Statistics SA, National Treasury & SA Revenue Services 2013 Annual Reports; Customs Control Bill: SA Revenue Services briefing

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Finance Standing Committee

17 September 2013
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

Statistics SA (Stats SA) briefed the Committee on its Annual Report for 2011/12. It focused on its mandate and set out how it played a vital role in supporting the decision-making system, because the information that it compiled informed planning, policy development, monitoring and evaluation, coordinated statistics and communicated the efficacy of the national development agenda. The organisational strategy was described, along with the impact of its programmes. Stats SA described how it invested in people, both by training in various areas, at schools and tertiary institutions, and by offering internships, and by empowering partners elsewhere in Africa. Its governance and administration was improving systems. Statistical coordination aimed to address the information gap, through various initiatives in various sectors, and it offered statistical advice and support. Its statistical products helped to understand economic growth and transformation, service sectors, price indexes, employment, poverty, service delivery, health challenges, crime and quality assurance. Census 2011 was outlined; although it had been criticised, there was no doubt that the information would help government in planning. Stats SA would continue to improve and was aiming to broaden the role and reach of official statistics, making them easier to use, and reforming reviews by better assessment. Members were pleased with the comprehensive presentation, but asked for clarity on a number of issues mentioned in the audit report, the staff establishment and skills, quality of Census 2011, decentralisation of offices, engagement with civil society and certain details on budgets. Some of the answers were to be given or amplified in writing.

National Treasury briefed the Committee on its Annual Report for 2012/13, noting that this Department had been rated top by the Department of Performance Monitoring and Evaluation and independent assessors for financial management performance. Its overall mandate was to manage all government finance, and it contributed to a number of government outcomes. Sovereign rating developments were shown and the concerns by the major rating agencies were explained, which included concerns about slow revenue growth, rising spending pressure, deterioration of external finances, slow progress in address structural issues, including infrastructure projects, lack of coherence in communicating the National Development Plan and reduction of investor confidence, particularly arising from the mining unrest. Each of the National Treasury programmes was outlined, along with what had been developed in this year. Some of the largest projects under review were cited. The guarantees provided to South African Airways, SA Express, Land Bank, Denel, and capital support to Development Bank, Land Bank were outlined. Net debt, provision and contingent liabilities amounted to 51.4% of GDP as at 31 March 2013. The work of the Accounting Support and Reporting Unit was highlighted, and the guidelines drawn and implemented were described. NT had completed various forensic investigation reports and 39 cases were referred to the Anti-Corruption Task Team. 20 arrests had been made and disciplinary hearings were in progress in Limpopo. Highlights in international financial relations were summarised. The Jobs Fund progress was also summarised. An unqualified audit was provided, with some matters of emphasis, which were later clarified at the request of members. Improved governance had been instituted. Members asked about appointments, the Job Fund, intergovernmental relations and the service delivery agreements, appointment of staff, and the savings. It was stressed that management of local government needed to be improved, as well as asset management.

The South African Revenue Services (SARS) presented its Annual Report for 2012/13, and noted that it had not achieved certain targets in relation to VAT collection, and processing of VAT refunds, although there were improvements. In this year, SARS had collected a record of R813.8 billion, which was summarised in various categories, and charts were also tabled showing revenue per tax type, tax to GDP ratios and trends, debt reduction by R6.4 billion. Each of the outcomes and programme achievements was detailed. There were currently about 19.5 million registered taxpayers. Figures were provided for registers, filing, penalties, audit cases, criminal prosecutions and fines, and it was noted that SARS had introduced faster and better filing solutions, turnaround at border posts and taxpayer services. Members asked about collaboration globally, the staff establishments, sought clarity on some of the numbers, the debt ratio and employment equity.

