Double Taxation Agreements with China & Nigeria: ratification ; Banks Amendment Bill: adoption; Adjustments Appropriation Bill:

NCOP Finance

02 October 2000
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Meeting report

FINANCE SELECT COMMITTEE
3 October 2000
DOUBLE TAXATION AGREEMENTS WITH CHINA & NIGERIA: RATIFICATION; BANKS AMENDMENT BILL: ADOPTION; ADJUSTMENTS APPROPRIATION BILL: BRIEFING

Documents handed out:
Explanatory Memorandum: Double Taxation Agreement between South Africa and China
Explanatory Memorandum: Double Taxation Agreement between South Africa and Nigeria
Banks Amendment Bill

SUMMARY
The Committee ratified the agreements between South Africa and China, and South Africa and Nigeria after a briefing by Mr Allwright from the South African Revenue Service. There was much debate around the gender sensitivity aspect of the Bank Amendments Bill. The Committee said that it would approve the bill, but would attach a proviso to the effect that it was not satisfied with the gender sensitivity aspect.

MINUTES
Double Taxation Agreements
Mr Allwright from the SARS said that the President had urged all relevant stakeholders to discuss the South African agreements between China and Nigeria speedily, as these agreements were very important with regards to relations between the said countries. Mr Allwright stated that residence-based tax and capital gains tax would not affect the agreements.

Agreement with the People's Republic of China:
Article 5: Permanent Establishment
Mr Allwright said that this section had caused much confusion. He clarified the issue of permanent establishment by pointing out that permanent establishment would be deemed where construction took place for a period of more than twelve months

Article 11: Interest
The Source State would have the right to impose a 10% withholding tax on the beneficial owner of interest.

Article 13: Capital Gains
In terms of capital gains tax, gains would be taxed where the immovable property was located.

Article 21: Students and Trainees
Payments received for education, training and maintenance would be exempt from taxation

Agreement with the Federal Republic of Nigeria:
Article 5: Permanent Establishment
Mr Allwright said that a sales outlet would be deemed as a form of permanent establishment.

Article 7: Business Profits
The United Nations Force of Attraction rule was used in drafting this clause

Article 8: Shipping and Air Transport
No reciprocal airways system was in place, which meant that no Nigerian flights come into South Africa. This meant that SAA would have to collect substantial gains from Nigeria.

Article 10: Dividends
A 7.5% withholding tax would be redeemable by the Source State

Article 11: Interest
A withholding tax rate of 7.5% would apply on interest, and a 7.5% withholding tax rate would apply on intellectual property.

The Committee unanimously agreed to ratify the two agreements

Banks Amendment Bill
The Chairperson said that the Bill would need to be read in the context of the Interpretation Act of 1957 in order for the references throughout the Bill to "he" be made applicable to "she". Mr Blackbird (SARS) made a few points:

Clause 1(c): Definition of Liquid Assets
The Exchequer Act of 1975 had been replaced by the Public Finance Management Act of 1999.

Clause 15: Large Exposures
Public sector bodies included the nine provincial governments

Discussion
The Chairperson emphasised the fact that Section 9: Review of Decision of Registrar must be drafted to be more gender neutral

Mr Blackbird said that he appreciated this concern, but added that this would mean that the whole Act would need to be revised.

Mr Kolweni (ANC) asked why the necessary gender-neutral changes had not been effected prior to the Bill being tabled.

Mr Blackbird said that certain changes had been made to the Bill with regards to gender sensitivity, However the State Law Advisors had rejected these changes saying that the whole of the original Banks Act of 1990 would then need to be changed in order to correspond legally. This would have delayed the process even further. Mr Blackbird added that in the face of urgently meeting global standards, it is extremely important that the Bill not be delayed.

The Chairperson proposed that the Committee take a ten minute caucus in order to come up with a single voice on the issue of gender sensitivity.

After the caucus, Mr Theron (DP) accepted the Bill on behalf of the committee, but noted with concern that the Banks Act of 1990 and the Banks Amendment Bill were not gender-sensitive. He said that the Committee had therefore added the proviso requesting the Department to correct this issue within one year as of 3 October 2000, notwithstanding the Interpretation Act of 1957.

The Committee adopted the Bill with the proviso.

Ratification of Abuja Treaty
As the official from the Department of Foreign Affairs was not present to brief the committee on this document, the ratification was postponed.

Adjustments Appropriation Bill
Mr du Plessis from the National Treasury said that the Minister of Finance had authorised the shifting of an amount of R107 million to the Legal Aid Board to assist them with payments towards their legal practitioners.

He said that an amount of R50 million had been allocated to the National Skills Fund flowing from resolutions taken by the Presidential Jobs Summit. He said that Cabinet had also approved that funds be made available from this amount for the Social Plan Technical Support Facility of the National Productivity Institute (NPI).

As this Bill had not been formally referred to the National Council of Provinces, the Bill was unable to be adopted. The Committee will vote on it on 5 October.

The Chairperson adjourned the meeting.

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