taxpayer to comply with the relevant legislation. SAICA’s general recommendation was that the rule of law be observed and that changes to tax legislation should in general not have retrospective effect. 

Tax Administration Act
Relief from understatement penalties for bona fide errors should apply from the effective date of the Tax Administration Act (No. 28 of 2011). As tax practitioners, SAICA expressed concern about the interpretation of the term “direct supervision”.

Value-Added Tax (VAT)
Streamlining of VAT registration

The proposed amendments to Section 23 might not eliminate or reduce the risks of disguised personal consumption or operate as an entry point for fraudulent VAT refund claims. These risks could only be reduced by more efficient VAT refund audit procedures. The South African Revenue Service (SARS) VAT registration procedures and policies should rather be reviewed to streamline the process.

VAT refund requirements
These proposals went against the scheme of the Value-Added Tax Act (No. 89 of 1991) and the general principles of taxing value added at each level of production. The recovery of VAT incurred prior to registration was also a concern. Where input tax credit refunds were deferred as a result of insufficient levels of taxable supplies, interest should be payable when the input tax was ultimately refunded.

Registration of e-commerce suppliers
The definition of e-commerce services was very broad and a whole plethora of non-resident suppliers would be liable to register for VAT, albeit where there was little risk of tax avoidance in the case of B2B supplies. Guidance could be taken from global best practice dealings with B2B and B2C (business to consumer) supplies.

Share schemes income recognition
Ms Deborah Tickle, Deputy Chair, SAICA National Tax Committee and KPMG Tax Partner, presented SAICA’s comments on share schemes, research and development and interest changes.

Section 8A should not be repealed and taxpayers’ rights in terms of their existing participation in section 8A should be maintained. Regarding the proposal to tax dividends from share schemes as ordinary income, dividends paid to participants from share schemes linked to listed shares should retain their exempt status. A review of all provisions related to employee-related share schemes should be undertaken to provide effective and clear tax laws and should include a revamp of Section 8B to provide legislation that gave real benefit and value for broad-based employee participation. It appeared that this change had not been carried through to the Dividend Withholding Tax legislation. It was unclear how Strate would distinguish between dividends paid, which were subjected to dividend tax, and dividends paid in terms of shares awarded through employee share schemes, which would be subjected to income tax. The matching deduction for the company should be for the employer company, not the company that declared the dividend. SAICA suggested that these changes not be made.

Research and development
A number of fundamental changes to the nature of the existing legislation (Section 11D) were introduced. This was therefore not a streamlining as noted in the explanatory memorandum. New rules added unnecessary subjectivity with the Minister of Science and Technology. The term “innovative” was not defined. The new requirement of “sale to, or for use by the general public” limited the application of the legislation. SAICA suggested that changes to Section 11D should be applied to pre-approval applications that would be received by the Department of Science and Technology after the date of promulgation of the Taxation Laws Amendment Act.

Deductible interest limitation in respect to indebtedness
Section 23K (10) as well as Section 23N made reference to transactions “entered into” on or after 1 July 2013. The denial of the interest deduction for all intra-group acquisitions for historic transactions was problematic. It would have an adverse effect on standard commercial debt financing. Some sort of safe harbour should exist for debt with no equity features. The word “subject to tax” caused confusion. The definition of “creditor” should be expanded in order to define clearly the circumstances in which the provisions of Section 23M would apply. It should also focus on the relevant income streams for Sections 23M and 23P, rather than to require the creditor as a person or entity not to be “subject to tax”.

Ernst & Young Draft Taxation Laws & Tax Administration Laws Amendment Bills Presentation
Mr Mark Preiss, Associate Director: International Tax Services, Ernst & Young, presented his firm’s comments to the Committee.

Share scheme anomalies
He alluded to the proposal that share scheme dividends to employees be deductible for paying company dividend and taxable for employees. It would be problematic if such dividends were to be declared by Johannesburg Stock Exchange (JSE)-listed or foreign entities to employees of underlying South Africa (SA) group companies. Employers should qualify for a deduction to address the concern.

Transfer pricing relief for equity loans
The draft law proposed relief from transfer pricing for SA taxpayers that advanced loans to offshore companies. The loan must have a term of at least 30 years and should not have preference over any other debts. The rules were too narrow and would apply only in very rare circumstances.

