Customs Bills [B43-2013] [B44-2013] [B45-2013]: SARS response to submissions; Merchant Shipping Bills [B41-2013] [B42-2013]: adoption

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Finance Standing Committee

05 November 2013
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The South African Revenue Services (SARS) reported to the committee with its responses to issues raised during the public hearings submissions on the Customs and Excise Amendment Bill [B44-2013]. The key issues raised by the South African Association of Freight Forwarders (SAAFF) and the Johannesburg Chamber of Commerce Industry (JCCI) in the Standing Committee on Finance were the alleged lack of consultation; the fact that different versions of the bill were presented, comments on the drafting methodology; queries about Inland Terminals, specifically City Deep, and penalties. SARS indicated that, having considered the submissions, it had now come up with an alternative option (although Members later complained that it was not before the Committee in writing). It was explained that at the moment, goods moved on a manifest from the port of entry to the inland terminal. In order to get tax-free status when moving goods from one entry point to another, there had to be in-transit movement, which implied proper clearance at the first point, and the difference between a manifest (basically, a simple summary of the cargo, with a general description) and a clearance (a document in which the importer submitted full details of tariff, value and origin, and declared them as correct). In the 1970s, when containers were still relatively rarely used, concessions were allowed that full declarations were not required. However, with the dramatic rise in numbers and volumes of goods, it was impossible to inspect all containers, yet SARS wanted to be able to target more accurately, by getting better information, which containers may need to be stopped. For this reason, the Bill originally proposed a change to clearances. However, in answer to concerns about the effect on contracts between shippers, exporters and importers, and on trade, SARS now proposed the creation of a different document which, although not a full clearance declaration, would contain the necessary information on tariff, value and origin, as well as the relevant importer. Any errors not resulting in revenue prejudice would be subjected to penalty, at SARS’ discretion, after three warnings.

Members asked why SARS was being so lenient and suggested that the wording be changed to “must” instead of “may” in relevant clauses. They expressed concern about City Deep, instances of non-compliance and the possibility of closure, as suggested by the media, but SARS explained that there was an attempt to improve the situation there, in view of its high incidence of non-compliance, to shift the point of intervention to the port of entry, and said that SARS had not threatened any closure. Members asked if this Bill was really needed now for SARS to achieve what it wanted to achieve, questioned the assertion that it had to be passed now, and said that SARS came across as surprisingly defensive. SARS apologised for this, and said the impression may have been created from its strong challenge to statements that it regarded as incorrect during the hearings. Members also asked who had been consulted, were assured that Transnet had been consulted, and its suggestion was that SARS should adopt the pre-clearance option, which could be implemented without undue disruptions. Members also asked for clarity about the technical nature of the processes, and how the one-stop border post would impact positively on the economy, and on information sharing.

National Treasury briefed the Committee on the Merchant Shipping (International Oil Pollution Compensation Fund) Contribution Bill [B41-2013] and the Merchant Shipping (International Oil Pollution Compensation Fund) Administrative Bill [B42-2013]. These were money bills related to the implementation of the international conventions on Merchant Shipping, which had been considered for ratification by the transport committees. The Civil Liabilities Convention provided that transport of oil had to be insured, whilst another convention covered the Oil Pollution Compensation fund (OPCF). The Contribution Bill provided for the imposition of a levy on imports to contribute to the Fund, which would be paid by the SARS to OPCF, and it would then claim back from the oil importers, currently six companies. The Administration Bill contained certain administrative measures for the implementation of the levy by SARS. In other countries, oil companies who were levied paid directly to the OPCF. However, SARS specifically did not wish this to happen, and preferred to pay itself, directly, and then reclaim from the relevant companies, as it wanted to avoid other authorities claiming levies or taxes from South African companies in South Africa, particularly in view of other pending conventions that would require similar contributions on waste.

