Rates and Monetary Amounts & Amendment of Revenue Laws Bill, Taxation Laws Amendment Bill; Tax Administration Laws Amendment Bill

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Finance Standing Committee

13 November 2018
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

The Committee met with Treasury for consideration of three Bills namely: Rates and Monetary Amounts and Amendment of Revenue Laws Bill, Taxation Laws Amendment Bill (TLAB) and Tax Administration Laws Amendment Bill (TALAB). The three Bills were informally adopted and would be put up for a formal vote the next day.

On the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, after considerable consultation and deliberation, including three sets of public hearings, the Committee reluctantly accepts the 1% value-added tax (VAT) increase. At the public hearings there was almost unanimous opposition to the increase from civil society. The Committee had from the outset expressed serious reservations with the increase, among other reasons, for the negative impact on the poor and lower-income earners, who are already dealing with increases in fuel prices and the cost of living generally. However, the Committee was also acutely aware of the severe constraints on the budget and the desperate need to raise additional revenue. The pressures have become more glaring following the introduction of the Medium Term Budget Policy Statement (MTBPS), which estimated 0.7% economic growth. The MTBPS also unexpectedly forecast that there will be a R27.4 billion shortfall of revenue this financial year, which includes R20 billion worth of VAT returns that have been withheld. The Committee welcomes the zero-rating of white bread flour, cake flour and sanitary pads, as well as the decision to provide free sanitary pads to learners. However, it believes that there can be more targeted expenditure to cushion the effects of VAT on the poor, by reprioritising within the expenditure ceiling. National Treasury needs to effectively consider the possibilities of increasing the allocation of free water and electricity to indigent households and vouchers for uniforms for learners at no-fee schools for locally produced school uniforms. More than ever, parliament and government have to ensure that more revenue is secured through considerably strengthening capacity at the South African Revenue Services to raise more revenue, drastically reducing wasteful expenditure and more effectively tackling the illicit economy and corruption. More revenue will also flow from investment, economic growth and job-creation. The Committee believes that the increase has to be reluctantly accepted, but should be reviewed at the end of the third year of its implementation, 1 April 2021, following an evaluation of the impact of the rate on revenue collection and the poor. This approach provided both certainty for the fiscus, in raising the revenue required for the Medium Term Expenditure Frame period, and allowed for a review, taking into account economic and financial conditions. 

The Chairperson said the Committee would formally vote on the Bills and their reports the next day. The Bills must be tabled in the House on the 20th of this month. In as far as policy issues go, there were no outstanding matters on the Bills. Lastly, the Committee would not be in a position to hold public hearings on the Financial Matters Amendment Bill next week as Treasury would only be able to formally table it after 27 November.

Meeting report

The Chairperson welcomed everyone and indicated the Committee would consider and adopt the three Bills informally. Formal voting and adoption of the Bills and Committee Reports would be deferred to the next day. He invited National Treasury to highlight aspects of the Bills that had not been traversed by the Committee thus far.

Consideration of Rates and Monetary Amounts and Amendment of Revenue Laws Bill
Ms Yanga Mputa, Chief Director: Legal Tax Design, National Treasury, said following the publishing of the VAT Panel Report and subsequent hearings before the Rates Bill was tabled in 24 October, three items had been added on the zero-rated list as per the Panel’s recommendations. The additions will come into effect in April 2019.

The Chairperson asked Members if there were any outstanding issues in relation to the Bill.

Mr A Lees (DA) said the DA’s initial position still stood- it was opposed to the 1% VAT increase.

The Chairperson said the DA’s reservation would be noted in the Committee Report. He took the Committee through the Bill clause-by-clause and indicated the Bill appeared to be consistent with discussions held in Committee. After considerable consultation and deliberation, including three sets of public hearings, the Committee reluctantly accepts the 1% value-added tax (VAT) increase. At the public hearings there was almost unanimous opposition to the increase from civil society. The Committee had from the outset expressed serious reservations with the increase, among other reasons, for the negative impact on the poor and lower-income earners, who are already dealing with increases in fuel prices and the cost of living generally. However, the Committee was also acutely aware of the severe constraints on the budget and the desperate need to raise additional revenue. The pressures have become more glaring following the introduction of the Medium Term Budget Policy Statement (MTBPS), which estimated 0.7% economic growth. The MTBPS also unexpectedly forecast that there will be a R27.4 billion shortfall of revenue this financial year, which includes R20 billion worth of VAT returns that have been withheld. The Committee welcomes the zero-rating of white bread flour, cake flour and sanitary pads, as well as the decision to provide free sanitary pads to learners. However, it believes that there can be more targeted expenditure to cushion the effects of VAT on the poor, by reprioritising within the expenditure ceiling. National Treasury needs to effectively consider the possibilities of increasing the allocation of free water and electricity to indigent households and vouchers for uniforms for learners at no-fee schools for locally produced school uniforms. More than ever, parliament and government have to ensure that more revenue is secured through considerably strengthening capacity at the South African Revenue Services to raise more revenue, drastically reducing wasteful expenditure and more effectively tackling the illicit economy and corruption. More revenue will also flow from investment, economic growth and job-creation. The Committee believes that the increase has to be reluctantly accepted, but should be reviewed at the end of the third year of its implementation, 1 April 2021, following an evaluation of the impact of the rate on revenue collection and the poor. This approach provided both certainty for the fiscus, in raising the revenue required for the Medium Term Expenditure Frame period, and allowed for a review, taking into account economic and financial conditions. 

Consideration of Taxation Laws Amendment Bill (TLAB)
The Chairperson said Treasury together with parliamentary staff, in addressing some technical aspects of the Bill, should do so in a way that does not undo the policy decisions taken by the Committee. The Bills must be tabled in the House on 20 October 2018. In as far as policy issues go, there were no outstanding matters on the Bill. He took the Committee through the Bill informally and noted there were no inputs from Members.

Consideration of Tax Administration Laws Amendment Bill (TALAB)
Mr Franz Tomasek, Group Executive: Legislative R & D, SARS, said some technical aspects of the Bill that were initially subject of much debate had been resolved to the satisfaction of stakeholders. The foremost issue that did come up during engagements with stakeholders was deregistration of non-compliant tax practitioners- there were calls for the extension of the period. Consequently, changes had been made such that the period in question had been extended to between six to twelve months. The ability to demonstrate compliance had also been built into the system.

The Chairperson took the Committee through the Bill clause-by-clause, and noted that there were no additional inputs from Members. He reiterated the Committee would formally vote on the Bills together with their reports the next day. Lastly, the Committee would not be in a position to hold public hearings on the Financial Matters Amendment Bill next week as Treasury would only be able to formally table it after 27 November.

The meeting was adjourned.

 

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