Acquisition debt: Section 23N
This proposal curtailed interest deduction on loans advanced by tax-exempt entities (e.g. foreign companies) to local South African entities to fund the acquisition of SA businesses. The 1 July effective date was problematic and should be adjusted so as not to be retrospective. Also, interest disallowed in SA in terms of the proposed rule, would, in many instances, still be taxable at comparable rates in the foreign investor’s jurisdiction, effectively resulting in double taxation.

Cross-border interest: Section 23P
The proposal provided more general limitation on deductions claimed by SA companies on interest paid to exempt related persons (e.g. foreign group companies). A formula had been applied to limit the deduction, with disallowed deductions allowed to be carried forward for 10 years. The 10-year period was not appropriate for long-term capital projects. The period should be extended to 20 years. Interest disallowed in SA in terms of the proposed rule, would, in many instances, still be taxable at comparable rates in the foreign investor’s jurisdiction, effectively resulting in double tax.

Collective investment scheme
According to this proposal distributions by non-property collective investment schemes (CIS) should be taxable in the hands of investors, unless distribution was a local SA dividend distributed by CIS within 12 months, in which case the dividend should retain its nature and an exemption should apply. The provision should be expanded to include similar treatment for interest and foreign dividend distributions, so that investors might be able to access the exemptions otherwise available in respect of these investment income types.

Research & development
Ernst & Young had various issues with the proposed refinements to the research and development incentive.

The firm submitted that:

● Medicines were an invention but the bulk of the costs was incurred after the invention. The incentive should include these costs;

● The Department of Science and Technology’s approval process was too subjective and could lead to perceptions of bias. Objective rules should be published after being made available for public comment;
The 1 October 2012 effective date was problematic for existing approvals and should be amended to a future date;

● Qualifying computer programs must be developed for sale or use to unrelated parties. The proposal should cater for the situation where the development company sold to a distribution company in the same group of companies, as is often the case; and

● Computer programs that were not developed for sale or used as above were often ancillary to an overall invention which otherwise qualified. The incentive should include the costs of developing these programs.

Treasury management companies
The draft legislation proposed that JSE-listed companies might form one SA based treasury company free of exchange controls and that the treasury company was not required to use the South African Rand (ZAR) as local currency so as to provide relief from foreign exchange gains/losses for tax purposes. The firm submitted that one should rather provide outright exemption from foreign exchange (F/X) rules (including headquarter companies).

Cross-border services
The draft laws proposed to withhold tax at a rate of 15% on cross-border services fees. Ernst & Young recommended that payments to foreign employees in SA not be subjected to withholding tax on services where the initial fee for the use of the employees was subjected to withholding tax.

Streamlined VAT registration
The draft proposal suggested that voluntary registration would be allowed for enterprises with R5 million of expenditure or a contractual commitment to incur this expenditure and VAT refunds would be fully accessible under this registration type. The R5 million capital investment did not allow for a situation where the taxpayer incurred a series of minor expenses over several years that initially failed to reach the R5 million threshold (via a single upfront commitment). This low-grade series of expenses could easily occur in the case of mining and oil/gas rights because the initial outlays mainly consisted of protracted legal and preparatory fees to obtain the rights.

E-commerce VAT registration
The draft proposal was that VAT registration rules would apply to foreign entities selling products into the SA market via e-commerce. The rules were too wide and caught intra-group supplies provided electronically, and it was questionable whether this should be the case. The proposal should not apply to e-commerce supplies to VAT-registered entities that were related to the supplier (i.e. fellow group companies).

Shell South Africa Upstream BV Comments Presentation
Mr Ivan Collair, Shell South Africa Government relations Advisor, presented Shell’s concerns and submitted suggested that:

Section 165 (1) (h) and (i) should include onshore oil and gas as part of the definition and the current legislation should be left as it is, with no reference to offshore;

Section 165 (1) (b) and (c) should refer to the 10th schedule and not to the Mineral and Petroleum Resources Royalty Act (No. 28 of 2008);

Shell South Africa commented that:

Section 165 (1) (a) used the word reservoir in “exploration” to define the area of economic mineral accumulation.

Shell South Africa noted that Shale/tight gas and oil reserves were not confined to a specific reservoir, as was the case for conventional reserves, so the concept of reservoir was not readily applicable to them.