Members asked whether consultations had taken place, and pointed out that if these Bills were not passed, South Africa, as a signatory, must still pay levies, but that they would be paid directly by importers to the OPCF, as was the position in most other countries, excluding Canada and Israel. They wondered why South Africa had chosen this option, and pointed out that the Canadian model also had a number of “add-on” clauses. They questioned if companies had already been contributing and if the implementation was the result of the 1992 Fund Convention. They also questioned the process, and asked whether the administrative costs of SARS in collecting the levy would also be claimed from the companies, but SARS assured the Committee that no additional costs would be claimed. They asked for more details on how the National Revenue Fund would be involved. The DA asked that its reservations about moving to this model be recorded in the Committee’s reports. Members voted to adopt both Bills, with those reservations noted.

Meeting report

Customs and Excise Amendment Bill [B44-2013] and Customs Duty Bill [B43-2013]: SA Revenue Service response to submissions raised in public hearing
Mr Kosie Louw, Chief Legal Advisor, South African Revenue Service, outlined that there had been consultation between the South African Revenue Service (SARS) and the South African Customs Union, the South African Government, the public, and the National Economic Development and Labour Council (NEDLAC).

He noted that, during the public hearings of the Standing Committee on Finance, the key issues raised by the South African Association of Freight Forwarders (SAAFF) and the Johannesburg Chamber of Commerce Industry (JCCI) were allegations of a lack of consultation, the fact that different versions of the bill were presented, comments on the drafting methodology, and questions around Inland Terminals, specifically City Deep, and penalties. It was noted that no real new issues were raised in this interaction with the Standing Committee.

Mr Louw explained the differences between a manifest and clearance declaration. A manifest did not contain the tariff, value and origin to determine risk; it was in effect a summary of cargo on board a vessel and it only provided a general description of the goods, for example ‘said to contain’ or ‘freight of all kinds’. A clearance declaration, by way of contrast, was a document submitted by the importer which contained details on tariff, value and origin, and in it, the importer declared to the truth of the information in a clearance declaration. The importer was therefore seen as an entity in South Africa that had declared to the correctness of the goods and thus could be held accountable if a false declaration was made. Discussions around this issue led to a heated debate in NEDLAC, with Labour supporting Government as the risks to and benefits for the country were obvious. However, finding the balance between control and trade facilitation was not an easy task as it required change in current behaviours and people naturally resisted change.

Mr Louw presented slides (see document, pages 28 to 31) to illustrate the difficulties SARS ha encountered with regard to City Deep. The most recent overall success rate for interventions in City Deep was 26%, compared to the national rate of 14%. The non-compliance at City Deep was therefore double the national average. The critical question was therefore whether South Africa should continue to allow goods to move from a first port of entry to an inland terminal like City Deep without proper information.

A new Customs system was rolled out earlier this year with an automated workflow driven system that allowed customs officers to complete all clearance processes end-to-end without having to perform manual functions. The processing times of clearance declarations had been reduced, and the One stop border post was to be rolled out in the near future. He said that it should be noted that agreement had been reached in NEDLAC on the penalty structure that provided for prosecutable and non-prosecutable penalties. There were two options presented related to inland terminals. The one option dealt with proposing amendments to the Customs Duty Bill to provide for mandatory advance clearance and conditional release for goods consigned to inland terminals. The second option was to create a different type of document (that was not a clearance declaration) on which the required information in regard to tariff, value and origin, as well as the relevant importer, were reflected.  This document would be submitted through electronic data interchange (EDI).

Mr Louw said SARS was proposing to insert a clause in the Bills to state that ‘errors not resulting in revenue prejudice’ would only be subject to a penalty after three warnings. These penalties would be discretionary and SARS would apply them leniently in the first 12 months to allow business to properly prepare for the change.

Ms J Tshabalala (ANC) said that she found the attitude and posture of SARS too lenient and compliant. She asked if this was really necessary.

Mr Louw said that SARS had attempted to put an alternative on the table as far as the current proposals were concerned.  He offered to explain the basis again and said that currently, goods moved on a manifest from the port of entry to the inland terminal. The current law, and the normal route followed also provided that in order to get tax-free status when moving goods from one entry or point to another, then it had to be an in-transit movement. Proper clearance, at the first point, and the full knowledge about the goods was necessary and important to allow for proper control over the goods moving from one point to another. The main point was that, in that movement, it was the customs authority’s task and mandate to have control over those goods until they were ultimately released for home consumption.  

