Committee Report on National Treasury Annual Performance Plan and Budget

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Finance Standing Committee

16 May 2017
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

The Committee considered its draft report on Budget Vote 7 for National Treasury. There were no substantive changes. Amongst the matters discussed, was the allegation that involved SARS withholding tax rebates and VAT refunds in order to boost revenue to meet revenue targets. Members suggested that the tax ombudsman be approached about this and a formal investigation undertaken because these are serious allegations. The former Minister of Finance was on the verge of formalising the investigation before being removed, thus the new Minister should consider signing off on the investigation so it can move forward. 

Meeting report

The Chairperson welcomed the new Member to the Committee, former Minister of Tourism, Mr Derek Hanekom. He would informally brief him on what the Committee has been up to, and certain matters of importance that he needs to be informed on.

Committee Report on National Treasury Annual Performance Plan and Budget
The Chairperson took Members through the report page by page. He advised that the Committee will vote on the report at its next meeting. The Chairperson advised that the report would be sent to the Director General of the National Treasury and the SARS Commissioner.

On Point 7.5, the Chairperson noted that the CEO Forum has expressed its anger and frustration about what happened (Minister’s efforts to reach out to businesses as a result of the ratings downgrade) so they remained aloof and did not go to the World Economic Forum, but what the Chairperson read from the media is that things have eased. They are beginning to accept that this is the reality and moving towards working together with government.

On Point 7.6, Mr A Lees (DA) said that he is concerned that it may apply only to the SOE (State Owned Enterprises) guarantees. It needs to look at all the contingent liabilities not just the State guarantees to SOEs. He will furnish an appropriate re-wording before the Committee votes on the report.

On Point 7.8, the Chairperson noted that there cannot be public hearings for over 25 hours and no changes are considered or made, in a structured and managed way. In 7.9, on the IRBA (Independent Regulatory Body for Auditors) hearings, the matter is very complex, and the Committee will support the de-monopolisation and de-racialisation but to what extent is “Mandatory Rotation of Auditors” going to advance this, and that is what is questionable here. The big four auditing firms (PriceWaterhouseCooper, KPMG, Delloite, and Ernst & Young) have about 90% of the market in the auditing field, same story with the banks, so the issue is we need to de-monopolise and de-racialise. So what IRBA is saying is that it wants “Mandatory Rotation” because companies (clients) take on these companies (big four auditors) and have them for many long years, which is true but also there is no guarantee that when Mandatory Rotation happens, preference will be given to a smaller or emerging company. The rationale behind this Mandatory Rotation is avoiding complacency, and the the auditor potentially having its objective role being questionable.

On Point 7.13, Mr Lees said it would be appropriate to add to the recommendations ‘that the Committee requires a detail report on the review of the contracts that exceed R10 million from Office of the Chief Procurement Officer, to be presented quarterly’  

The Chairperson added that before the end of the year reasonably soon after the appointment of the new Chief Procurement Officer, the Committee will require a list of all the transactions over R10 million, and meet with the Chief Officer once a year, and table the report twice a year.

On Point 7.16, on Sugar Sweetened Beverages tax, the Chairperson suggested that consideration be given to finalise this process but before the Committee votes on the Bill it will consider the progress in negotiations and resolutions brought to the Committee. So the Committee will welcome the considerations from NEDLAC, and before the Committee votes on the Bill it will take into account progress on the Sweetened Sugary Tax made by NEDLAC.

On another point, the Chairperson noted that the Committee will be meeting with the Head of Hawks to discuss when the alleged guilty people will be brought into the judiciary and criminal justice system.

On the point of cost containment measures, Mr Lees asked how they are going to be introduced and how the departments are going to implement them. He asked about a briefing by National Treasury on compliance by each department on a quarterly basis.

The Chairperson replied that cost containment is worrisome across government and it is something that needs to be dealt with.

The Chairperson advised that the Global Financial Integrity Report on Global Illicit Financial Flows said that between 2003 and 2012 the country lost about 100 billion US dollars from monopolised industries. Most of this is done by multi-nationals, like Starbucks and Microsoft.
The Chairperson said the Committee gets told all the time that SARS is withholding VAT refunds, which is why it is able to achieve its targets. However, there are overwhelming arguments by SARS and it provides statistics to back up its arguments, so how does the Committee challenge such allegations when there is no evidence before the Committee suggesting that SARS is using funds to achieve targets. He alerted that evidence be brought before the Committee.

Mr Lees suggested that it needs to be brought to the attention of the tax ombudsman to deal with it.

The Chairperson said the Committee notes that this matter be dealt with fairly and expeditiously

Ms T Tobias (ANC) asked if there is an ombudsman that oversees SARS. The matter can be referred to the ombudsman and a timeline be given on when the Committee can expect a report. If these allegations are true, this means that Parliament has been deliberately misled, which leads to a charge against the leadership of SARS. It is a serious allegation, but the Committee needs to put in a recommendation on this and a time frame.

The Chairperson stated that the revenue target was achieved by SARS, but it only achieved those targets through dividend tax, and SARS made enormous revenue out of it.

Ms Tobias picked up certain elements and the elements suggest that the Committee might want to look into this matter. With that being said, there is no smoke without fire and in many instances when allegations are made, they are made because there is a particular reason why they are advanced. There is a responsibility to deal with this matter, because in the event that there is a problem, the responsible party will be the Committee. There should be a recommendation on this and a reasonable time frame put on it. The ombudsman investigations can take years, and this is a complex matter so within a reasonable time frame whilst the investigation is ongoing, preliminary reports can be furnished to the Committee.

Mr D Hanekom (ANC) agreed with Ms Tobias, but he advised that rather than putting it in the report, taking it a step back. If this is true, that rebates are being held back to meet revenue targets, it must be exposed and addressed. The Chairperson had alluded that there is insufficient evidence in front of the Committee to confirm that this act is really happening, so the objective then is to find out whether it is happening or not. If so it should be addressed because it will have gargantuan implications on business especially small businesses and their cash flow. So for now the Committee should focus on having a discussion with the ombudsman to determine if something can be done and investigate and how long it may take. If this is really happening, there is not a lot of work that needs to be done to get enough evidence to convince the Committee that this is happening, and address the matter very sharply. If there is not something that can be done within a reasonable time frame, then the Committee can find another way of going about it.

The Chairperson advised that as far as he knows a decision has been taken to look into it as the ombudsman has been getting a lot of complaints. He approached the former Minister of Finance on the matter, and the former Minister agreed that it will be investigated but he is uncertain whether it was formalised or not. The new Minister should also agree to go forward with the investigation on this as the former Minister was on the verge of giving the go ahead on this matter.

The meeting was adjourned.


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