Revenue Laws Amendment Bill [B32-2006]; Adjustment Appropriation Bill [33-2006] & Formal Committee Report on Medium-Term Budget Policy Statement: fin

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Finance Standing Committee

06 November 2006
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Meeting report

FINANCE PORTFOLIO COMMITTEE
7 November 2006
REVENUE LAWS AMENDMENT BILL; ADJUSTMENT APPROPRIATION BILL AND FORMAL COMMITTEE REPORT ON MEDIUM-TERM BUDGET POLICY STATEMENT: FINALISATION


Chairperson: Mr N Nene (ANC)

Document handed out:
Revenue Laws Amendment Bill [B33-2006]
Revenue Laws Second Amendment Bill [B34-2006]
SARS/Treasury response to submissions on draft Revenue Laws Amendment Bill
Adjustments Appropriation Bill [B32-2006]

Treasury presentation on the 2006 Adjustments Budget
Committee Report on the Medium-term Budget Policy Statement [available once adopted by at Committee Reports]

SUMMARY
The Treasury said that the only changes to the response they had given the Committee on the 31 October, were the insertion of the effective dates in the Revenue Laws Amendment Bill. The Committee agreed to the Bill.

The Committee adopted its Committee Report on the Medium-term Budget Policy Statement.

Treasury briefed the Committee on the Adjustment Appropriation Bill, noting that they had received requests for unforeseeable and unavoidable expenditure that amounted to R7.3 billion but Treasury had approved only R1.7 billion of this. There were declared savings (the amount by which Departments wanted their budgets reduced because they could not spend it all) of R2.1 billion for 2006/07 compared with only R5 million in 2005/06. Land Affairs and Correctional Services had the highest amounts at R1.122 billion and R603 million respectively. The Committee agreed to the Adjustment Appropriation Bill.

MINUTES
Revenue Laws Amendment Bill: finalisation

Mr Keith Engel, a Chief Director of Legislative Policy at the Treasury, said that the only changes to the response that National Treasury and South African Revenue Service (SARS) had given the Committee on the 31 October, were the insertion of the effective dates in the Bill.

The new General Anti-avoidance Rules would be effective from 2 November 2006. The date of the reportable advance arrangements would be effective on the date of the presidential proclamation. Also, with regards to the partial taxation of clubs, the Bill would come into effect in 2007 but clubs had the opportunity to apply and get themselves into the new regime until 2009. With regards to research and development (R & D), there some concerns that the Bill prevented joint partnerships. The Bill was altered to let two parties invest in the same R & D as long as they put in their own funds.

The Committee agreed to the Bill.

Committee Report on Medium-term Budget Policy Statement: finalisation
The Committee adopted the report.

Adjustment Appropriation Bill: briefing and finalisation
Mr Neil Cole, Treasury's Director of Budget Reform, said that R230.4 billion had been made available for spending in 2005/06. Of this, 2.4% or R5.6 billion had been unspent. Approximately R1 billion of the unspent amount was due to savings being made, that is, there were some managerial interventions that led to the savings. R800 million had not been transferred to the Provinces due to non-compliance with the Division of Revenue Act. The March 'spike' in expenditure was still a concern.

On aggregate, Departments should be at an expenditure level of 40% of their budgets. Last year, 48.1% of the total budget had been spent at this point, and it was too early to assess if the March 'spike' would recur.

Section 30(2) of the Provincial Financial Management Act (PFMA) said that adjustment budgets could provide for significant and unforeseeable economic and financial events affecting fiscal targets; any expenditure in terms of section 16 of the PFMA; money to be appropriated for expenditure already announced my the Minister during tabling of the annual budget; roll-over of spent funds from preceding financial years and the shifting of funds between and within votes.

Unforeseeable and unavoidable expenditure was that that was unforeseen at the time of the tabling of the budget and was now deemed to be unavoidable. However, expenditure that, although known when finalising the estimates of expenditure, could not be accommodated within locations, tariff adjustments and price increases and extensions of existing services and the creation of new services that was not unforeseeable and unavoidable, could not be considered as unforeseeable and unavoidable expenditure.

The Treasury had received requests for unforeseeable and unavoidable expenditure that amounted to R7.3 billion but the Treasury Committee had only approved R1.7 billion of this (R900 million was flood related, R662 for changes to VAT and R138 for others).

In terms of section 16 of the PFMA, expenditure of an exceptional nature which was currently not provided for and which could not, without serious prejudice to the public interest, be postponed to a future appropriation could be included in an adjustment budget. In this regard, emergency funding of R110.546 million was approved by the Minister for disaster relief for the floods in Taung in the North West.

The budget made provision for World Cup stadiums but this was not allocated to a specific vote. R600 million had been given to the Department of Sport and Recreation. It was also announced in the budget that a contingency reserve could be used for the recapitalisation of State Owned Enterprises. Some of these were the Pebble Bed Reactor (R462 million); Denel (R567 million); InfraCo (R627 million); Alexkor (R80 million) and the South African Rail Commuter Corporation (R620 million).

There were declared savings (the amount by which Departments wanted their budgets reduced because they could not spend it all) of R2.1 billion for 2006/07 compared with only R5 million in 2005/06. Land Affairs and Correctional Services had the highest amounts at R1.122 billion and R603 million respectively. Projected under-expenditure for the current year was R2.1 billion compared with a projection of R2.5 billion in 2005/06. Declared savings and projected under-expenditure for 2006/07 totalled R4.2 billion.

The Fund Appropriation Bill showed funds appropriated per programme. The format was based on standardised classification aligned to international reporting requirements. The total adjustment from National Departments amounted to R8.2 billion. Adjustments were offset against the contingency reserve; unallocated amounts; declared savings and projected under-expenditure. The adjustments resulted in an increase in expenditure from R472.7 billion to R474.2 billion.

Discussion
Dr S Van Dyk (DA) asked if there were any requests unforeseeable and unavoidable expenditure from the Police Service in line with the Minister of Safety and Security's assertion that more was going to be done to combat crime.

Mr Cole replied that there were no such requests from the Department of Safety and Security and usually the Department spent all of their allocations.

Mr M Johnson (ANC) asked what the relationship was between Sentech and InfraCo. Was there any duplication in activities?

Mr Cole replied that InfraCo was separate from Sentech. The InfraCo project involved the laying of cables and other infrastructure for broadband internet access to bring down the cost of connectivity.

Voting on Adjustment Appropriation Bill
The Committee agreed to the Bill but said that more work had to be done to address the anomalies.

The meeting was adjourned.



 

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