In the 1970s, a practice had grown up, when containerisation started, to allow a concession that there did not have to be a full declaration. It was possible to move goods just on a manifest, and it would be regarded as still an in-transit movement. There was control, but it moved on a manifest. In those days volumes were much less and it was almost possible to inspect all containers. Things have changed today, with about 4.5 million containers moving in and out of South Africa. It was impossible for SARS to stop all of them and only about 1.5% of them were inspected. There was no desire to stop more, but rather to be better at targeting the ones that needed to be stopped.

Mr Louw said that the business constituent of NEDLAC had said that if the rule of dispensation on moving was changed from a manifest to customs clearance, it would affect a number of issues, such as the contract of sale, the contract of carriage, shipping lines would no longer be issued through bills of lading, and the whole trade process would be disrupted. Goods would therefore not be able to be moved seamlessly in this process if a full-blown declaration was now required at the first port of entry. That was why a legal opinion on the matter had been sought. In a trade environment, at the moment, goods moved on a contract of sale basis. Under a Contract of Sale, when goods were loaded onto a ship in a foreign harbour on its way to South Africa, the risk passed, at loading point, from the seller to the importer. Under the proposed new environment, the same would still apply on a contractual basis, so that the risk passed from the importer when the goods were loaded. In the spirit of moving thing forward, what was needed was better information. It was “not going to be the end of the world for SARS” if it switched from a full declaration to another type of document to assist business and not disrupt their trade arrangements. For this reason, SARS then proposed an alternative option. This option was not called full customs clearance and would not impact on trade arrangements. It was just a separate document wherein all the requirements were stated, so all the information needed was provided. It may be that this was regarded as more lenient, but it was done to try to find a better way to move forward on this process; so that the customs service got what it needed to fulfill its mandate, without causing undue disruptions in business trade, trade cycles or the supply chain. That was the explanation for the alternative that was put on the table.

Ms Tshabalala noted that there was non-compliance at City Deep. She asked what was required to get City Deep to comply.

Mr D van Rooyen (ANC) asked about the rate of non-compliance at inland ports.

Mr Louw replied that at City Deep there was an attempt to improve by getting better information. The point of intervention could then be shifted, as far as illegitimate trade was concerned, to the port of entry, so it was possible to actually start stopping goods there. Hopefully, with better information, there would be better risk detection at the point of entry. Obviously, there were low risk goods and 98% of the goods would still flow to City Deep. Post clearance or low-level inspections could still be done at City Deep. It was hoped that detection of risky goods at earlier stages would improve.

Ms Tshabalala asked for clarity about turnaround times for processing and clearance.

Mr Louw replied that it could take a few seconds to a day, depending on the quality of the information. If it was legitimate and all the information was available, the customs clearances document could be turned around in a few seconds.

Ms Tshabalala asked what would be done about crime and corruption, if the information given on the customs clearance forms was not true.

Mr Louw replied that if the mis-statement was intentional, there were new laws that tried to assist with prevention of that risk by imposition of penalties. A charge could be laid with the National Prosecuting Authority (NPA) or with the police (SAPS) so that the relevant people could be prosecuted.

Ms Z Dlamini-Dubazana (ANC) expressed her agreement with the proposals in the Excise Amendment Bill and the Customs Duty Bill.  She asked if the Non-negotiable Waybill and the Declaration Form were the documents used to spot- check packages, and if there were perhaps comparable documents to establish and ensure that what was declared by a foreigner was legitimate in all respects.

Mr Louw said he would recapitulate. The first form, as he had explained, was the form currently used, and that was the Bill of Lading. The second one, which was the new one that SARS wanted and that was mentioned in the Bill, would give all the information that was required. However, now there was a suggestion (maybe it did not have to be a full-blown clearance) for a different type of document, which could be called by any other name. It would make sure that the crucial information was provided on proper description, proper value, and proper country of origin. Those were necessary for the customs authority to fulfil its duties properly and effectively. However, it would not result in the disruption of any contractual arrangements by sellers and importers.

