Committee Report on 2020 Fiscal Framework and Revenue Proposals

NCOP Finance

10 March 2020
Chairperson: Mr M Maswanganyi (ANC); Mr Y Carrim (ANC, KwaZulu-Natal)
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Meeting Summary

The Finance Committees of the National Assembly and the National Council of Provinces held a joint meeting to consider a draft report on the fiscal framework and revenue proposals contained in the 2020 Budget. They then held brief separate meetings to adopt the report with amendments.

The Democratic Alliance (DA) and the Freedom Front Plus (FF+) reserved their positions when the report was put to the vote.

Both parties noted their opposition to proposals to establish a state bank.

The DA described the budget as inefficient. It said the proposed tax relief measures did not go far enough, and there should have been incentives to encourage small businesses.

Co-Chairperson Carrim said the opposition parties were entitled to have their comments included in the final reports of the Committees.


Meeting report

Co-Chairperson Carrim invited comments on the first section of the report, which dealt with public hearings held by the Committees. It summarised the political overview given to the Committees by the Minister of Finance, as well as submissions by a range of organisations. It also summarised the National Treasury’s response to the submissions. There was general acceptance of this section.

The Co-Chairperson then invited discussion on the section dealing with the Committees’ observations and recommendations.

Dr D George (DA) referred to section 7.5, which welcomed tax relief and other tax measures announced in the Budget. He said the DA agreed with the sentiment expressed. However, it believed there should have been more relief for taxpayers, because the government was not using people's money effectively. There should be tax incentives for people who provided things the government should be providing. An example was people who provided their own electricity by installing solar panels.

Mr Carrim suggested that Dr George provide a brief written outline of the DA’s position, to be attached as a comment in the Committee's final report. He said legal opinion obtained previously was that there was nothing to prevent a party’s views from being reflected in the report. He commented that to him personally, it did seem reasonable to provide an incentive for people to provide their own power.

There was some discussion about sections 7.8 and 7.9, referring to a proposal to introduce an inspector-general to oversee the SA Revenue Service (SARS) and to give the Office of the Tax Ombud operational and financial independence from SARS.

Co-Chairperson Maswanganyi said there had been various commissions of inquiry into tax matters. Clarity was needed on the roles of the inspector general and the tax ombud, as well as the oversight role played by Parliament.

Dr George took issue with section 7.10, welcoming measures to limit corporate interest deductions in order to combat profit shifting. He acknowledged that it was important for large businesses to be prevented from abusing the tax system, although the DA did not believe this was happening to any great extent. However, there should be more tax incentives to encourage smaller businesses and entrepreneurs. 

Mr Carrim said the ANC disagreed with Dr Geoege’s views on the extent of corporate tax evasion. He said it was recognised internationally that illicit financial flows were “horrific.”  However, Dr George was entitled to his view.

Dr George referred to section 7.14, which dealt with government spending and the amounts allocated to different departments.  He said the government could be “much leaner” in its spending if there was not so much wastage and corruption. The DA welcomed the proposal to trim the public sector wage bill, although it remained to be seen if this would happen. The budget deficit was “big and growing.” He recognised that this was a structural issue which had to be fixed over time, but “we certainly don’t believe that the budget is as efficient as it should be.”

Mr Carrim responded that there was no need to make this a party political issue. His Committee had repeatedly stressed the need for government savings. He suggested an amendment stating that the Committee as a whole reiterated its concern that the National Treasury needed to do more in cooperation with other departments and public entities to reduce wastage, inefficiency and the levels of corruption.

He pointed out that the public sector wage bill itself would be handled by Parliament's appropriations committees. The finance committees should steer clear of getting involved, other than urging the government to negotiate efficiently with the unions.

Mr D Ryder (DA, Gauteng) suggested that the report should include a reference to the need for the government to ensure it received “value for money” in procuring goods and services and in negotiating the wage bill.

Members agreed.

Mr Carrim added that the finance committees should be careful not to “cross a line” in telling government departments, or indeed other parliamentary committees, what to do. However, they could urge fellow committees to cooperate with them in exercising more efficient oversight.

Dr George expressed the DA’s “vigorous opposition” to section 7.20 welcoming a proposal to establish a state-owned bank and a sovereign wealth fund. While the establishment of a sovereign wealth fund was not a bad idea, provided the money could be found and it was used effectively, the idea of a state-owned commercial bank was “horrific and beyond imagination.”  It would be a “”bottomless pit” swallowing taxpayers’ money in order to make cheap loans.

Mr Carrim reiterated that opposition parties had the right to insert a brief text in the report to outline their position. However, he urged Dr George to “put it in a more sedate way.”

Mr S du Toit (FF+, North West) said his party also opposed the idea of a state bank.

Ms D Mahlangu (ANC, Mpumalanga) said her party supported the idea.

Committee Members agreed to a suggestion by Mr Ryder that their report should urge the government to go ahead with an auction of broadband spectrum as soon as possible. Mr Ryder said such an auction represented “low hanging fruit” in terms of revenue collection.

The Committees then adopted the report with amendments. .

For the Standing Committee of Finance, its adoption was moved by Ms Z Nkomo (ANC) and seconded by Ms M Mabiletsa (ANC), with the DA and FF+ reserving their positions.

For the Select Committee on Finance, its adoption was moved by Mr E Njandu (ANC) and seconded by Ms Mahlangu, with the DA and FF+ reserving their positions.

The meeting was adjourned.


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