ATC140306: Report of the Select Committee on Finance on the 2014 Fiscal Framework and Revenue Proposals, dated 5 March 2014

NCOP Finance


1. I ntroduction

The Minister of Finance tabled the 2014 National Budget before Parliament on 26 February 2014 in line with section 27 of the Public Finance Management Act (PFMA), (Act 1 of 1999) and section 7(1) of the Money Bills Amendment Procedure and Related Matters Act 9 of 2009 (the Money Bills Act). Section 7(2) of the Money Bills Act requires the Minister to include, among other information, the proposed Fiscal Framework and Revenue Proposals in the tabled Budget.

According to section 8(3) of the Money Bills Act, the Standing and Select Committees on Finance must, within 16 days after the tabling of the Budget, report to the National Assembly (NA) and the National Council of Provinces (NCOP), respectively, on the proposed Fiscal Framework and Revenue Proposals. The Fiscal Framework gives effect to the national executive’s macro-economic policy and includes; estimates of revenue, expenditure, borrowing, interest and debt servicing charges and an indication of the level of contingency reserves.

After the tabling of the Budget on 26 February 2014 and the engagement with the Minister of Finance on 27 February 2014, the Finance Committees jointly held public hearings on 04 March 2014. Submissions were received from National Union of Metalworkers South Africa (NUMSA), Federation of Union of South Africa (FEDUSA), South African Institute of Tax Practitioners (SAIT), South African Institute of Chartered Accountants (SAICA), PriceWaterHouse Coopers (PwC), the Manufacturing Circle, Business Unity South Africa (BUSA), the Financial and Fiscal Commission (FFC), Budget and Expenditure Management Forum (BEMF), Ernst & Young Advisory Services (EY), Metope Investment Managers and PPC manufacturers.

This report summarises the economic outlook; fiscal framework; revenue trends and tax proposals; government debt financing and the key issues emerging from the public hearings with the above-mentioned stakeholders.

2. The 2014 National Budget overview

The 2014 Budget reflects on some of government achievements over the past two decades, acknowledges the challenges that lie ahead and proposes plans to address these challenges. Key amongst the achievements is the sound institutional framework, which includes the Offices of the Public Protectors, Auditor General, the South African Reserve Bank, the Independent Electoral Commission and effective and independent courts. Strides had been made in providing access to education, housing, water, electricity, sanitation and other basic services. The challenges remain persistently high levels of unemployment, poverty and inequality. The economy continues to grow below potential and some of the basic services delivered are uneven and of poor quality. Government has adopted the National Development Plan (NDP) as its long term framework for economic growth and social development. The plan guides the allocation of public resources and recognises the need to diversify the economy, raise export competitiveness and partnerships to overcome some of the challenges identified.

Governments’ budget priorities include investment in infrastructure, youth employment and improved service delivery. Examples of NDP priorities that are directly funded and supported over the medium term include building on existing partnerships; Community Works Programme (CWP); support for smallholder farmers and small, medium and micro enterprises; detailed expenditure reviews across government; employment tax incentives, Expanded Public Works Programmes (EPWP), Special Economic Zones (SEZs) and public infrastructure investment.

The global economy is not yet on the path to sustained recovery. World economy gathered momentum in the second half of 2013, led by a recovery in the advanced economies. The recovery in the US has prompted the US Federal Reserve to taper its quantitative easing programme. Growth in Europe, South Africa’s major trading partner, remains subdued. Growth in emerging market and developing economies remain robust. Increased financial market and capital flow volatility remain a concern given recent US tapering.

Government’s prudent macroeconomic framework cushioned the South African economy against the global economic turmoil and enabled it to continue growing. Fiscal imbalances remain but output and employment have returned to pre-crisis levels. Public finances appear sustainable and debt levels appear manageable over the medium term. A widened current account deficit remains a concern until exports increase and investment flows strengthen. The flexible exchange rate regime that South Africa adopted has helped to absorb the external shocks, amongst other things. The inflation outlook has deteriorated and rising interest rates will increase the cost of borrowing.

Given the risks that emerged, government is maintaining its expenditure ceiling, with no additional funds added to total spending. The proposed 2014 Budget framework makes provision for R1.25 trillion rand in the 2014/15. The Budget emphasises the need to contain costs and improve efficiencies across government. The framework balances continued growth in spending and fiscal consolidation. It is expected that the spending reviews and forensic investigations will help to cut waste and increase efficiency across all spheres of government.

South Africa’s fiscal framework remains grounded in a sustainable countercyclical approach to managing revenue and expenditure. The budget deficit is expected to narrow in 2013/14 as a result of government’s expenditure ceiling and strong revenue collections. Tax proposals for the 2014 Budget continue to prioritise economic growth, job creation and generating sufficient revenue to finance government spending.

3. Economic outlook

3.1 Global economic developments and outlook

According to the International Monetary Fund (IMF) global economic activity and world trade strengthened in 2013, particularly in the United States (US) and the United Kingdom (UK). The key drivers of improved activity had been attributed to export rebound in emerging market economies and higher inventory demand in developed economies. Global economic growth registered 3 per cent in 2013.

The IMF expects global growth to increase from 3.0 per cent in 2013 to 3.7 per cent in 2014, averaging 3.9 per cent in 2015, largely on account of recovery in advanced economies. The outlook for the Euro zone remain fragile and uneven, particularly economies in the periphery where the risk of deflation, strong fiscal consolidation and weak banking sectors are constraining the recovery. Growth in the Euro area is projected to strengthen to 1 per cent in 2014 and 1.4 per cent in 2015. Recovery will be uneven, with more modest growth for economies under stress held back by high debt and financial fragmentation.

The United States is expected to grow at a rate of 2.8 per cent in 2014, up from 1.9 per cent in 2013 and growth is projected at 3 per cent in 2015. Growth will be supported by final domestic demand and in part by a reduction in the fiscal drag as a result of the recent budget agreement. The US growth is being driven by a recovery in the housing market and robust private sector demand.

Growth in emerging markets is expected to increase to 5.1 per cent in 2014 and 5.4 per cent in 2015. Economic activity in sub-Saharan Africa remains robust, having averaged 5.1 per cent in 2013, with growth projected to increase to 6.1 per cent in 2014 and moderate slightly to 5.8 per cent in 2015.

The US Federal Bank has begun the process of cutting back in quantitative easing, signalling a recovery in the US. These developments have implications for emerging market and developing economies such as sharply depreciating currencies, capital outflows, slowing growth, rising inflation, significant current account and fiscal deficits and the deteriorating confidence.