South African Revenue Services finally briefed the Committee on the Customs Control Bill and Customs Duty Bill, focusing, for each, on the main purpose of the Bills, the reasons why the legislation required re-writing, mainly to do with the need to update the customs and excise legislation and to bring it in line with international requirements, the benchmarking processes followed and the consultation process on the bills. The Customs Duty Bill was concerned with imposition of duties, the assessment of duties and the payment and collection of duties. It  gave maximum effect to the notion of self-assessment, provided what “duties” were customs duties, provided for refunds without application in prescribed situations, and stressed enhanced self-assessment and the provision of rulings in advance. The Customs Control Bill would serve as the platform for implementation of the Customs Duty Bill, and followed the value chain in a logical manner. The content of its chapters was outlined. It would be flexible enough to support small business, and application fees would be lower for small business. SARS believed, from public comment, that the bills would reduce red tape. Members were concerned with the delays in introducing he legislation, and how corruption would be tackled.
 

Meeting report

Statistics South Africa r Annual Report 2012/13
Mr Pali Lehohla, Statistical General, Statistics South Africa, said that the mandate of Statistics South Africa (Stats SA) meant that it played a vital role in supporting the decision-making system, because it informed planning of monitoring and evaluation, planning and policy development, produced official statistics, coordinated the production of official and other statistics within the South Africa national statistics systems (SANSS), and communicated the efficacy of the development agenda.

He outlined the organisational strategy map, indicating programmes such as businesses processes, investment in learning and growth, statistical products in space, and their impact.

Mr Lehohla said that investing in people involved a number of areas. He cited its working with schools which involved “maths4stats” training of teachers and census at schools, working with tertiary institutions such as university of KwaZulu-Natal, Stellenbosch, Wits University and University of Cape Town. Within Stats SA, several internships would be offered, including on E-learning, bursaries, leadership training and statistical training. Stats SA investing in people also had to do with empowering partners in the NSS and on the African continent.

Stats SA’s governance and administration was about improving systems (such as invoice tracking systems), processes and policies, integrated planning and reporting, management systems for institution building, such as the Management Performance and Assessment Tool (MPAT), and enterprise risk management.

A table showing financial performance of Stats SA was summarised, indicating the 2011/12 expenditure, adjusted appropriation, virement, final appropriation, actual expenditure, variance and expenditure as a percentage of final appropriation per programme.

Mr Lehohla said that statistical coordination was aimed at addressing the information gap – and it would involve the census of schools, data mining, integrative statistical and geographical products, engaging experts and researchers, and addressing the quality gap. Stats SA offered statistical support and advice to various organs of state, including South African Police Service (SAPS), provincial governments, municipalities, and Departments of Home Affairs, Transport, Monitoring and Evaluation and Tourism.

Mr Lehohla said that Stats SA’s statistical products were aimed at understanding economic growth and transformation. It was focusing on the sectors of manufacturing, business services, construction, transport, storage and communication, agriculture, hunting, forestry and fishing, mining and quarrying, trade, finance, electricity, gas and water, and tourism. Furthermore, Stats SA products were aimed at understanding price changes, and so it was looking at the consumer price index, producer price index, as well as understanding employment, decent work and job creation by conducting quarterly labour force surveys and quarterly employment surveys (see the attached document for more detail).

Stats SA’s statistical products also aimed at helping with an understanding of poverty and service delivery by conducting the general household survey, non-financial survey of municipalities, living conditions survey, income and expenditure survey and Census 2011.

In the area of health, Stats SA was looking at mortality and causes of death. It conducted surveys on crime, and was also involved in data quality on crime statistics, statistical support and advice and training in quality assurance.

Mr Lehohla said that Census 2011 was a great experience and the information obtained would help the government in planning and service provision. Census 2011’s key achievement included the fact that results were released within 12 months, and information was available on web portal CDs, Mobi and other androids. The key products were my ward, My Councillor, My Village, My suburb and new data portal.

Mr Lehohla summarised again that Stats SA’s impact on society would help the planning environment, the monitoring and evaluation environment (measuring development) improved knowledge and understanding, appreciation of statistical learning, and risks (through policy interpretation).