Shell South Africa required clarity to understand how the new “delegation” of fiscal stability authority to the Minister of Mineral Resources would work.

Dube TradePort Corporation (DTPC) Comments
Ms Kate Ralfe, Dube Tradeport Senior Manager: Spatial Planning, questioned the approval process for the corporate income tax incentive as proposed and said it could result in additional red tape due to the fact that approval from two separate departments were required, She suggested that the process be streamlined through the” one-stop-shop” as mentioned in the Special Economic Zones Bill. Clear timeframes needed to be stipulated around the decision related to the incentive. The training of zone operators should ensure clarity over who qualified for the incentive and who did not. The criteria for approval needed to be made very clear to operators and should be clearly stated in the legislation.

Clause 48 provided that Section 12 R be inserted after Section 12Q of the Income Tax Act (No. 58 of 1962). The proposed Section 12R(1)(d) of the Taxation Laws Amendment Bill stated: “not less than 90% of the income of that company is derived from the carrying on of business or provision of services within that special economic zone”. The proposed legislation reads as if companies with activities elsewhere in the country might not qualify for the incentive. Clarity was required, in the case where the zone operator for a special economic zone was a public/private partnership, or where the vehicle established to operate the zone would normally be charged corporate income tax, as to whether or not the reduction in income tax would apply to the zone operator.

In the proposed insertion of Section 12 R(4)(a)(v) biofuels were specifically excluded from the corporate income tax incentive. Dube TradePort submitted that companies engaged in bio-fuel production should be judged on a case by case basis.

 Clear time limits were given in relation to the income tax incentive, stating that it would apply for only 10 years. This would mean that the attractiveness of the zone would decrease over time as the 2024 time horizon approached. Dube TradePort suggested that this could be reworded to state that the incentive applied for 10 years post the establishment of the investor within the zone. Clarity was required as to how investors already located within the special economic zone area would be dealt with from an incentive point of view.

South African Institute of Tax Practitioners (SAIT) TLAB and TALAB 2013 Commentary
Professor Sharon Smulders, SAIT Head: Tax Policy and Research, highlighted the following concerns.

Share scheme deductions
The majority of share schemes were used to facilitate Black Economic Empowerment (BEE) as required by various government scorecards or to facilitate employee ownership in major companies, thereby promoting savings. SARS granted the deduction in theory but the deduction was often meaningless because the payer was a holding company with no income or a share scheme entity with income trapped at the entity level without offset. SARS was concerned that dividend schemes reduced executive tax from 40% to 15% but in fact the overall tax system came out +3% ahead, with dividends (15% - 12%). In terms of fairness, the deduction for share scheme dividends was a must in accordance with the employer/employee matching principle. Without the deduction the total tax charge for share schemes dividends was 28% company rate plus the 40%charge on the R72 remainder. A more holistic approach was thus required.

Small business taxation
Prof Smulders welcomed the proposed streamlining of the VAT registration process for small businesses but was concerned about the regulatory burdens imposed through the R1 million to R5 million expenditure limits, VAT recoverable on pre-R5 million expenses and the R100 000 limit which could affect cash flow. Other factors that would affect small businesses were the base used to calculate tax, removal of dividend character overlap and anti-hybrid debt instrument recharacterisation rules.

Research and development
The proposed draft legislation aimed to narrow the definition of R&D. Narrowing the definition would not assist SA to become a world class leader in various sectors of the economy. Discovery of technical knowledge and knowledge essential to the use of such invention, design or computer program must be included in the definition. Pharmaceutical inclusions were welcomed but regulations or guidelines should be issued clarifying what would qualify and other industries should be included. Prototypes should be deducted, as it was a necessity before a product could be sold.

Foreign vs local businesses
Prof Smulders suggested that the Section 9D limit be reduced from 75% to 70%. Also why not introduce horizontal monitoring which was based on mutual trust? The proposed deductible interest limitation (section 23N and 23P) would be a disincentive for foreign direct investment. The section should only be applicable if the ultimate recipient paid tax at a rate lower than 75% of the SA rate. She welcomed the exemption for international shipping transport entities but cautioned that its effectiveness should be monitored.