Recovery in advanced economies will translate into moderately higher demand for South African exports. Slowing growth in China and its shift away from investment led growth may lower the prices of South Africa’s commodity exports. Volatile capital flows have contributed to Rand depreciation, putting upward pressure on inflation. South Africa’s net portfolio flows fell to R24.3 billion in 2013 compared to R88.8 billion in 2012.

Increased financial market and capital flow volatility remain a concern in emerging economies, given the US tapering in early 2014. There is a need to manage the risks of potential capital flows reversal. Economies with domestic weaknesses and larger current account deficits appear particularly exposed. Some of these risks could have implications for the South African economy through trade, capital flows and currency volatility. Domestic risks include further delays in introducing new infrastructure, protracted labour disputes and more pronounced inflationary pressures associated with the depreciation of the Rand.

Major risks to the global economic outlook are the reduction in US monetary stimulus; high debt levels in China, the rising level of government debt in Japan, very low inflation in advanced economies, particularly the Euro area and high current account and fiscal deficits in a number of emerging markets. Despite the expected strengthening of activity, global priorities remain ensuring robust growth and managing vulnerabilities. Given these risks, monetary policy stance should stay accommodative while fiscal consolidation continues (IMF 2014). The FFC sees the Budgets 2014 subject to the Euro area sovereign debt crisis, the US fiscal cliff and quantitative easing by the Federal Reserve and slowing emerging markets growth.

3.2 South African economic performance and outlook

The domestic economy is growing at a moderate pace but continues to perform below its potential. Over the medium term, new power plants and transport infrastructure will lift constraints to output; stronger global recovery will support exports and growth in sub-Saharan Africa will promote expanded trade and investment. The macroeconomic framework is resilient, supported by healthy public finances. Gross Domestic Product (GDP) growth is projected to improve from 1.9 per cent in 2013 to 2.7 per cent in 2014 and to 3.5 per cent in 2016.

The FFC proposes improvements in skills and education, investment in Research and Development (R&D) to unlock growth potential. The Commission further proposed that in order for government to address the negative sentiments of credit rating agencies, the economic growth rates set should be achieved. This could be achieved through full and effective implementation of the infrastructure programme and stabilising the public debt to GDP trend.

The Manufacturing Circle is of the view that growth imperatives and stabilisation of debt in 2016/17 will be manageable only if confirmed additions to generation capacity and shale gas exploration can be expedited and if government could improve implementation of infrastructure investments.

BUSA is concerned that National Treasury has for a number of years, forecast higher GDP growth rates than actual performance. Inflation had also been forecast lower than the actual outcomes. BUSA believes that government’s forecast for GDP growth for 2014/15 fiscal year is high. SAICA is of the view that projected growth forecasts of 2.7 per cent and 3.5 per cent in 2014 and 2016, respectively, as optimistic given that growth declined from 2.5 per cent in 2012 to 1.9 per cent in 2013.

FEDUSA noted that the IMF forecast the SA economy to grow at a rate of 2.8 per cent in 2014 and 3.2 per cent in 2015 in light of the global and domestic economic developments. The South African Reserve Bank (SARB) adjusted its growth forecasts downwards relatively in line with the IMF. FEDUSA’s concern is that National Treasury’s growth forecasts are not in line with this and appear to be optimistic.

According to the National Treasury, risks to the domestic outlook include delays to the introduction of new infrastructure, protracted labour strikes and more pronounced inflationary pressures associated with the depreciation of the Rand. The FFC identified key domestic risks as labour unrest, inadequate education and skills base, insufficient infrastructural investment and service delivery, perceptions of rising corruption and stress on consumers to cope with increased inflationary pressures. The Commission proposed that, to address the labour unrests, Government should consider establishing levers that serve to strengthen accountability of both employers and unions in the collective bargaining framework.

The SAIT proposed four pillars needed to stimulate economic growth in South Africa, namely, e ntrepreneurship and the stimulation of the small business sector that has the capacity to reduce unemployment, foreign direct investment that is also crucial to stimulate jobs and build infrastructure in the country, innovation and investment in Research and Development that is needed to achieve innovation.

The Budget Review 2014 expects real growth in gross domestic expenditure to pick up from 2.8 per cent in 2013 to 3.4 per cent in 2015. Growth in household consumption expenditure moderated to an estimated 2.7 per cent in 2013, down from 3.5 per cent in 2012. Growth in household consumption depends on the economy’s ability to create jobs, real disposable income growth, household indebtedness and consumer confidence and the interest rate environment. Growth in real household consumption expenditure is projected to increase from 2.7 per cent in 2013 to 3.4 per cent in 2016, supported by stronger employment growth prospects and reduced household debt levels.

The year on year inflation rate as measured by the Headline Consumer Price Index (CPI), averaged 5.7 per cent in 2013, from 5.6 per cent in 2012. The Rand exchange rate depreciation led to a revision of the Headline CPI, which is now expected to breach the upper end of the target band in 2014. Headline CPI is expected to average 5.9 per cent in 2015 as weaker Rand translates into higher petrol and food price and puts pressure on wage demands.

The SARB increased the interest rates by 50 basis points in January 2014 in response to deterioration in inflation outlook. The weakness of the Rand in part follows the general emerging market phenomenon but it is also reinforced by other factors such as declining terms of trade and on-going labour disputes. The Rand depreciated by 17.6 per cent against the US Dollar in 2013. In the short term, the weaker exchange rate poses a significant risk to the inflation outlook. A sustained real depreciation could provide a significant boost to export competitiveness.

The outlook for investment expenditure remains positive over the medium term. Growth in real Gross Fixed Capital Formation is forecast to grow at a rate of 4.2 per cent in 2014 reaching 6.0 per cent in 2016 in line with the global and domestic outlook.

Table 1: Macroeconomic projections 2009 to 2016

Calendar year








Percentage change




Final household consumption








Final government consumption








Gross fixed capital formation








Gross domestic expenditure
























Real GDP growth








GDP inflation








GDP at current prices (R billion)








CPI inflation








Current account balance (% of GDP)








Source: Budget Review 2014, National Treasury

A larger trade deficit widened the current account deficit (a source of external vulnerability) to an estimated 6.8 per cent of GDP in the third quarter of 2013. Stronger export growth was offset by import growth. Along with deterioration in the terms of trade (largely driven by commodity price movements) these factors exerted pressure on the current account. The current account deficit is projected to narrow from 6.1 per cent in 2013 to 5.5 per cent in 2016 as export growth improves.