In conclusion, Mr Lehohla said that Stats SA would continue improving its method of work, implementing international standards and classifications. It would continue investing in statistical skills development, growing and expanding through coordination and partnership. It would offer improved quality through technical support, assessment and standardisation. It was continuously aiming to broaden the role and reach of official statistics, to change the face of statistics (by making statistics easy-to-use), and to reform reviews by better assessments. He assured the Committee that Stats SA would continue to deliver its mandate, improve the quality of its products, invest and grow statistical capability, and build a sustainable institution.

Discussion
The Chairperson, and other Members, thanked Stats SA for the comprehensive presentation.

The Chairperson wanted clarity on the figures of R32 million, insurance provision, the disclosure notes as indicated on the Financial Statements, and an update on the investigation into the payments of goods and services.

Dr Z Luyenge (ANC) wanted clarity on staff establishment, skill retention strategy and the use of consultancies.

Mr E Mthethwa (ANC) wanted clarity on recruitment process, the quality of Census 2011 and decentralisation of statistics offices.

Mr D Van Rooyen (ANC) noted that the Committee had not been invited to the launch of the 2011 Census results. He then asked the Stats SA to elaborate more on 2011 census results, the reports on non-compliance with PFMA, and its leadership

Ms J Tshabalala (ANC) wanted clarity on population development, youth unemployment, survey operation, the accurateness of population and social statistics, the engagement between Stats SA and civil society. She also asked why Stats SA did not comply with the Public Finance Management Act (PFMA).

The Chairperson wanted clarity on the decline of money for goods and services. He also asked why the entertainment budget was so high.

Mr Lehohla replied that the staff of Stats SA had worked very hard in pulling together to ensure that there was good work. He noted that the insurance regulations by National Treasury allowed the Stats SA to spend up to R200 000, but in future the institution would be looking into its insurance policy and seeing how it could be reviewed. He noted that Stats SA did not comply with PFMA because of issues raised in the disclosure notes. Stats SA had got good leadership in place, but the finance and statistics skills were rare in the country. The systems that Stats SA had put in place had not worked so well, but it would be working to improve these systems. The matter of its financial performance could not be disclosed at that stage, because it was still in the hands of the management team. Stats SA had implemented policies to try to deal with the skills issues and was trying to have a full complement of talent. It did have a staff retention plan was there, focusing specifically on talent and skills. Stats SA would continue to look for people with good maths and statistics results. It would continue shadowing students across the country to monitor how they performed in maths and accounting subjects.

Mr Lehohla said that Stats SA did not release the MPAT results, but MPAT was very important for the work Stats SA was doing. Institution building would always be important for Stats SA. Access to information by the public was another very important point, and so Stats SA would make sure that the public had access to the information that this body amassed.

The 2011 census results were satisfactory, and the whole process and results were open. Stats SA did not understand why the media criticised the census results so highly, but this implied that the academics and qualified people did not do the good work. However, he conceded that perhaps Stats SA had not done enough when it had been compiling the report, and in future, there should be a forum of discussion and consultation.

He noted that he would amplify on some questions asked by Members in writing.

Ms Kefiloe Masiteng, Deputy Director General: Population and Social Statistics, Stats SA, added that Stats SA remained confident about the quality of 2011 census data. Stats SA worked with university professors and other competent people. Unfortunately, as Mr Lehohla indicated, the media reported differently about 2011 census data. Stats SA had developed an Integrated Field Operation Strategy (IFOS) to help in carry out the work effectively. It was difficult for Stats SA to count foreigners, because some were not easily accessible, but Stats SA had managed to count registered foreigners.


Ms Risenga Maluleka, Deputy Director General, Stats SA, replied that Stats SA would continue with field service work.

It was confirmed also that the website of Stats SA contained lot of information about the work of Stats SA.

National Treasury Annual Report 2012/13 presentation
Mr Lungisa Fuzile, Director General, National Treasury, said that the National Treasury was responsible for managing South Africa’s national government finance, and drew its mandate from Chapter 2 of the Public Finance Management Act, together with Chapter 13 of the Constitution. National Treasury (NT) contributed directly to government Outcome 4 (decent employment through inclusive economic growth), Outcome 9 ( a responsive, accountable, effective and efficient local government system), Outcome 11 (creating a better South Africa and contributing to a better and safer Africa and a better world), and Outcome 12 ( an efficient, effective and development oriented public service, and empowered, fair and inclusive citizenship). The table showing sovereign rating developments was summarised. indicating current rating, rating prior to downgrading and first rating in 1994(see attached document for more details).