Ms Dlamini-Dubazana referred to the clearance declaration that had to be submitted by the importer, containing the tariff, the value and the origin. SARS had said that lack of information was the key problem. However, clause 41 of the Customs and Excise Bill [B44-2013] gave government \a little power to control fraud, as it referred to “true, correct and sufficient information” and “furnish such additional information in connection with such invoice”. She also felt that SARS and the amendments proposed were still too lenient. In her opinion, the Bill should have been worded that importers “must” do certain things. This, to her mind, showed that SARS was not serious about controlling imports.

Mr Louw reiterated his point earlier that section 18 of the current customs legislation provided for the movement of goods on a Manifest  - which was a summary of the bill of ladings. In the new Bill, following this proposal, this would be changed to a declaration with the essential details. He suggested that Mr Frans Tomasek, General Manager, Legislative Policy at SARS could point out specific sections in the Bill.

Mr Franz Tomasek, General Manager, Legislative Policy, SARS, firstly commented that difference between using the words “shall”, “may” and “must” had to do with old and new drafting styles. Previously, “shall” had been used for “must” and where “may” was used, this indicated a discretion. However, the use of all three words created confusion, and he current drafting style was to use “must”, which had been done in these bills.

Ms Dlamini-Dubazana said that the same problems were apparent with clause 35 of the Customs Control Bill, as people were not giving information. The only thing that was going to be declared was non-confidential information.

Mr N Koornhof (COPE) said that everyone was under the impression that City Deep was going to be closed down. He asked how it was possible that that message could get out so wrongly, because the opposite was being said now.  

Mr Louw replied that he did not know how it was possible for this message to have gone out, around this and the Committee was welcome to read it. The main reason for this policy change was the search for better information. There was no desire to impact on import and exports at City Deep. City Deep was mentioned specifically. However, SARS was not intending to do anything to close down City Deep, especially since millions of rands had been sunk into its development.

Mr Koornhof asked if this Bill was really needed now for SARS to achieve what it wanted to achieve.

Mr Louw replied that there was a need for the Bill, especially if the current proposal held that imports were done on a pre-clearance basis. Even if SARS switched to a different kind of form, then some changes would be required to the Bill. Changes had already been developed, and it was possible to insert the new wording in a day or two, whenever the Committee was ready. There were some changes needed to the Bill as far as the alternatives were concerned.

Mr Koornhof said that the Committee had various options; one of them could be to delay implementation and convince Parliament to come in February and deal with this Bill.

Mr Louw replied that SARS was in the hands of the Committee and although a short delay would not “be a train smash”, it would be problematic if the delay stretched to a year. SARS would be ready if the Bill was finalised in January or February.

Mr D Ross (DA) said that after this extensive consultation process and all these questions, the SARS people might be a little disappointed. The SARS mandate was certainly to protect society. This was the control aspect. The economy had to be looked at in more detail. With the fiscus and revenue losses, Mr Ross said that he could sense that SARS did not want to close City Deep but perhaps just limit the economic activities there, given that City Deep was not considered as a point of entry. He asked if it was correct to assume that City Deep would still exist, but the changes in terms of its status would have economic implications that needed deeper consideration.

Mr Louw replied that the mandate was the central aspect of its duties as far as losses were concerned. An attempt would be made to provide some numbers on the broader losses.

He said that City Deep was referred to in the legislation as an inland terminal. In the new legislation, it was called the same.  If there was an insistence on clearance at the first point of entry then the goods would move in transit on the basis of that first clearance. The difference was that where the current in transit movement was on a manifest, SARS wanted in future to use a clearance, to get better information or alternatively, it would also be satisfied with some other type of document (as in the new proposal) that could provide the necessary information.

Mr T Harris (DA) said that he had found SARS surprisingly defensive. This had made him wonder about certain things, because the presenter had said that “we need to do this as quickly as possible”. This seemed to involve literally voting on this now and sending it to the House. He saw no reason to do this; the alignment was clear, and SARS had admitted that it would not be a disaster if this were to stand over to early next year. He noted that during the public hearings there was substantial opposition to one particular point of Bill.