Import volumes recorded strong growth in 2013, led by machinery and appliances and oil. Growth in imports is projected to rise from 5.3 per cent in 2014 and reach 7 per cent of GDP in 2016 as demand recovers. Export growth is expected to increase from 5.6 per cent in 2014 to 7 per cent in 2016.

From the production side of the economy, growth was supported by favourable yields in agriculture, steady growth in financial and business services, telecommunications, transport and civil construction. Growth in the mining sector remained volatile in 2013 as industrial action, maintenance and other disruptions affected production. The mining sector is expected to remain under pressure following stoppages in the major platinum mines and the risk of these disruptions spreading to gold mines. Manufacturing production struggled to gain momentum in 2013, registering growth of 1.3 per cent. The Manufacturing sector also experienced maintenance stoppages and strikes in the motor vehicles and parts sub-sector. A broader economic recovery depends on improving the operating environment in mining and manufacturing.

The pace of job creation lags behind growth in the labour force, contributing to persistently high levels of joblessness. The rate of unemployment declined to 24.1 per cent in the third quarter of 2013, from 24.5 per cent a year earlier. Between September 2012 and September 2013, the economy created 14 000 jobs in the formal non-agricultural sector. Job losses in mining and manufacturing were offset by gains in the community, social and personal services sector. Moderate employment gains are expected over the medium term. The private sector will continue to be the major contributor to job creation. The public sector will continue to support job creation through initiatives such as EPWP, CWP, Employment Tax Incentive, Jobs Fund, National Youth Service Programme and Skills development.

SAICA’s view is that the 2014 Budget should have started the implementation of structural reforms to grow the economy and create jobs. To address unemployment BEMF proposed that government implements the Basic Income Grant to inject more funds in communities to stimulate demand and entrepreneurial initiatives among poor communities. This organisation suggests that government should promote the Green economy. It also recommended that more investment be made to low carbon economy by investing more into the public transport system, energy saving homes and buildings, encourage local food production and small scale organic farming initiatives .

FEDUSA remain concerned that the unemployment rate according StatsSA persists to be high at 24.7 per cent in the third quarter of 2013, with youth unemployment standing at 55 per cent. NUMSA is pleased with the announcement that the rollout of the infrastructure programme accompanied by programmes to support the local manufacture of components, ranging from buses to energy components in order to support this industry and create more decent jobs.

4. Fiscal policy and outlook

South Africa’s fiscal framework is grounded in a sustainable, countercyclical approach to managing revenue and expenditure over the medium term. Government will balance continued support for economic recovery with fiscal consolidation. Key social and economic programmes will be maintained, complemented by efforts to improve value for money. Spending will be well contained over the medium-term.

The fiscal outlook for the years ahead is challenging. With the onset of the 2009 recession, government was able to use the fiscal space built in preceding years to support the economy. Low international interest rates made it relatively cheap for government to finance its borrowing requirement. Moderate domestic inflation limited cost pressures on public sector budgets and rising commodity prices supported government revenues.

The changed environment has significant implications for the fiscus. Rising global interest rates, rand depreciation and weaker commodity prices have significant fiscal implications. Projected debt service costs for 2014/15 are R5 billion higher than estimated in October 2013. Economic growth remains below potential and the fiscal space has been eroded by rising debt. The terms of trade deteriorated and are unlikely to improve over the medium term. A weaker outlook for commodity prices has contributed to a downward revision of estimated tax revenue in 2015/16.

Rand depreciation has led to rising cost pressures, including the compensation budgets. Compensation accounts for almost 40 per cent of consolidated non-interest expenditure. It is projected that over the next three years, this item would grow by 1 per cent on average. If inflation exceeds current forecasts, the purchasing power of budgeted allocations will decline, while compensation budgets will automatically increase in terms of current public sector wage agreement. The FFC cautioned that the three year wage bargaining cycle is coming to an end and that government should plan to ensure moderate growth over the medium term.

Government is committed to maintaining an explicit nominal expenditure ceiling, while preserving the value of the social wage; reducing the budget deficit to stabilise debt; and improving the quality of spending and reducing waste. The ceiling commits government to spending limits of R1.03 trillion in 2014/15, R1.11 trillion in 2015/16 and R1.18 trillion in 2016/17. Expenditure growth has been substantially reduced .

Countercyclical response to global economic crisis resulted in large budget deficit. The deficit remained persistently high as revenue and growth forecasts were repeatedly revised downwards. The budget deficit is expected to narrow from 4.0 per cent of GDP in 2013/14 to 2.8 per cent of GDP in 2016/17. The BEMF suggested that the budget deficit be reviewed and recommends that government should allow the budget deficit to increase to 6 per cent from the current 4 per cent. According to the Forum, the additional 2 per cent will inject more funds in the fiscus to fund long term social projects .

Net debt is projected to stabilize at 44.3 per cent of GDP in 2016/17. Government responded by limiting expenditure growth, trimming the departmental budgets and reducing the contingency reserve. The contingency reserve allocation is reduced by R3 billion and R4 billion in 2014/15 and 2015/16, respectively.

The FFC cautioned that reducing the contingency reserves further is likely to increase the risk of having too low reserves should South Africa experience any shocks. SAICA’s view is that over the next two years, this will limit government’s ability to accommodate unforeseeable and unavoidable expenditure and to fund emerging priorities. Reprioritisation will be the defining feature of the budgeting during such a period. SAICA’s view is that wasteful expenditure should be reduced and that cost controls across government should be implemented.

SAIT also noted that an important progress has been made to reduce wasteful spending but more needs to be done, and that a substantive review of government spending is required. SAIT is of the view that linking government priorities to specific programmes in a more direct manner and holding responsible persons accountable for their actions is a necessity.

The 2014 Budget also maintains tight controls of goods and services budgets. Several steps had been taken to support spending efficiency including expenditure reviews and cost containment measures. BUSA welcomes the fact that real growth in public spending is forecast to increase from 2 per cent in 2013 to 2.8 per cent in 2014 and then reduce to 1.8 per cent in 2016.

