The Committee considered the Disaster Management Tax Relief (DMTR) Bill and Disaster Management Tax Relief Administration (DMTRA) Bill. Members were given a brief overview by National Treasury and the South African Revenue Service (SARS) on the clauses in both Bills.
Treasury pointed out that the changes to the DMTR Bill were in clause seven, and said that no further amendments had been made after the Bills were drafted. The Committee also considered the Committee’s Reports on both Bills. Members agreed that most of the discrepancies in the Bills had been addressed during the joint sittings with the National Assembly.
Members raised concerns about the effectiveness of the Sector Education and Training Authorities (SETAs), and asked about the impact of the Skills Development Levy holiday on the ability of the SETAs to operate. Treasury reassured the Committee that the Ministry and the education sector had agreed that the SETAs would use their three month buffers to cover operational costs during the holiday period. Treasury was asked if the issue of people who did not have access to cashflow being able to borrow against retirement funds, was being considered, and responded that the proposals for offsetting against one’s pension would be addressed in the second round of the Tax Laws Amendment Bill (TLAB). All outstanding submissions that were not addressed in the COVID measures would be dealt with in the TLAB.
The Committee agreed that any outstanding comments and responses on the Bills would be submitted in writing to the Committee Secretariat by 10h00 tomorrow in order to be included in its report.
The Chairperson said the Committee would be considering the Disaster Management Tax Relief Bills and the National Assembly (NA) Reports. He reminded Members that they were not obliged to accept the view of the NA. He proposed that the Committee first look at the policy issues associated with the Bills and then conduct a clause-by-clause consideration. Voting would take place tomorrow. The Bill would be presented to the House on Thursday, 17 September 2020.
Ms D Mahlangu (ANC, Mpumalanga) and Mr D Ryder (DA, Gauteng) agreed with the Chairperson.
The Committee Secretariat noted an apology from Mr M Moletsane (EFF).
The Chairperson recorded an apology from Mr Ismael Momoniat, Deputy Director General: Tax and Financial Sector Policy, National Treasury, who would be late due to a meeting with the Minister.
Committee report on Disaster Management Tax Relief Bill [B11 – 2020]
The Chairperson highlighted section three of the report on the Finance on the Disaster Management Tax Relief (DMTR) Bill [B11 – 2020], which states that the DMTR Bill contained proposed measures to:
- Expand the Employment Tax Incentive (ETI) scheme’s age eligibility criteria and the amount claimable;
- Provide for special dispensation for funds established to assist with COVID-19 relief efforts;
- Increase the deduction available for donations to the Solidarity Fund; and
- Provide for the Skills Development Levy holiday.
He pointed out that Members had been present at the briefings on the Bills with the NA, and had agreed with the above.
He elaborated on the key issues raised during the public hearings in section 4.
These were the expansion of the ETI age eligibility criteria and amount claimable; the special tax dispensation for funds established to assist with COVID-19 relief efforts; the Skills Development Levy holiday; and increasing the tax-deductible donations in respect of the Solidarity Fund by an additional 10 per cent. He noted section 4.3 and Members’ acceptance of the expansion of the streamlined tax dispensation. He remarked that the Committee had to be careful with the expansion, given the global occurrence of organisations seeking to wrongly expand the parameters of what was allowed. He noted the Committee’s agreement with the Ministry’s acceptance of extending relief for a further two months.
The Chairperson pointed out that the Skills Development Levy holiday in section 4.4 meant that qualifying entities would not be liable for repayment of the levy later, for the exempted period from May to 30 August. He raised a concern around the impact on Sector Education and Training Authorities (SETAs). He asked how much money had been foregone as a result of the holiday, and what the implications for the SETAs were. He said the role of SETAs was even more important now, given the exacerbated job crisis in the country, even though the SETAs had not been performing well.
Mr Chris Axelson, Chief Director: Economic Tax Analysis, National Treasury (NT), replied that the holiday would save businesses about R6 billion over the four month period. This was part of the R70 billion in total relief measures, which was under the R500 billion relief package. SETAs operated on a buffer of three months of expenses. It was agreed that during the holiday period, SETAs would use these buffers to cover operational costs. Those SETAs that did not have adequate buffers would end up making arrangements with Public Finance.
The Chairperson requested NT to submit a paragraph on this matter, as the Committee was concerned with the lack of required performance by SETAs, and the consequences for SETAs. He highlighted the policy in section 4.5, which aimed to encourage South Africans to make contributions to the Solidarity Fund.
He advised that the Committee had received no new submissions on the DMTR bills, and expressed concern with the trend of fewer submissions on Section 75 bills in recent years.
Mr S du Toit (FF+, North West) said the SETAs were not as effective as had been intended. The support should be redirected to businesses directly, which was more important than support to SETAs at this point in time. Companies were under tremendous financial stress.
The Chairperson replied that although he was not opposed to what Mr Du Toit had said, it would have to be balanced against the importance of the SETAs as well.
He highlighted section 4.6.4, which emphasised that National Treasury reported to the Committee that amendments to Clauses 7, 8 and 9 dealt only with the extension of the relief measures dealing with streamlined tax dispensation for funds established to assist with COVID-19 relief efforts by two months --from four to six months. NT had indicated that these funds would have qualified for tax exemption in terms of the current provisions of the Income Tax Act, 1962, and the extension of this relief was tax neutral and did not result in an additional direct cost to government. The Committee was satisfied that the extension of the relief provided for in Clauses 7, 8 and 9 of the Bill by two months would not adversely affect the fiscal framework and the composition of tax revenue, but would provide much needed relief, as the country was still under COVID-19 lockdown measures.
