Municipal Finance Management Bill: deliberations; Revenue Laws Amendment Bill; Eastern & Southern African Anti-Money Laundering

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Finance Standing Committee

07 November 2002
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Meeting Summary

The Committee adopted the Revenue Laws Amendment Bill, two international agreements on double taxation and a memorandum of understanding relevant to the Financial Intelligence Centre's involvement in international anti-money laundering. Deliberations continued on Chapters 7, 8 and 12 of the Municipal Finance Management Bill

Meeting report

Revenue Laws Amendment Bill
Before the Committee voted on the Bill, Mr F Tomasek (SARS) noted that changes had been made as a result of submissions received before the deadline and even those that had arrived after the deadline. They had put together a comprehensive response document on the submissions and had made appropriate changes.

The Chair put the Bill to vote and the Bill was passed.

Mr C Lowe (DP), representing the Democratic Alliance in the absence of Ms Taljaard, noted the party's objection to the Bill.

The Chair inquired from Mr Lowe what the background to their objection is since the Democratic Alliance had not opposed any of the Bill's provisions during the committee's deliberations.

Mr Lowe replied that he was not there to defend or advance Ms Taljaard's cause but that the Democratic Alliance has always opposed the Capital Gains Tax. He added that he is merely at this meeting to note for the record the party's objection. He did not know the reasons for the decision but he was sure that Ms Taljaard had participated very vocally in the deliberations on this Bill.

The Chair said that it would have been useful for the Democratic Alliance to mention what their opposition was. She added that she finds this action peculiar as it comes only at this moment in time.

Mr Hanekom wanted it noted that the ANC finds it puzzling and strange that the opportunity was not used to assist the ANC in dealing with possible problems there might be in this piece of legislation. He stated that it is simply not true that she had participated vocally during the deliberations.

The Chair mentioned that the issue of having two major pieces of legislation dealing with tax each year had been raised with her. It has been suggested that one major tax bill might serve Parliament better. She asked the committee's opinion. Such a Bill would be finished by October before the Medium Term Budget Policy Statement.

Dr Woods (IFP) said that he would support it in principle, but that he had sympathy with SARS in that loopholes do crop up that have to be dealt with quickly. He suggested having a main bill each year and, when needed, an incidental amendment could be made.

Ms Hogan stated that the Finance Committee should look at setting up a specialist taxation sub-committee.

Dr Woods noted that for three years after 1994 there had been a sub-committee for taxation and he believes they were far more effective legislators then - because of that particular focus.

RSA and UK/Ireland Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains.
Mr Tomasek reminded the Committee that both these agreements had presented to the committee in January. The Convention with UK/Ireland confirms the understanding that the secondary tax on companies is a tax on companies and not a withholding tax on the shareholders.

The Chair put the Convention to vote and it was agreed to.

Agreement between RSA and New Zealand for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains.
Mr Tomasek noted that there is a protocol to the agreement. What this effectively provides is that if South Africa negotiates a treaty with another country that limits the rate of secondary tax imposed on a company then they would open negotiations with New Zealand to provide them with the same concession.

The Chair put the Agreement to vote and it was agreed to.

Memorandum of Understanding between the Eastern and Southern African Anti-Money Laundering Group (ESAAMLAG)
Mr Michel (Special Advisor to the Financial Intelligence Centre) told the committee that since he had
briefed them in June their membership application has been approved by the ESAAMLAG. ESAAMLAG is the regional anti-money laundering group in Africa of the international coordinating body, Financial Action Task Force (FATF). South Africa is attending FATF as an observer with a view to be invited as member next year.

Mr Michel said that he had received a request for South Africa to host a training program for the region. He said that they would willingly do so.

The Committee agreed to recommend that Parliament approve the Memorandum.

Municipal Finance Management Bill
Chapter 7 Responsibilities of Municipal Officials

The Committee resumed their deliberations on this Bill by starting at Clause 42D.