4.1 Fiscal Framework

The 2014 consolidated fiscal framework estimates budget deficit of 4.0 per cent of GDP in 2013/14 compared with 4.2 per cent projected in October 2013. Stronger revenue growth and under spending by national departments, provinces and public entities led to a narrower deficit. The deficit is projected to narrow to 2.8 per cent in 2016/17 as the economic growth and revenue collection pick up pace. The FFC is of the view that the 2014 budget deficit reduction is aggressive relative to the October 2013 forecasts and that the reduction could be enough to avoid further downgrades to the sovereign credit rating.

The consolidated fiscal framework makes R1.25 trillion available for spending in 2014/15, R1.35 trillion in 2015/16 and R1.45 trillion in 2016/17 financial year. Expenditure growth has been substantially reduced. Revenue of R1 099.5 trillion in 2014/15, R1 201.3 trillion in 2015/16 and R1 324.7 trillion in 2015/16 financial year has been set aside. The fastest growing item of the main budget expenditure is debt service costs. Projected debt service costs for 2014/15 have increased by R5 billion since October 2013. This reflects exchange rate depreciation, higher inflation and the increase in interest rates by the Reserve Bank. Debt outlook remains sustainable and debt service costs stabilise in 2015/16, and begin to decline as a share of GDP.

SAICA noted that the fastest-growing item of main budget expenditure is debt-service costs and that the projected debt-service costs for 2014/15 have increased by R5 billion since the October 2013 Medium Term Budget Policy Statement. SAICA is of the view that this reflects exchange rate depreciation, higher inflation and the increase in the Reserve Bank’s repurchase rate from 5.0 per cent to 5.5 per cent in January 2013.

Table 2: Consolidated fiscal framework, 2010/11 to 2016/17

Rand billion/ percentage of GDP










Medium-term estimates





1 010.5

1 099.3


1 324.7








Non-interest expenditure




1 041.6

1 131.1

1 218.1

1 306.5








Interest payments


















1 045.2

1 149.3

1 252.3

1 351.6

1 451.7








Budget balance















Source: 2014 Budget Review, National Treasury

Budget 2014 projects total consolidated government revenue of R 887.8 billion in 2012/13 (R16.7 billion less in taxes), R985.7 billion in 2013/14 (revised down from R1.005 trillion in October 2012) and R1.091 trillion in 2014/15 compared to R1.118 trillion previously predicted. Total consolidated budget revenue is expected to stabilise at 29 per cent of GDP over the medium term. Government’s tax revenue is highly dependent on the developments in economic conditions globally and domestically.

Tax revenue has performed well in 2013, leading to an upward revision of consolidated current revenue by R11.4 billion, since October 2013. The depreciation of the Rand has boosted profits in some sectors, leading to buoyant corporate income tax receipts. Above inflation wage settlements have sustained personal income tax and strong imports have boosted customs revenue.

Compensation accounts for 39.5 per cent of consolidated non-interest spending in 2013/14, down marginally from a high of 39.7 per cent in 2011/12. Transfers and subsidies account for 29.9 per cent of consolidated non-interest spending. Capital spending is the fastest-growing component of non-interest expenditure over the three-year period, followed closely by capital transfers.

Over the medium-term cost containment measures will be vital to ensure fiscal discipline in government. Strengthening oversight in government spending will play a key role in ensuring efficiencies and value for money. As part of strengthening oversight, National Treasury in partnership with the Department of Monitoring and Evaluation has launched a series of expenditure reviews to provide greater understanding of performance and identify ways to improve value for money.

Procurement reforms, through the office of the Chief procurement Officer, will be necessary to simplify procurement procedures, strengthen accountability and improve government’s ability to detect corruption and maladministration. Improved service delivery will be achieved through efficient and effective spending of resources.

NUMSA welcomed proposals to establish a Chief Procurement Office and the establishment of the Parliamentary Budgetary Office (PBO), which will assist Parliament in ensuring that fiscal policy is aligned to government’s five priorities of education, health, rural development and agrarian reform, taking forward the fight against crime and creating decent work. NUMSA further recommended that given the tight financial situation the country finds itself in, the Minister’s proposals to combat excessive consultancy fees should be reinforced by a thorough evaluation of all projects

The Manufacturing Circle expected the National Treasury to announce, amongst others, a full fiscal review, support for innovative industrial policy to help dynamic local manufacturers to grow and enforcement of local procurement to grow the market for manufactured goods. The Manufacturing circle also expected an announcement of initiatives to cut administered costs to enhance manufacturing competitiveness. These measures are necessary to ensure that infrastructure maintenance and provisioning is funded, financed and costs are recouped efficiently; that price setting regulations and discount options for energy and other utilities are on par with competitor economies.

BEMF proposed that to fight corruption and poor financial management the government should implement Auditor Generals recommendations and use Municipal Finance Management Act (MFMA) and Public Finance Management Act (PFMA) to ensure those found guilty of corruption are held responsible.

Expenditure to GDP is estimated at 33.0 per cent in 2014/15, narrowing to 31.9 per cent in 2016/17. The wage bill has been one of the major concerns in government expenditure over the past year. The Minister of Finance, National Treasury and Parliament have put more emphasis on government departments to ensure that their personnel are within budget. Slower wage bill growth and robust expansion of capital budgets will result in a moderate improvement in the composition of spending by 2016/17. BUSA sees the limited government wage bill reduction as prudent given the above inflation increases in the past years and urges government to instil discipline in negotiating increases.

The FFC welcomed and noted the idea of setting an expenditure ceiling as effective in controlling expenditure and maintaining stability. In light of this, the Commission proposed that government should complement these with research on the scope of the ceiling, setting of the precise level of the ceiling and the assessment of government performance at all spheres against the ceiling and progressive realisation of constitutional mandates. In addition to that government should put the ceiling approach in legislation such PFMA and MFMA.

SAICA noted the Minister’s observation that in order to maintain the expenditure ceiling, additional allocations to priority areas and upward adjustments to the public-sector wage bill have been achieved through reprioritisation across departments.

4.2 Fiscal sustainability

Government’s net debt as a share of GDP continues to grow, but is expected to level off at 44.3 per cent of GDP in 2016/17. Global interest rates are expected to rise but domestic rates on new debt issuances remain low by historical standards. Total government gross debt as a percentage of GDP reached 45.8 per cent in 2013/14, which is the highest level since the 1998/99 financial year. Gross foreign debt however remains low at 4.3 per cent of GDP. About 90.7 per cent of gross government debt is long dated domestic debt, which lowers the overall risk profile of government debt. As debt stabilises, government is committed to rebuilding fiscal space by reducing the ratio of government debt to GDP.