Mr Fuzile said that concerns raised by major rating agencies were that the fiscal situation was at risk as a result of slow revenue growth and rising spending pressures, and expectations were that growth would be slower than previously was expected. South Africa’s external finances were deteriorating. Slow progress on several long-standing structural issues contributed to South Africa’s economic performance falling behind that of its peers, and this included slow implementation of infrastructure projects, lack of coherence regarding the communication of the National Development Plan (NDP) and its implementation, and the reduction in investor confidence as a result of labour unrest in the mining sector.

Mr Fuzile reported on the National Treasury’s programmes. The Public Finance and Budget Management programme provided an analysis of performance measurements. Reporting by departments and state entities had been brought in line with improved guidelines emphasising cost effectiveness and enhanced performance management.

There was now a personnel costing model to assess medium to long term sustainability of remuneration budgets, and this had also assisted in improving management of remuneration budgets. A quarterly remuneration bulletin had been introduced as a monitoring tool, and employee compensation guidelines were developed with the aim of improving the accuracy of personnel costing in the national and provincial spheres of government, and a further aim of assisting departments and entities to budget accurately for personnel. The design, coordination and management of the 2013 budget process had been adopted, to improve the budget decision making process in line with the budget framework adopted and to enhance the quality of the various budget documents published.

Mr Fuzile said that the Public Finance and budget Management Programme indicated that the Public Finance division was responsible for liaison with national departments on budgeting and expenditure monitoring issues. It would support the Minister of Finance in policy advice and inter-departmental correspondence and consultation. The Public Finance division supported the function group committees of the Medium Term Expenditure Committee (MTEC), which were responsible for advice on expenditure allocations and consolidated expenditure estimates. The preparation of the Estimates of National Expenditure was done in conjunction with the other departments, and it included information on public entities in the detailed vote chapters (set out on the NT website).

Large projects under review in 2012/13 included Eskom’s investment programme, the proposed Grand Inga hydroelectric scheme, infrastructure investment in liquid fuels, and feasibility reviews of the nuclear build programme, the manganese railway project, and the Durban-Gauteng rail corridor.

Mr Fuzile moved on to describe the Asset and Liability Management Programme, which indicated that guarantees provided to South African Airways were R5.006 billion, that R539 million was provided to South African Express Airways, that R1 billion was provided to Land Bank, and there had been an extension of the term of the existing R1.85 billion guarantee to Denel. It was reported that R7.9 billion capital support had been given to the Development Bank of South Africa (DBSA) over the Medium Term Expenditure Framework (MTEF) period. Land bank was recapitalised with R200 million. The total government guarantees issued to the state-owned companies (SOCs) amounted to R471.9 billion, of which R179.4 billion was utilised. The net debt, provision and contingent liabilities amounted to 51.4% of Gross Domestic Product (GDP) as at 31 March 2013. The ongoing broadening of the coordination of public sector cash had increased the portfolio of cash available for bridging finance.

Mr Fuzile said that the Finance Accounting and Reporting Programme reports stated that the Accounting Support and Reporting Unit had assisted with the improvement of financial management in various departments, municipalities and public entities, through helping to draw and implement accounting support plans and training interventions. NT’s Guide to Preparing Financial Statements was converted into an accounting standard. Other research and development activities were undertaken, such as providing guidelines on annual report content, and a template on the preparation of financial statements in line with the Generally Recognised Accounting Principles (GRAP). Internal audit strategic support plans were developed and implemented to assist institutions in improving effectiveness of their units and committees, whilst the risk management guidelines assisted institutions with training for monitoring and oversight functions.