He said that there was not one legislative amendment to the text. This was a very difficult situation for the Committee, because the industry was so emotional and concerned about the City Deep issue. The acceptance of a carrier manifest as a declaration to customs for the inbound seamless movement of containerised cargo would not shut down City Deep. It would, however, have a significant detrimental effect on the container terminal there and certainly raise major questions about the billion rand investment that Transnet had put into the container terminal. He expressed discomfort about proceeding without hearing from Transnet in Gauteng and City Deep itself.

Mr Louw apologised if SARS had came across defensively, but said that this might have been the result of the attempts to rectify statements made to the Committee during the last week, which, in the view of SARS, were incorrect, and could not go without challenge.

Mr Louw said that there had been consultation with Transnet. Transnet’s view in the end was that if SARS wanted another option, then pre-clearance would be the best route to follow. There would be pre-clearance three days in advance so as not to disrupt the rail trade. Rail would also not be discouraged in any way.

Mr Harris said that the SARS had spoken about the case studies and how they did not deal with the issues. What the case studies did demonstrate, however, was how unintended consequences could arise from changes in legislation. He reiterated his discomfort in proceeding without airing this Bill and the options further, particularly with the people who would be affected at City Deep. He added that he would have appreciated seeing the changes to the wording that would result from the SARS’ proposals at the end of their presentation. 

Mr Louw reiterated that City Deep would not be shut down.

Mr van Rooyen asked for confirmation of his understanding that the consultation process was more of a technical issue than anything else.  

Mr Louw responded, in regard to the consultation, that the processes needed to be split between the SARS consultations and the consultation with Parliament. It was a technical issue. There have been many consultations around these Bills. In the end there were no new issues and the big issues that had been in contention for many years back still remained.

Mr van Rooyen asked SARS to illustrate how the One-Stop border post would impact positively on the economy, what Transnet’s position on this was, and what the other positions were.

Mr Louw replied that he could not see that there would be a major impact on ports, and more or less the same volumes of goods would be stopped. The volume of unstopped goods would also be the same. SARS would be better equipped as far as its targeting of goods to stop was concerned.

Ms Dlamini-Dubazana said that in the Customs Control Bill, clause 35, the information sharing agreement would still have the same results, because the problem would persist that people did not give the right information. The only matter to be declared was non-confidential information.

Clause 2 was saying that people should be selective and give exemptions. Clause 3(b) reflected the same concern that she had about information.

Mr Tomasek responded that the issue here was SARS’ attempt to strike a balance between facilitation and control. What the provision was trying to say was that it would not be necessary to fill out different forms for different departments. Where the port authority and SARS both had the information, it could be shared. The idea was to provide for a single “One-Stop” window into government.

Ms Dlamini-Dubazana asked for the answer to be repeated.

Mr Tomasek added also that if, for example a document had to be sent to both SARS and the Commission, it would be possible in the future to assess and transmit the information first to the most relevant authority, who would then share that information with others. So if the port authority asked who the best authority was, and concluded that SARS was, and SARS asked the same question and had the same answer, then the information would be given to SARS first, who would then share the information with the port authority.

Ms Dlamini-Dubuzana said for the Committee as legislators, it was still unclear.

Mr Tomasek said that he was giving the Committee a high level summary, and if the Committee drilled down the clause, it would see how it was broken down into more detail. Unfortunately in the tax and custom space people looked for loopholes and gaps and wanted to be very sure about how things were going to operate. Hence this required a lot more detail. SARS was trying to get into detail so that people knew where they stood, but the objective was as it had been explained.

The Chairperson welcomed the presentation by the National Treasury and said that the other views presented would also be taken into consideration when the Committee made a determination on the process embarked upon up to now. This economic activity was key to the economy and did not undermine growth and job creation. It was not just a just a question of numbers and voting, the Committee would apply its mind as the last arbiter. At this time there was no submission from the industry to substantive points in the legislation. The key was how substantive the current bill was, and if it differed from the inputs made throughout the process, because this Bill was a product of many consultations and inputs from all stakeholders.