Government plans to rebuild fiscal strength and reduce public debt in order for the fiscus to respond well to any negative global economic shocks. Strong public finances would also enable government to invest more on social services and infrastructure. This will be done by reducing spending on debt servicing by reducing government’s net debt position over time and switching to longer dated debt instruments. South Africa’s debt stability will depend on increased economic growth, as well as fiscal balance and restraint. Sound fiscal policies and improved economic growth will enable proper debt servicing and stability, thus enabling the government to channel funds to priority service delivery areas.

Numerous factors impact directly on increasing government debt. These include a weaker rand exchange rate that has pushed the value of foreign debt up; an increase in inflation that has led to an increase in the value of inflation linked debt; and the deterioration in economic growth has also increased the debt-to-GDP ratio. All these factors will impact directly on the countries’ ability to reach its objective to stabilise debt in the outer years of the MTEF.

During the 2013/14 MTBPS, total gross national loan debt was estimated at R1.5 trillion and was expected to grow by more than 30 per cent as a percentage of GDP over the MTEF, while gross foreign debt was expected to increase by more than 5 per cent as a percentage of GDP over the next three years.

Total public sector debt stood at 57.3 per cent of GDP in 2012/13 and it is expected to grow more slowly over the medium term. The public sector borrowing requirement is estimated at R227.2 billion or 6.6 per cent of GDP in 2013/14. The main budget deficit declines over the medium term, borrowing by state owned companies is projected to decline while local government borrowing remains low. Public sector borrowing requirement is expected to narrow to 4.3 per cent of GDP in 2016/17.

SAICA’s main concern is that South Africa’s debt is expected to increase from the 39.7 per cent for the 2013/14 year to 41.9 per cent in the 2014/15 year. Having noted that the fastest-growing item of main budget expenditure is debt-service costs, SAICA’s view is that the key for stability is that South Africa’s sovereign credit rating does not move downwards.

The costs of servicing government debt are influenced by the volume of debt, new borrowing and market variables such as interest, inflation and exchange rates. Debt service costs continue to grow over the medium term. The domestic bond market will remain the primary source of debt funding.

Risks to the fiscal outlook include economic uncertainty and a new round of public sector wage negotiations. If inflation remains stable, faster growth would enable government to attain its fiscal objectives. Deterioration in the economic outlook would require government to consider additional expenditure and revenue measures to ensure fiscal sustainability. Growth in employee compensation has slowed over the past two years but higher than expected inflation would add to the wage bill. A further deterioration in the inflation outlook, would add additional pressure on the budget.

5. Revenue trends and tax proposals

5.1 Revenue trends

South Africa has built a progressive tax system founded on the principles of equity, efficiency, simplicity, transparency and certainty. Consolidated budget revenue consists of tax revenue net of Southern African Customs Union transfers, departmental revenue, mineral royalties, social security fund revenue and provincial and public entity own revenue.

Total tax revenues have remained buoyant in 2013/14 and the revenue estimate presented in last year’s budget has been revised upwards by R1 billion. Nominal total tax revenue declined from 27.6 per cent of GDP in 2007/08 to 24.4 per cent in 2009/10 as a result of the 2009 recession. Tax revenue is expected to recover to 25.9 per cent of GDP in 2013/14, supported by strong growth in corporate income tax and customs duties. Nominal total tax revenues are estimated to grow at an average of 10.4 per cent per year over the medium term, reaching 26.5 per cent of GDP in 2016/17. Optimistic tax revenue collections, however, depend on improved tax compliance and strong economic growth.

The revised tax revenue estimate is R85.2 billion or 10.5 per cent higher than actual tax revenue in 2012/13, and R4 billion above the estimate presented in the October 2013 Medium Term Budget Policy Statement . The marginal upward revision for 2013/14 compared to the 2013 Budget is the result of strong growth in corporate income tax and customs duty revenues, revised upwards by R7.1 billion and R3.2 billion respectively. Revenue has been revised marginally downwards in 2015/16, reflecting a weaker economic outlook.

This is the first time since the 2009 recession that nominal corporate income tax revenues will exceed the 2008/09 peak of R165.5 billion. Personal income tax has also been revised upwards by R2.7 billion compared with the 2013 Budget estimates. This positive performance has been offset by downward revisions in dividends tax revenue (R5.9 billion), VAT (R3.7 billion), the fuel levy (R1.7 billion) and excise duties (R2.3 billion). Fuel levy revenues have been revised downwards mainly due to increased diesel refunds. Mineral royalties are expected to generate R6.5 billion, about R600 million above the estimated amount.

PwC noted that tax revenue as a percentage of GDP continue to rise and are projected to continue to rise towards the 2007/08 peak of 27.6 per cent over the medium term. It cautions that a continued rise in the level of taxation may not be sustainable in the long term and that ideally the level of taxation should be reduced over time to promote economic growth. Contrary to PwC’s views, BEMF recommends that tax revenue as a percentage of GDP should be increased to 30 per cent to raise additional revenue.

5.2 Tax proposals

Tax proposals for the 2014 Budget continue to prioritise economic growth, job creation and generating sufficient revenue to finance government spending in line with the National Development Plan (NDP) objectives of expanding the economy and reducing unemployment.

The main tax proposals for 2014/15 include:

· Personal income tax relief of R9.3 billion;

· Measures to encourage small enterprise development;

· Clarity on valuation of company cars for fringe-benefit tax purposes;

· Reforms to the tax treatment of the risk business of long-term insurers;

· Amending the rules for VAT input tax to combat gold smuggling;

· Increases in fuel and excise taxes;

· Measures to address acid mine drainage; and

· Adjustment of the proposed carbon tax and its alignment with desired emission-reduction outcomes to be identified by the Department of Environmental Affairs.

Direct taxes on Individuals

Personal income tax relief compensates for the effects of inflation, which pushes some individuals into higher tax brackets. About 69 per cent of taxpayers have taxable incomes below R250 000 per year. This group will receive 39 per cent the total amount of tax relief that arises from the increase in the rebates and income tax brackets. Other direct taxes on individuals include medical tax credits, tax preferred savings accounts and retirement savings reforms. Retirement fund taxation reforms provide additional relief and encourage savings, while tax preferred savings account is a measure to encourage household saving.

SAIT commended the Minister of Finance for reinforcing the need for individual retirement savings and look forward to more information to be released around the tax efficient savings vehicles to be implemented in 2015. SAIT is, however, disappointed that annual interest exemption has not been increased especially considering the recent increase in the interest rates.