Committee Report on Disaster Management Tax Relief Administration Bill [B12 – 2020]
The Chairperson highlighted the key policy issues raised during submissions and public hearings in section 4 of the Disaster Management Tax Relief Administration Bill [B12 – 2020], which states that the key issues that were raised on the DMTRA Bill were:
- The definition of a qualifying taxpayer;
- The deferral of payment of employees’ tax liability for small to medium sized enterprises; and
- The extension of time periods.
He pointed out that the Committee had received submissions on recommendations for larger businesses with a turnover of more than R100 million to benefit from the relief as well. The South African Revenue Service (SARS) had assured the Committee that larger businesses were not per se excluded, as they could still apply for case-by-case relief. Most of the issues on the definition of a “qualifying taxpayer” were dealt with during the initial consultation with NT.
The Chairperson pointed out the amendments that had been made, which were to extend COVID tax relief measures in clauses 2 by a month, replacing the words/dates; “31 July 2020,” with “31 August 2020”, “7 September 2020” with “7 October 2020,” and “5 February 2021” with “5 March 2021”. He reminded Members that the Bills were strictly COVID-related, and more measures would be covered in the ordinary tax administration amendment laws to be processed by Parliament with the Medium-Term Budget Policy Statement (MTBPS) later in the year.
He suggested Members go over the document by the Parliamentary research unit, stating that it was important that the Committee got the view of not only the executive, but also that of a Parliamentary research unit. Some of the issues discussed were around expanding the age eligibility criteria, the amount claimable, and the special tax dispensation.
Mr Ryder said that the majority of the details of the Bill had been agreed on. No one had expected a 51% drop in gross domestic product (GDP), and should the need arise, further adjustments would take place. This was the first COVID Bill, and a good gesture from Treasury. He remarked that the Bills were blanket adjustments. If there were entities that felt they needed further extensions and alleviations, they had to apply for them. There was an opportunity for people to make individual and circumstantial applications.
The Chairperson agreed that most discrepancies had been dealt with on the NA side. He requested that comments made by Mr Ryder and other Members be submitted in writing to the Committee Secretariat by 10h00 tomorrow, so that they were included in the Committee report.
Consideration of Disaster Management Tax Relief Bill
Ms Yanga Mputa, Chief Director: Legal Tax Design, National Treasury, explained that new definitions were stipulated in clause 1, one of which was the Solidarity Fund. The proposed changes were made only in clause 7. No new amendments had been made after the drafting of the Bill. She gave Members a brief overview of clauses 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 of the Bill.
Consideration of Disaster Management Tax Relief Administration Bill
Mr Franz Tomasek, Head: Legislative Policy Tax, Customs and Excise, SARS, gave an overview of clauses 1, 2, 3, 4, 5, 6, and 7 of the DMTRA Bill.
The Chairperson asked what percentage of SARS’ staff were physically at work under the current lockdown 2 restrictions.
Mr Tomasek replied that he did not have an exact percentage at the moment, and could get back to the Committee with a specific figure. Staff that tended to be physically present in offices were those who were client-facing through appointments. SARS had been working to make its employees technologically capable of working at home. For instance, call centre operators were working from home, using voice-over internet protocol (IP). The operators were being given access to the SARS network to do so.
The Chairperson said he was informed that on average, a third of the staff was to come in. The staff rotated as well. However, directors general (DGs) were struggling to get a third of the staff to come in. Ministers and officials were concerned about this. He remarked that perhaps SARS’s working from home arrangement was more efficient due to how technologically advanced it was.
Mr Tomasek replied that there had been an unfortunate stage of stagnation, but SARS was working very hard to bring things up to speed. There had been a massive drive to enable teams to work from home through technology, especially in response to the pandemic.
Mr Ryder commended SARS for its response and remarked that it was a fantastic innovation that prevented people from having to physically go in and commence tax processes.
Mr Ryder asked if the issue of people who did not have access to cashflow being able to borrow against retirement funds, was being considered.
Mr Momoniat replied that the DMTR Bills dealt only with COVID measures. The proposals around offsetting against one’s pension would be addressed in the second round of the Tax Laws Amendment Bill (TLAB). Some of the submissions were related to the entire financial year. Therefore, outstanding issues would be dealt with in the TLAB. He added that some of the proposals that were advocated needed to be motivated. Treasury had received a motivation from one of the Members.
The Chairperson requested that NT submit its response to this concern in writing, so that it was on record and included in the Committee’s report. The Chairperson asked if there had been any response to the proposal of Dr D George (DA).
Mr Momoniat replied that Treasury was looking at the range of the responses, and still deciding on what it agreef with and what it does not, as well as the reasons,
Dr Dumisani Jantjies, Deputy Director: Finance, Parliamentary Budget Office (PBO), raised a concern around the issue of excessive profits in some industries due to the COVID-19 pandemic and lockdown. Was NT going to consider an additional tax for those industries as a way of making up for tax losses?
Mr Momoniat requested Dr Jantjies to submit a specific proposal to NT around that, given how blunt the tax instrument proposal could be.
The meeting was adjourned.
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