Tax compliance costs
Prof Smulders expressed concern that the amendments would increase compliance costs for:
● Employer verification of ‘over 65 years of age’;
● Recognition of Double Taxation Agreement (DTA) relief for withholding tax on services;
● Goods imported for oil and gas production;
● Payment and recovery of tax;
● Place of legal notification; and
● Fringe benefit valuation – defined benefit fund.

Tax administration matters
If the legislation went through SARS would not have to provide reasons for assessment or tax calculation methods used. This would hamper dispute resolutions. It appeared that everyone would be compelled to use e-filing. This was not considerate, as most people in rural areas did not have access to e-filing. SARS should look at other methods.

Discussion
Mr N Koornhof (COPE), asked SAICA if a dividend received by an employee was reinvested would it also then be taxable.

Ms Tickle replied that if that dividend was received under the present proposals then it would be taxable in the employee’s hands. If it was reinvested back into the share scheme and those shares become unrestricted then the employee would be taxed on them.
Mr Koornhof referred to section 23N and asked Ernst & Young if an offshore company gave a bank guarantee and the SA bank then loaned the money to a SA company, would that interest then be tax deductible.

Mr Preiss replied that Section 23 would not apply there.

Mr Koornhof asked Ernst & Young if there was a time limit on cross border services.

Mr Preiss replied that if there was a tax treaty in place then a time limit would apply; if there was no tax treaty then a time limit would not apply.

Mr Koornhof asked if it is possible to enforce VAT regarding e-books on suppliers from outside SA.

Mr Nel replied that was possible to collect VAT because the companies would comply as the legislation was in place.

Mr Koornhof asked SAIT if the VAT proposals would support small businesses.

Prof Smulders replied that anything was better than what was available now. It was horrific how much time and money small businesses had to spend to get VAT registrations through.

Mr Koornhof asked Shell if offshore should rather not be deleted. Would it make a difference? How would it impact the environment?

Mr Collair replied that it came back to the debate about environment versus development. Shell South Africa did not think that it was an either/or situation. It felt that both can co-exist, within reason. The potential of shale gas in the Karoo was so vast that it should be exploited, but in a way that would not impact the environment.

Mr Koornhof asked Shell South Africa with whom “fiscal stability” should rest.

Mr Collair replied that fiscal stability should rest with National Treasury as it was its domain.

Mr T Harris (DA) asked SAICA if it would step in to fill the vacancies at National Treasury.

Mr Nel replied that SAICA did help out at one stage but admitted that it would be better to have people there for the long term; a short term solution was not the way to go.

Mr Harris asked what the view of the presenters were on Clause 34 of the Tax Administration Laws Amendment Bill which allowed assessments beyond the three-year period.

Ms Nel replied that there needed to be finality as SARS could not take forever to amend assessments. But when an error has been made the Act must allow SARS to amend assessments as well.

Mr Preiss replied that Ernst & Young’s concern was finality. Three years was enough time for the taxpayer and SARS to resolve an issue.

Mr Harris referred to the employee share schemes about which many of the presenters spoke. Did the presenters think the system was misused?

Ms Tickle replied that under normal circumstances the abuse was not very broad.

Mr Harris asked if tax practitioners were registered to controlling bodies as required. How many were registered?

Mr Nel replied that SAICA had about 13 000 professionals registered. SAICA supported the idea as taxpayers overall would benefit from this.

Prof Smulders replied that SAIT had over 10 000 tax practitioners that have registered with it. It was a process that was definitely needed. The only concern SAIT had was that the practitioners now had to carry all the risks but it was not reciprocated by SARS.

Mr Harris asked Shell South Africa for clarity on the 10th Schedule.

Mr Collair replied that it was put in place to provide fiscal stability.

Ms Z Dlamini-Dubazana (ANC) asked Ernst & Young’about research and development and what part did it want the National Treasury to refine.

Mr Preiss replied that he was referring to the research and development issue regarding the invention of medicines. The procedures that followed the actual invention of medicines cost money. So if SA wanted to encourage research and development in medicines then it made sense that the bulk of the costs that were incurred after the invention should be included in the incentive.

Mr E Mthethwa (ANC) asked SAIT what the criminal issues were on which it felt SARS was too harsh.

Prof Smulders replied that there was a few such as when a taxpayer failed to inform SARS of his change of particulars. SAIT understood that this needed to be supplied but to make it a criminal offence was too harsh. A penalty would suffice.

The meeting was adjourned.
 

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