Draft Revenue Laws Amendment Bill [B33-2006]: National Treasury & SARS response to public submissions

FINANCE PORTFOLIO COMMITTEE
31 October 2006
DRAFT REVENUE LAWS AMENDMENT BILL: NATIONAL TREASURY AND SARS RESPONSE TO PUBLIC SUBMISSIONS

Chairperson: Mr N Nene (ANC)

Documents handed out:
SARS and Treasury response to submissions on the draft Revenue Laws Amendment Bill, 2006
Submission from Professor M Lester on proposed General Anti Avoidance Regulations (GAAR): Section 80A of Income Tax Act

SUMMARY
National Treasury and the South African Revenue Service provided responses to written submissions on the draft Revenue Laws Amendment Bill. The responses covered a number of issues which included the Research and Development (R&D) incentives, Oil and Gas Incentives, Taxation of Foreign Income, and Public Benefit Organisations. The discussion largely focused on the issue of capacity building. Members felt that the presentation was very technical, and tried to discuss ways in which SARS and Treasury could assist in making the technical issues easier to understand.

MINUTES
SARS and Treasury response to submissions on draft Revenue Laws Amendment Bill
The presentation was made by Mr Franz Tomasek, SARS Assistant General Manager: Legislation, Mr Cecil Morden, Treasury Chief Director: Tax Policy and Prof Keith Engel, Treasury Chief Director (see document for full details).
 

Discussion
Mr Bhamjee (ANC) asked what type of revenue laws would be applicable to research companies such as Master Research Africa.

Mr Morden replied that the objective of the R&D incentive is to incentivise research into activities that will improve the productive capacity of the country in the long term. Pure market research however does not fall into that category, therefore it is deemed that pure market research should fall under the normal expenses.

Mr I Davidson (DA) stated that he had difficulty understanding the SARS and Treasury responses, despite the fact that SARS and Treasury detailed correctly all the briefing sessions and hearings.

The Chair agreed that the Committee had indeed been presented with volumes of information. There would be ongoing discussion on some of the matters that had been presented. If the Committee felt that there were some areas of concern that need to be addressed, then the Committee could always bring in SARS.

Mr Davidson then asked SARS and Treasury to comment on the role of the courts in terms of case law and how they plan to approach avoidance legislation. He also asked how the onus of proof would be changed with respect to reportable transactions.

Mr Tomasek argued that with regard to the case law, there are aspects where SARS would try to retain the case law. There are areas where the law conflicts, however provisions have been made where the law can be used in an alternative sense. In terms of onus of proof, significant penalties were given for not reporting, hence time needs to be taken in order to make sure that SARS is not getting routine transactions. However there are vast amounts of money involved in the non routine transactions.

Mr M Johnson (ANC) raised the issue of capacity among Committee members. He argued that the Committee did not have the capacity to meaningfully contribute to deliberations on the revenue laws. He also asked SARS and Treasury what steps were being taken to ensure that the underprivileged had access to information on the revenue laws in order for them to respond.

Mr Morden stated that SARS and Treasury had taken note of the Committee's concern and would try to find ways of making the presentation less technical.

Prof Engel assured Mr Johnson that the law meant to affect rich companies with millions and that SARS was not after the underprivileged.

Mr K Moloto (ANC) argued that SARS should try accommodate the needs of the members of the Committee when holding deliberations on the Bill. There needed to be a long-term training program for the Committee, so that they could understand the technical issues being presented.

Mr Tomasek stated that SARS had implemented capacity building programmes in the past, and would be glad to assist members of the Committee in areas where they need assistance.

Mr Bhamjee then argued that he found the information documents by SARS empowering, however this time the information had been very technical in nature. He suggested that perhaps each quarterly session SARS should have a specific theme on which they focus and provide briefing, as the information that had been presented at this meeting had been too much to absorb.

Meeting was adjourned