SAICA indicated that whilst the income tax brackets were adjusted, not enough was done to compensate for wage inflation in the mining, manufacturing, construction, retail, logistics, and finance sectors. This resulted in individual tax burdens creeping up slightly.

Ernst & Young is grateful that the Minister of Finance did not increase tax rates for individuals, but cautions that the economy need revenue for the increasing funding needs and that expenditure must be brought under control if this trend is to continue. FEDUSA and the PwC also welcome Personal income tax relief of R9.3 billion that was granted to individuals and noted that this relief was relatively evenly distributed across taxpayers at all income levels and essentially compensated for the effects of inflation.

SAIT is of the view that encouraging foreign investment is one of the key aims of the NDP as foreign direct investment activities will assist in broadening the South African tax base as well as stimulating employment. SAIT is concerned that a high corporate tax rate is unlikely to encourage this type of investment, and although South Africa has reduced its company tax rate over the last few years, global trends suggest that the rate is still relatively high compared to other countries.

PwC supports the Retirement savings reforms proposed in a form of revisions to the retirement fund lump-sum withdrawal tables as these changes will effectively promote retirement savings and the benefits that flow there from. However, they are disappointed that no adjustments to the monetary cap of R350 000 on deductible contributions to retirement funds were proposed. For that reason, PwC views the monetary cap as a discouragement to retirement savings and will act as an absolute limit that individuals contribute to retirement funds.

SAICA is of the view that the review of the tax-preferred savings accounts, first mooted in the 2012 Budget Review as a measure to encourage household savings, will proceed, but unfortunately the budget provides no information other than what was previously announced. SAICA believes that tax free savings accounts should be implemented with effect from 1 March 2014.

Ernst & Young welcomes the introduction of a tax friendly savings regime for individuals ( tax preferred savings accounts and also in support of the last year’s legislative attempts steps to unify the retirement regime with revised percentage limits. Ernst & Young views 40 per cent taxable limit for interest deductions for foreign owned SA subsidiaries as problematic, and should be addressed despite silence in the budget. The proposed implementation date of January 2015 should be changed. PwC also support the tax preferred savings and investment accounts but advocate that consideration be given to increasing the annual and lifetime contribution limits in order to further incentivise savings.

Metope Investment Managers noted new amendments to tax that further define equity and debt instruments and understand the rationale behind proposed amendments, however, these amendments might have unintended consequence to Property Fund Industry. This was acknowledged in the relief given, but only to the big players.

According to Metope Investment Managers, flow through of income principles is important in the Property Industry for a number of reasons, amongst others; it enables pension funds to invest in property funds which encourage savings and investment in income generating assets. Very importantly, removing flow through of income principles will make property a relatively unattractive investment class. This is important for South Africa, because increasing its property market size will increase liquidity in the sector and attract foreign investment. This in turn will result in funding of new developments and greater infrastructure development for the country.

According to the Unlisted Property Funds Working Group, the negative impacts of Section 8F (3 )( d)(i) and 8FA(3)(d)(i) are: elements of protectionism which might crowd out smaller businesses or funds; existing players seriously may be affected by these changes; e xisting investors who may have geared themselves, may no longer offset income earned against interest payable and that i n the current environment incubator funds it is very difficult to set up and bring to market/listing.

Metope Investment Managers proposed that the government should level the playing field between pension funds and non pension fund investors and remove clause 8F(3)(d)(i) and 8FA(3)(d)(i) from the Act. In the interim, this Group gives its undertaking to work hard to find a mutual satisfactory way of keeping the flow through of income principle for unlisted investors with appropriate regulatory rules to maintain the required protection for investors.

Direct taxes on businesses

Direct taxes on businesses include small and medium enterprise development, employment tax incentive, debt reduction rules, Public-private partnerships, long term insurance risk policies and foreign reinsurance. Government wants to encourage entrepreneurship through small and medium enterprise development as a way of growing a sustainable economy. Accordingly, government provides tax relief to foundations that promote entrepreneurial development through grants, make grants received by small and medium sized enterprises income tax exempt and enhance the flexibility of the venture capital company regime.

SAICA believes that, from an economic perspective, small businesses are an essential part of South Africa and should be developed and encouraged while at the same time keeping it simple. A long standing view of SAICA is that the tax administrative and compliance obligations of small businesses are burdensome. SAICA therefore welcomes the fact the budget review acknowledges that red tape and bureaucracy are hindrances to doing business, especially for small and medium-sized firms, and that government aims to streamline the regulatory regime.

SAICA also acknowledges that small businesses find it difficult to obtain finance in general and acknowledges the introduction of reforms that would reduce compliance costs and facilitate access to equity finance. SAICA also agrees with the view of the Tax Review Committee that the lower tax rates for small business corporations do not address tax compliance costs, and is pleased to see this being subject to public consultation.

SAIT noted that small businesses are the engines of job creation, but despite this sector’s critical role in the economy, it is concerning that this sector faces various challenges such as the regulatory and legislative burden imposed on them in the form of tax legislation. SAIT welcomes the exemption of grants received by small and medium-sized enterprises, regardless of the source of the funds.

PwC welcomes relief for small businesses from both a tax burden and tax administration perspective but caution that other significant barriers remain, most notably in the form of red tape and labour rigidity.

BUSA supports the shale gas initiatives, less carbon intensive electricity production, water related infrastructure spending and tax measures recommended by the Davis Committee to promote SMMEs.

With regards to the imported e-commerce, Ernst & Young notes that foreigners providing local e-commerce services will be required to register for VAT but support the amendment related to individual consumers and business to business as the services would be zero rated.

Government introduced the employment tax incentive on 01 January 2014 to help reduce youth unemployment. Government will monitor implementation of the incentive and may if necessary strengthen measures to protect workers from practices that abuse its intent.

The Manufacturing Circle does not support the exclusive design of the Special Economic Zones (EPZs) and is of the view that the incentives should be extended to all compliant manufacturers to avoid market distortion and to enhance overall economic competitiveness. BUSA sees promotion of EPZs as a way that accelerates growth in these sectors and proposes that government expedites the legislative process and extend EPZs to existing plants to encourage expansion of domestic investment and exports. BUSA welcomes the employment tax incentive and the reasonable intake of this in January 2014.