M Fuzile said that the Capacity Building Unit developed a Public Finance Management (PFM) talent pipeline, policy framework and practice notes on PFM recruitment, development and retention strategies. The financial management maturity assessments were conducted and forwarded to the Standing Committee on Public Accounts (SCOPA) and Standing Committee on Finance (SCoF) and the final revisions were made.

It was reported that NT had completed various forensic investigation reports and 39 cases were referred to the Anti-Corruption Task Team. 20 arrests had been made and disciplinary hearings were in progress, with the support of Department of Public Service and Administration (DPSA), in Limpopo provincial departments, as a result of the section 100 intervention.

Mr Fuzile said that the International Finance Relations Programme division continued to advance the interests of South Africa in bilateral and multilateral engagements, with a strong focus on economic development of the African continent. Some of the highlights described included international highlights, such as strengthening the operations of the South Africa, Nigeria, Angola constituency in the World Bank, and of the African constituency in the International Monetary Fund, as well as participation in the successful South Africa-hosted BRICS summit. The African highlights included engagement in Africa, premised on economic opportunities, institutional reform and outreach, participation in development of regional economic integration strategies and infrastructure financing mechanisms, as well as strengthened PFM outreach programmes through CABRI.

Mr Fuzile said that the division dealing with Civil and Military pensions, contributions to funds and other benefits programmes was related to fiscal transfers. Civil and military pensions dealt with the payment and administration of Special Pensions, Military Pensions, other statutory pensions and post-retirement medical subsidies, and migration of post-retirement employees to a financially sustainable medical scheme.

The table outlining the Jobs Fund progress was summarised, indicating indicators, first and second calls for proposals and the total.

Mr Fuzile said that the Administration Programme provided leadership, strategic management and administrative support to the Department of Finance. The highlights of this Administration Programme included the improvement of NT’s risk maturity level and it had maintained the zero tolerance stance on corruption. NT had been moderated, by independent assessors, as the best government department in terms of its financial management practices, strategic sourcing and its economies of scale, which had produced a 12% cost reduction. The internship programme had recruited an additional 42 interns at 31 March 2013, bringing the total to 72.

Mr Fuzile summarised the table showing the financial statements. This indicated the 2012/13 final budget, by economic classification, the 2013/13 final outcome, variance in rands and percentages. The Auditor-General had provided an unqualified audit report, with some Emphasis of Matter, relating to the restatement of corresponding figures, as disclosed in the Notes to the Financial Statements. He stated that the corresponding figures for 31 March 2012 had been restated. This arose as a result of amendments made to the Government Employee Pension Fund law, which was effected from 1 April 2011, to bring into effect the change in dispensation with respect to the pensions to non-statutory forces. The other matter on the AG’s audit report stated that a service level agreement was not concluded.

Mr Fuzile outlined the improved governance plans for 2012/13. He noted the development of a Governance Action Plan which included an audit register that was monitored by management and presented to the Audit Committee, the vigorous enhancement in supply chain management procedures, which had resulted in there being no adverse findings in relation to this matter, and the improvement of general governance, as confirmed by the Department being moderated as the best in financial management practices, by the Department of Performance Monitoring and Evaluation.

Discussion
Ms Tshabalala thanked the National Treasury for the report. She wanted clarity on the remarks about irregular appointment of service providers, leadership, job funds and job creation, intergovernmental relations and service delivery agreement.

Dr Luyenge appreciated the National Treasury’s report as it shed more light on the work being done by National Treasury. He wanted clarity on the appointment of staff additional to establishment. He asked if the National Treasury was a profit-making organisation, because it had showed savings in money that should have been used for service delivery.

Mr Van Rooyen noted that the management of local government needed to be improved. He then wanted clarity on the comments that there had been an unqualified report, taken with the remarks on the Government Employment Pension Fund (GEPF).

The Chairperson suggested that in future the National Treasury should pay attention to asset and liability management.