Dr Woods commented on Clause 42 I (b). The phrase effective, efficient, economical can be interpreted in two ways; firstly, according to their meaning in the dictionary and, secondly, as official financial management and accounting terminology. If it is the latter, there are serious system implications on the output budgeting side. It is the same as in the Public Finance Management Bill and afterward promulgation, there was some confusion on this matter. He asked for Mr Pillay's view.

Mr Pillay (National Treasury) replied that the intention here is the same as in the Public Finance Management Bill. He added that as practice develops, interpretations and guidance would have to be provided. It is not clear to him how to narrow it down.

Chapter 8 Municipal Budget And Treasury Offices

Dr Woods commented on the phrase in charge in Clause 44 (1)(a). He wondered what it meant in legalese.

The Chair asked Mr Pillay to take the matter up with the drafter, Adv Grove.

Mr Dorfling (SALGA) asked what the prescribed competency levels would mean. He wondered whether there is a standard somewhere to measure against.

Mr Pillay told the Committee that they are looking at setting a benchmark. He added that they are working closely with the professional organisations representing the professional finance officers in the country.

The Chair asked whether the phrase, annual training courses, in Clause 45A (2)(b) was put in deliberately for constant refreshing.

Mr Pillay said that the intention is to force officials to go to the training courses.

Ms Hogan said that one has to bear in mind that this legislation will be in place for 40 years or so. She liked the idea of annual training but she felt that it is quite a tough legislative requirement.

Dr Woods supported the point the Chair made and suggested the word regular instead of annual.

Mr Pillay agreed to change it to regular. He added that there are currently quite a number of training courses out there and that the problem is that the right officials do not attend. Instead, they send representatives.

Mr Dorfling asked whether 45A (1) could not be extended to more than just the Treasury staff. He said that the budget process encompasses a lot more departments than just the Treasury and everybody involved should be trained. He requested that they provide for that.

The Chair agreed that this is a sensible request and asked Mr Pillay to look at eloquent wording for that.

Chapter 12: General Treasury Matters
With regard to Clause 105A Procurement and asset disposal policy, Dr Woods asked whether local government falls under the new Procurement Act.

Mr Pillay replied that it does if it is the Preferential Procurement Act that Dr Woods means.

Dr Woods said he meant the new Act that the Deputy Director-General has been working on for the last year.

Mr Pillay said that that section of the Treasury had checked this draft and they were happy with it.

Mr Van Ronge (SALGA) raised his concern about the wording of Clause 105A (2)(c).

The Chair suggested deleting including on the basis where they are located or are doing business. It was agreed to make the change.

Dr Woods proposed the inclusion of a word in Clause 105A (2)(i). He suggested including predetermined before criteria in the phrase: "must provide criteria for the evaluation of bids to identify the bid that represents the best value for money". He added that this is his "arms deal experience" coming through. The change was made.

Dr Woods asked whether there is another section in the Act on tender audit functions.

Mr Pillay replied that there is reference.

Mr Van Ronge said he had trouble distinguishing between internal audit, external audit and the audit committee themselves.

Ms Hogan added that she was also confused it. She asked Mr Pillay to have a look at this section.

Dr Woods said that it seems like the roles of the audit committee and the internal audit function have been blurred.

The Chair said that they need to spell out the lines of authority to make sure that there is clarity on who does what.

Mr Mettler (SALGA) questioned the need for Clause 107A (1)(b) "place on that website information regarding the business and affairs of the municipality as may be required or prescribed in terms of this Act". He proposed deleting it. This was agreed on.

With regard to Clause 106 - 109 dealing with Treasury regulations and guidelines, there was confusion on the difference between guidelines and regulations and it was decided that this should be discussed in a subcommittee with Adv Grove (the Treasury drafter).

Ms Hogan again voiced her frustration with the Department of Local Government's lack of cooperation. She said that municipalities are going to be in a mess if this piece of legislation is passed without amending other pieces of legislation. She reiterated that she had given the DPLG one last chance at the previous committee meeting on November 8. She said that her only recourse left is to go to her Minister and ask him to approach the DPLG Minister.

The meeting was convened.

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