SAICA and PwC proposes that the refund system related to the employment tax incentive become effective as soon as possible as opposed to during the fourth quarter of 2014 and be expanded to the EPZs and specific sectors. SAICA welcomed the government plans to expand the programme in the years ahead. SAIT acknowledges that the benefit of the employment tax incentive is really meaningful for the small business sector and welcomes the incentive.

FEDUSA welcomes the Incentive and hope this is a step towards decreasing unemployment as it offers employers incentives to hire people between the ages of 18 –29 years. The Federation encourages government to design the tax incentive scheme for Special Economic Zones with great care to avoid unintended consequences. BEMF is of the view that employment tax incentive is a tax cut to big business and will not contribute to increasing overall employment.

Indirect taxes

Tax proposals on indirect taxes include increases in excise duties on alcoholic beverages and tobacco products, inflationary adjustments to fuel taxes, measures to address acid mine drainage and a comprehensive policy package to address climate change and amending VAT rules to combat gold smuggling.

BEMF suggested that initiatives to reduce tax avoidance should be strongly supported by government. In addition to th at the government should increase the number of basic goods which are VAT zero-rated and subject luxury goods to higher rate of VAT.

Government proposes to increase the excise duties on alcoholic beverages by between 6.2 per cent and 12 per cent in 2014. The specific excise duty rate for traditional African beer will remain unchanged. Government proposes to maintain this benchmark by increasing the excise duties on tobacco products by between 2.5 and 9 per cent.

Government proposes to limit the increase in the general fuel levy in line with inflation in 2014/15. PwC supports this decision. The proposed increase of 12c/litre is less than the increase applied in 2013/14. The proposed increase for the Road Accident Fund levy of 8c/litre is equal to the adjustment in 2013/14.

Regulatory and other measures have been put in place to address the serious environmental consequences of acid mine drainage. To complement current efforts and ensure that the mining sector makes a fair contribution to continuing acid mine drainage expenses, consultations will be initiated with all interested parties on the best mechanism to use, such as an environmental levy or equivalent instrument.

National Treasury and the Department of Environmental Affairs agree on the need to align the design of the carbon tax and the proposed desired emission-reduction outcomes. To allow for this process and ensure adequate time for consultation on draft legislation, implementation of the carbon tax is postponed to 2016. BUSA and PwC welcome the Minister’s decision to delay implementation of the carbon tax for further consultation as a sensible one in the current circumstances.

SAIT notes that innovation is an important factor to stimulate economic growth and combat unemployment. According to SAIT, It was evident from the budget speech that there was limited support by Government to the private sector in the form of R&D tax deductions and R&D grants.

PPC recognises the need for a predictable and gradual transition to a climate change resilient economy in South Africa and supports South Africa’s national and international climate change objectives and obligations. However the proposed carbon tax, in its current form, presents PPC with the following key areas of concern:

· Timing of the implementation

· Structure and design of the tax formulation

· Issues of clarity and certainty, and

· Differentiating the cement industry from other economic sectors

PPC argues that the Carbon Tax is premature due to the adverse economic impact it will have on industry in the country, especially given the current emerging market circumstances.

The carbon tax, as structured currently, will negatively impact PPC’s profitability. Initially PPC may be able to pass the cost of the carbon tax onto the consumer. However this will not be sustainable in the long run because the carbon tax will make PPC’s products uncompetitive against imports from countries that do not impose carbon taxes. This will result in the company eventually having to absorb the cost of the carbon tax which may ultimately severely impact the PPC’s profitability and the viability of the business to operate.

PPC believes that the opportunity arising from the delay in implementing the carbon tax until 2016 must be utilized as an opportunity for robust and constructive stakeholder engagement and consultation. This is imperative in order to ensure that the carbon design, alignment and enabling legislation is sound and effective for differentiated sectors such as cement. Effective Border Exchange controls related to the import of cement from countries that do not impose a carbon tax are absolutely necessary to protect coastal manufacturing sites from unfair competition.

Tax administration

Over the next few months, a newly designed case sourcing system will be rolled out to improve internal efficiencies and compliance. Addressing non-compliance within the tobacco industry remains a priority. During 2013, 15 entities were identified as non-compliant with up to R1 billion worth of tobacco/cigarettes seized. Twelve criminal cases are being pursued. Consequences for non-compliance will result in withdrawal of licences and more inspections

National Treasury will conduct research, over the next two fiscal years, on effective tax rates for companies in different sectors; review of the VAT zero-rating provision for housing subsidies to eliminate practical anomalies; review of how educational services and public transport are treated for VAT purposes; review of the sustainability of the local government fiscal framework; and a review of the taxation of cooperatives.

The FFC supports the establishment of the Davis Tax Committee to review the country’s tax system as well as the range of environmental instruments under consideration. PwC had concerns with the alignment of unemployment insurance benefits and contributions, no adjustments to the monetary cap on deductible contributions to retirement funds have been proposed and there was no reference to the status of the proposed gambling taxes taxation of trusts in the 2014 Budget. PwC has also raised concerns about significant loss of resources in the legal tax unit at the National Treasury.

6. Committee discussions and observations

Having considered the 2014 National Budget and public submissions, the Committee observed the following observations from stakeholders, and furthermore the Select Committee on Finance amongst others, observed the following:

6.1 The FFC proposal that to achieve the projected economic growth need to be achieved in order to dispel the negative view of the Credit Rating Agencies, the government must address the leadership in labour markets, improve skills and education;

6.2 The Committee wanted to know if the FFC had any interactions with the advisory bodies such as the Parliamentary Budget Office and requested the FFC’s view on the PBO and how it can advance its support to Parliament. The Commission indicated that it has been assisting the PBO in building capacity and that its difficult to find suitable candidates with the relevant skills and that it will take long for the office to be fully functional based on the Commission’s own experience;

6.3 The FFC’s support of the NDP’s assertion that 10 per cent of GDP should be spent on growth, given the positive economic relationship that exists between GDP growth and infrastructure spending. The Commission cautioned about the weaknesses in implementing the infrastructure programme;

6.4 It is the FFC’s responsibility, amongst others, to ensure the allocation of resources, but lack of capacity hindered this and asked for the Commission’s intervention. The Commission view problems at local government as structural in nature, requiring human resources with the right skills to address;

6.5 The FFC’s view on contingency reserves and debt forecasts as a percentage of GDP beyond three years is that it is concerned that in an event of shocks, the country would not have a buffer given the level of reserves. According to international standards, debt optimality can reach 60 per cent as a percentage of GDP, therefore SA at 44 per cent, is lower; Furthermore, fiscal deficit narrowing is not sufficient, the economy should grow beyond 3 per cent to stabilize debt level to pre-crisis level;

6.6 NUMSA’s view on Credit Rating Agencies that the country should not panic and should not make use of them as these agencies tend to hold South Africa ransom. The Committee indicated that Credit Rating Agencies price the countries debt, and therefore are needed;

6.7 State owned entities money had not been spent according to the 2014 Budget Review. The Committee raised the issue around the degree of under spending and whether it was as a result of labour unrests and contractors.