The Merchant Shipping (International Oil Pollution Compensation Fund) Contribution Bill [B41-2013] and the Merchant Shipping (International Oil Pollution Compensation Fund) Administrative Bill [B42-2013]
The Chairperson said that public hearings had not been held on the Merchant Shipping Bills and asked National Treasury to take the Committee through them. They were very technical and demanding.

Ms Empie van Schoor, Chief Director Legislation: National Treasury explained that these two bills accompanied two other bills that were currently before the National Council of Provinces (NCOP), being dealt with in the transport committees. The first Bill (the Contribution Bill) was a money bill, and the second (the Administrative Bill) set out the administrative measures needed to implement that money bill. The two Convention to which they related would also be explained, and the bills taken through the transport committees dealt with implementation of the Conventions.

Ms van Schoor noted that the Civil Liabilities Convention said that transport of oil had to be covered by insurance, and the strict liability principle applied, so that there would not have to be proof of negligence or intent. However, the insurance that transporters took out did not necessarily cover all damages that were incurred during an oil spill. For that purpose, there was another Convention that covered the Oil Pollution Compensation Fund (OPCF) which was the Fund referred to in these two Bills that were now before this Committee. If a victim could not recover fully through the insurance from the ship owner, then s/he had to claim against the OPCF. This Fund was funded by levies paid by contributors from the oil companies in the countries that contributed. The levy was calculated by the OPCF on an annual basis.

The Contributions Bill also provided for the imposition of a levy on imports to contribute to the fund, and, in the case of South Africa, this levy was paid by the SARS. The process was outlined in the two Bills.  One of the questions that were raised in the briefing sessions was why the option was chosen that SARS would do the collection from the companies and pay over to the OPCF, unlike most other countries, where contributors or oil companies paid directly to the OPCF. The reason was that this was one of the first instances where the international fund imposed levies, and South Africa did not want to set the precedent that international Funds could come into the country and act basically as tax collector on their own. There were other conventions presently being considered that related to air pollution and other matters like nuclear waste, which would shortly be brought to Parliament also for ratification. The amounts would be quite substantial.

Ms van Schoor said that in the case where oil companies did not pay, the director of OPCF had to enforce compliance through court action in South Africa. In this particular instance the amounts mentioned that were currently being paid over would be around R3 million. This was a small amount but the Bill provided that the South African government would make payment to the fund. This, in terms of the Convention, was actually the best form of compliance that the international fund could ask for, where the government paid over the funds then SARS would effect recovery through collection from the six importing oil houses – currently Engen, Shell, Chevron, BP, Total and Sasol. They would be liable to pay the levies ultimately.

Ms van Schoor said that the Administration Bill basically contained certain administrative measures for the implementation of the levy by SARS. Another term, which defined the provision for the tax administration regime, would apply when this Administration Bill was implemented.

Mr Koornhof asked if the gas companies would pay directly into the international OPCF.  He asked further if they had been consulted and if they were happy with the arrangement like this, and if they liked the Canadian model.

Ms van Schoor replied that the provisions in the Fund Convention specifically allowed for consultation, where the obligations of the contributor in Article 14, could be assumed. Consultation was therefore provided for as long as the Fund was not consulted directly.

Mr Harris asked if it was correct to say that companies had already contributed to the Fund since 1992.

Ms van Schoor replied that three of the companies had already paid over contributions to the fund voluntarily.

Mr Harris said that now that South Africa was a signatory it was a member state and would be required to pay into the OPCF.  If these bills were not passed then it would still be a signatory as a country, but the OPCF would collect directly from the oil companies, without the revenue authority being involved, as was the case in most other countries. The model that South Africa was proposing was the Canadian model. He was not entirely convinced as to why there was a need to follow this model rather than the model that everybody else used. He had just been advised that the Canadian authorities actually did much more than this Bill envisioned. This still had to be checked, and SARS’ input would be appreciated, but he understood that under the Canadian Model, other ships were actually covered and assisted with the administration of claiming back from the OPCF, because apparently it was quite difficult to claim from the Fund. The Canadians did set up this collection fund, but then that fund had extra benefits for other ships in the country, and also assisted with processing. He felt that the model that South Africa was proposing was only going half-way, and he believed that this Bill was not well-designed, and the approach needed more thought.