Mr Fuzile replied that the National Treasury stood to be advised by the Parliament as to when the Annual Report should be sent to members. The people appointed had impacted positively on the performance of the National Treasury. The National Treasury’s internship programme had helped students in gaining work experience and some students had been employed on a full time basis by the National Treasury. There was not much information on the Jobs Fund, but the gathering of this information was still under way. It would be provided to Members in due course. Improvement programmes for intergovernmental relations were in place, and it was an ongoing process. GEPF was a fully funded pension fund.  The National Treasury had tried to comply with relevant legislation.

South African Revenue Service Annual Report 2012/13
Mr Ivan Pillay, Acting Commissioner, South African Revenue Services, noted that in some respects the South African Revenue Services (SARS) had failed to meet some goals for 2012/13. He noted that achievements on Value Added Tax (VAT) were at 57.6%, although there had been improvement in ensuring that VAT returns were filed on time (3.78% improvement), but VAT refunds were processed within an average of 30.51 working days (against a target of 21 working days). It was reasoned that the modernisation of VAT should significantly contribute to higher levels of compliance in on-time filing, and in this financial year, it was noted that 59% of all refunds were paid within 48 hours, compared to 46% in the previous year.

Mr Pillay summarised the graphs. He indicated that SARS collected a record of R813.8 billion in 2012/13, continuing its high-growth trajectory. The graphs indicated total tax revenue collected, annual growth in tax collections, and percentages. The chart showing percentage of revenue per tax type in 2012/13 was summarised, indicating customs duty, fuel levy and Standard Tax on Companies (STC). The chart showing tax to Gross Domestic Product (GDP) ratio trendlines was summarised, indicating total tax revenue and tax to GDP ratio. The chart showing debt reduction by R6.4 billion was outlined, indicating debt and administration penalties (see attached document for more detail).

Mr Pillay said that in respect of SARS Outcome 1: Increasing Customs Compliance, the customs revenue amounted to R151.1 billion (R0.9 billion above target), but under the preferred trader programme, only 154 traders were audited There was a decline in illicit economy, through 3 298 illicit cigarette contraband seizures. SARS seized nearly 54 million contraband cigarettes with a street value of R37 million.

Outcome 2 related to increased tax compliance. The tax revenue was amounted to R662.8 billion (R2.8 billion above target), but Personal Income Tax (PIT) was R276.7 billion (against a target of 10.1 billion), and Company Income Tax (CIT) was R160.9 billion (showing 5% growth) and VAT was R103.6 billion (showing 16.4% growth).

In relation to the taxpayer register, he noted that the total SARS register was 19.5 million registered taxpayers and traders (showing 11% increase).

Filing on time stood for PIT, at 86.05% (3.47% improvement) and for PAYE at 71.25% (4.12% improvement).

Mr Pillay said that Outcome 2: Increased Tax Compliance, also showed that the total of audit cases completed stood at 1.5 million (a 42% increase), and 246 criminal prosecutions received a guilty verdict, resulting in fines of R21.3 million and effective prison sentences of 133 years. 

The Outcome 3: Increased ease and fairness of doing business with SARS, indicated that SARS had faster e-filling solutions and new e-filing mobile solutions, improvements in turnaround time at border posts, better taxpayer services and quick resolution of queries. Callers were receiving live assistance to guide them through their queries, after the implementation of new SARS “Help-you-efile” service.  The graphs showing cost of revenue collection and human capital and employment equity were summarised, as well as the table showing tax revenue performance by tax type for 2012/13 financial year.

Discussion 
Ms Tshabalala acknowledged the performance of SARS, and she noted that the issue of people with disability was a course for concern. She wanted clarity on global collaboration with other stakeholders.

Dr Luyenge noted that SARS was doing good work up to the expected level. He asked how good the staff establishment was.

Mr Van Rooyen thanked SARS for complying with relevant legislation. He wanted clarity on laws and regulations mentioned on page 90 in the Annual Report.

The Chairperson noted that SARS had performed very well under difficult situations. He wanted clarity on the capital number and employment equity ratio.

Mr Louw replied that unfortunately not everyone paid tax, and that was the reason why SARS had debt. The issue of debt had been dealt with by SARS’s legal department. There were different components of debts, and some took long to be paid. As a result, SARS would always experience some debt. Most importantly, there had been different situations that caused debt.  The debt book was a complicated issue.

Mr Pillay replied that SARS had staff that could deliver, although some staff needed some training. SARS had students on board and some had received training from SARS.  SARS had looked at employment equity and there was a plan in place to address the employment equity related issues. People with disability were not sidelined.  SARS’s strategic plan covered SARS’s performance. The main challenge faced by SARS was upskilling and upgrading (mostly through promoting).  SARS would continue to invest in skills development in the country, and it would work tirelessly to deliver good service.

The Chairperson thanked SARS and other departments for their presentations, and noted that the Committee would continue with its oversight to ensure that good service was delivered to the people.

Customs Control Bill and Customs Duty Bill: South African Revenue Services briefing
Mr Kosie Louw, Chief Officer: Legal and Policy, South African Revenue Services, gave an overview of what he would cover in his presentation. He indicated that customs was essentially about collection of duties and taxes, which involved tariff, value, origin. It was also linked to trade facilitation, which involved simplification and harmonisation of trade procedures, accreditation systems, advanced information which enabled risk-profiling. It aimed to protect society against drugs and illicit substances, to protect the economy, by imposing anti-dumping duties, high duty rates and quotas, an to protect the fiscus against, for example, smuggling of cigarettes without paying duty, and under-valuation.

The current Customs Act was written in 1964 and needed to be re-written because it had not kept pace with global trade trends and technological advances. This Act (the current Act) did not adequately reflect modern standards of the revised Kyoto Convention and other international instruments to which the Republic of South Africa had acceded. In principle it was now accepted that customs procedures should be efficient, transparent and predictable for traders, there should be distinctive difference between customs and excise, there should be transparency and simplification (enhance clarity of law), and support of regional economic integration.

Mr Louw said that the Bills being introduced would support the National Development Plan to promote exports and business competitiveness, to stimulate domestic manufacturing and support Small, Medium and Micro Enterprises (SMMEs). They were now aligned with the Constitution and would give effect to South Africa’s international obligations in terms of international agreements. The Bills would  reduce red tape, corruption and delays at the borders by promoting electronic communication. They would help in facilitating trade and custom protection, would support other national legislation, including that in the sectors of agriculture and health, and would combat valuation fraud.

Mr Louw said that the Bills complied with General Annex to the World Trade Organisation (WTO) revised Kyoto Convention, complied with specific Annexes to the Convention, complied with the General Agreement on Trade and Tariffs (GATT), the International Convention on the Harmonised Commodity Description and Coding System, and the SACC agreement and Istanbul Convention (for temporary admission of goods). The drafting of the bills was informed by international best practice, as provided for in the Revised Kyoto Convention, and a comparative evaluation of customs controls and laws of other countries. He reported that Canada, Australia, India, New Zealand and United Kingdom were evaluated.

Mr Louw said that NT had consulted widely in government on the Bills. The NT had first initiated discussions with Southern African Customs Union (SACU) members in September 2008. The Green paper and first Customs Bill was circulated on 11 December 2007. There was a briefing session with National Treasury on 11 February 2008, followed by briefing sessions with relevant stakeholders on 4 March 2008. Second versions of the Bills were circulated to government departments on 18 June 2008, followed by further interactions with SACU members in 2009 and 2013. The consultation with the public was held in 2009, and the Bills were again circulated in 2011 and 2013 for public comment.  The briefing sessions with different clusters were held on 30 May 2013, and June 2013.  The Cabinet approved the bills on 26 June 2013. 

Customs Duty Bill
Mr Louw said that the Custom Duty Bill (CDB) comprised of three key elements, namely; the imposition of duties, the assessment of duties and the payment and collection of duties. The CDB Bill gave maximum effect to the notion of self-assessment, since traders had the chance to make their own tariff classification, value determination, and origin determination.