Ms van Schoor said that another country that had the same model was Israel. Confirmation had been received from the South African Maritime Organisation in London about this. These Bills gave effect to South Africa’s obligations under the Conventions. If there were add-ons through other countries’ legislation, that was their choice, including whether they wished to confer benefits on other ship owners. Effectively, SARS was giving effect to the Conventions through these bills. She repeated that SARS felt it most important not to set a precedent in South Africa where international funds were collected by another authority, and felt that SARS must play a role. It was felt that this model would work and there would be compliance.

Ms Z Dlamini-Dubazana (ANC) asked for clarity about the Contributions Bill.  She asked if the implementation and emendation was actually the outcome of the 1992 Fund Convention. If this was the case, then South Africa had already made an agreement or contracted with other states about what needed to be done. She asked for clarity about clause 2 that talked about ‘Directors’ in the National Revenue Fund. She asked if the National Revenue Fund had been established already, and what precisely was spoken of here.

Ms Van Schoor indicated that she was from the National Treasury, not from SARS, but the Bill was developed together with SARS. There would be two processes. Firstly, the government would get an invoice from the OPCF, which would indicate what was payable for the previous year, then the Minister would put a notice in the Gazette that would say what that levy was that needed to be paid over. Government made the payment on a particular date, regardless of the other collection process that SARS was engaged in, as was required by the Convention. She explained that the National Revenue Fund (NRF) was established by the Constitution, and all monies paid were appropriated from that fund. It was thus already in existence. It was only money bills that could provide for direct charges against that fund, and not ordinary legislation.

Mr Koornhof asked how far back the Convention dated.

Ms van Schoor said that the Convention was from 1992.

Mr Harris noted that the International Oil Pollution Compensation Funds set the levies payable. He asked if the Minister setting the rates in the draft law would take into account the overheads of the collection.  

Ms van Schoor replied that any administrative cost incurred would not be imposed on the oil and gas companies, so they would only pay what was the levy set by the OPCF. This may vary, because the Director of that Fund may decide to levy only a portion of the amount at the beginning of the year, and then the rest later in that year.  That was why a process had been provided where the Minister would determine the levy annually. However the full amount, as required by the OPCF, would be paid over by the government. Because the determination was on the previous calendar year, it was easy to determine the amount, and there would be an invoice submitted by the Director to each country. Prior to that, each country would submit information to the OPCF on the number of entities that imported oil and the amount of oil. The Director then determined the levy based on that information. 

Mr Harris asked for clarity about whether it was the intention that the Minister would ever determine a rate for the levy that was more than the effective levy to the OPCF.

Ms van Schoor replied that it was not. She referred to clause 3 of the Contributions Bill. The factors to be taken into account was set out clearly in clauses  3(1)(a) and (b). These were the contributions calculated by the Director of the Fund, and also the volume of the contributing oil imposed in the tax period. The second part was, strictly speaking, not necessary, but was useful to include as well. The cost that SARS incurred in collecting the levy could not be claimed from the companies.

Mr Harris said that until these laws were passed South Africa was exposed because essentially it was not complying with international obligations. He asked that the reservations of the DA to the legislation be noted in the Committee Report. He said that he had serious reservations about the approach being taken, but if this Bill was not passed now, the country remained vulnerable. He indicated that the DA would support the legislation, but with extreme reservations.

The Chairperson put each of the Bills, in turn, to the Committee, asking for proposers, seconders and adoption.

The Merchant Shipping (International Oil Pollution Compensation Fund) Contributions Bill [b41-2013] was adopted, with the reservations noted.

The Merchant Shipping (International Oil Pollution Compensation Fund) Administration Bill [B42-2013] was also adopted, with the reservations noted.

The meeting was adjourned.


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