Mr Louw summarised the CDB chapters and noteworthy changes. This Bill provided for the application of the Act to SACU, obliged the Commissioner to develop systems and procedures necessary for the implementation of the Act, defined duties that were customs duties for purposes of the SACU agreement. It provided for refunds without application in prescribed situations. SARS would pay interest on refunds or drawbacks not paid within the prescribed timeframes. There would be  enhanced self-assessment of duty by persons clearing goods. The Bill would be introducing a  General Anti-avoidance Rule (GAAR), and enhanced procedures for self-assessment of origin by persons clearing goods. It would provide for the issue, upon application, of rulings in advance of the Tariff classification of goods, determination of the valuation of goods and determination of the origin of goods (see attached document for full details). 

Customs Control Bill
Mr Franz Tomasek, Group Executive: Research and Legislation, South Africa Revenue Services, summarised the Custom Control Bill (CCB). He noted that this Bill would serve as a platform for the implementation of the CDB, and of other laws concerned with goods imported into, or exported from the Republic. The CCB was primarily concerned with the control of goods. The CCB followed the value chain in a logical manner, and dealt, therefore, with control of places (entry and exit points), control of import and exports of goods, advanced reporting of imports and exports, registering and licensing, movement in and out of terminals and depots, dispute resolution and judicial enforcement, collection of debt due, clearance and release of goods, and tax status of goods.

Mr Tomasek summarised some chapters of the CCB. Chapter 1 was concerned with interpretation, application and administration of CCB. Chapter 2 related to customs control, places of entry and exit and custom control areas. Chapter 3 set out the reporting requirements. Chapter 4 outlined general principles governing clearance and release. Chapter 5 outlined general principles governing transport, sealing, and loading of goods. Chapter 6 outlined the tax status of goods. Chapter 7 outlined standard processes and requirements for clearance and release. Chapter 8 outlined home use goods. Chapter 9 outlined national and international transit requirements. Chapter 10 set out provisions around excise warehouse transit. Chapter 11 was concerned with transhipment, and in this regard he noted that manifests would be accepted as a transhipment clearance, provided they reflected the minimum information as prescribed. Chapter 12 set out the provisions concerning temporary admission.

In conclusion, Mr Tomasek said that the CCB was flexible enough to cater for measures to support SMMEs. The Commissioner was empowered to prescribe licensing requirements that could include requirements responsive to the size or turnover of a particular business. The application fees for advance rulings would be lower for small businesses, to facilitate compliance, and small businesses would be encouraged in the processing of goods.

Finally, he noted that the Customs and Excise Amendment Bill provided for consequential amendments as a result of the Custom Control and Duty Bills. It was also renaming the 1964 principal Act as the “Excise Duty Act, 1964”.

Discussion
Mr N Koornhof (COPE) asked if SARS was happy with the legislation and whether the legislation was better than it had been in the past. He asked if this meant that there would be no red tape.

Mr Van Rooyen wanted clarity on storing of processes. He asked why the Bills had been delayed for so long.

Mr Mthethwa wanted clarity on new advance cargo, and asked how it would be monitored.

Ms Tshabalala  wanted clarity on Custom Duty Bill, in so far as it dealt with evaluation of all the goods.

Ms Tshabalala was also concerned on how corruption would be dealt with.

Mr Louw replied that goods were coming in and moving out on the basis of manifest. Manifest allowed businesses to move their goods. There were two step processes in place that deal with trade. The aim of the Bills was to protect the South African economy and society. SARS was notified by the importers about their classifications, so that SARS could deal with trade correctly. Mr Louw explained that the Bills took three years to finalise, because there were so many substantial issues that were involved. Mr Louw indicated that SARS calculated interest on a daily basis. He conceded that corruption was a big problem and SARS would work hard to deal with it. Corruption had been difficult to pick up especially when third parties were involved, and there was lack of information from importers. The new advance cargo loading dealt with third parties and the people who received the goods. Tax legislation had always been criticised for imposing more powers. Whether the assessment of the goods was correct would depend on the information communicated. SARS had a risk tool that checked whether goods were correct. Finally, Mr Louw concluded that from the feedback SARS received from the public, it seemed that they thought the legislation was better and would reduce red tape.

The meeting was adjourned.
 

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