6.8 NUMSA has social responsibility and could assist government to become more productive. NUMSA’s view was that the backlog on infrastructure cannot just be blamed on the Union;

6.9 Manufacturing Circle is concerned about the Rand’s strength or volatility and that the exchange rate volatility is but one of the problems that the sector faces;

6.10 Metope Investment Managers proposal to get the smaller investors into the big property market, which is that a framework be created for unlisted investors, with rules, to protect the smaller investors;

6.11 The difference between listed and unlisted investors in terms of business is that whilst listed investors enjoy benefits such as power to get finance at good rates, amongst others, the unlisted investors have no such advantages;

6.12 The Budget Expenditure Monitoring Forum (BEMF) proposals include transition tax, increased in social infrastructure, social solidarity tax, increasing taxation as a percentage of GDP, given the impact that these may have on the economy. The Committee further encouraged the Forum to attend the individual budget vote meetings in the fifth Parliament to raise their concerns;

6.13 PwC’s view regarding the proposed carbon tax, tax relief and tax incentives for SMMEs and that there were no tax provisions to support growth. PwC indicated that:

o A reform of the tax structure in terms of the level of taxation and tax mix is necessary;

o Personal Income Tax, Corporate Income Tax and the tax structure is out of sync with the international norms;

o There is a need to shift taxes away from income to consumption;

o It is not against the carbon tax but believe that a tax is not the only solution that government should explore;

o With regard to personal income tax relief, PwC expected partial relief and is of the view that the surprise revenue collection from Corporate Income Tax led to the relief;

o As far as it is concerned, the employment tax incentive is not available to SMMEs because if PAYE is not available therefore, the incentive is not applicable.

6.14 PwC’s concern about the number of vacancies at the National Treasury’s legal tax unit following 10 resignations of staff at senior level;

6.15 FEDUSA and BEMF’s concern that the 2014 budget is not gender sensitive. FEDUSA indicated that the budget should have addressed gender based violence and that the European Union utilizes a toolkit to determine whether the budget is gender blind or sensitive;

6.16 SAICA’s view on the contingency reserve is that given than only R4 billion had been set aside for the current financial year, SA is exposed to shocks. There is also a concern that these targets won’t be met and proposed that government should cut government expenditure, reduce corruption and address wasteful expenditure;

6.17 Ernst & Young’s view on e-commerce (making registration a minimum requirement) and the number of users registered for turnover tax (10 000);

6.18 SAIT’s view that VAT be increased above 14 per cent and to compensate for the poor, some basic items could be zero rated;

6.19 The Committee observed that the recommendations made by the Tax Review Committee had been incorporated into the 2014 Budget; and

6.20 The Committee further noted that the bargaining cycle at the Public Service Cordinating Bargainig Council (PSCBC) for government employees is coming to an end relating to remuneration for public servants.

7. Recommendations

Having considered the 2014 Fiscal Framework and Revenue Proposals and conducted public hearings, the Select Committee on Finance recommends that the House accepts the 2014 Fiscal Framework and Revenue Proposals.

The Select Committee on Finance further recommends as follows:

7.1 National Treasury should brief Parliament on a quarterly basis on the Employment Tax Incentives and monitor the implementation of this incentive to identify any unintended consequences. National Treasury should share with Parliament some achievements of this incentive (since it was promulgated into law) as well as detailed progress made into the incentive;

7.2 The Minister of Finance should develop further measures to enhance and monitor the implementation of entrepreneurship, SMME development and sustainability, increasing black participation in this sector, given the potential of small businesses to create jobs;

7.3 The Minister of Finance, together with other relevant government departments, should prioritise the implementation, monitoring and evaluation of programmes that target job creation;

7.4 The Minister of Finance should report on the reduction in core spending plans, including financing new policy initiatives from savings, efficiency gains and reprioritisation over the next three years; analysis of personnel spending and phasing out of projects that are ineffective or no longer aligned with policy priorities. This report should be submitted within 90 days of the adoption of this report by the House;

7.5 The Minister of Finance should report on government’s need to continue its strong focus on rooting out corruption, improving the efficiency and effectiveness of public spending and enhancing accountability of public officials with respect to performance. This report should be submitted within 90 days of the adoption of this report by the House;

7.6 The Committee noted the expenditure review process and recommends that in addition to that, National Treasury should enhance Monitoring and Evaluation programmes in departments to track progress made in achieving government objectives at policy level and report to Parliament;

7.7 National Treasury should encourage other government departments to assess the relevance of their programmes in terms of their efficiency and effectiveness in achieving intended policy objectives and also consider discontinuing some and introducing new programmes;

7.8 The Committee supports the implementation of cost containment measures and recommends that these measures are enforced in provinces and municipalities to encourage other innovative means to contain expenditure synchronised with improved service delivery. National Treasury should ensure that these measures are enforced and should report to Parliament within 90 days of the adoption of this report by the House;

7.9 The Committee noted significant progress regarding the appointment of the Chief Procurement Officer in the National Treasury, and the role played by National Treasury in combating corruption. However, the establishment of this directorate should be accelerated;

7.10 National Treasury should strengthen support to local government to ensure successful rollout of infrastructure and improved oversight. National Treasury should furthermore share with the House the impact of its established partnership with the Department of Monitoring and Evaluation on expenditure reviews to ensure greater understanding of performance and value for money;

7.11 SARS and National Treasury should simplify the process in order to fast-track registration for VAT on e-commerce services and ensure all businesses in this sector are registered as required by law;

7.12 National Treasury should provide Parliament with an analysis of infrastructure spending as a percentage of GDP over the medium term and, where possible, for the years beyond the MTEF. This analysis should be submitted within 90 days of the adoption of this report by the House;

7.13 National Treasury should provide Parliament with an update on the timeframe for the final implementation of the Special Economic Zones, including all tax incentives that have been announced for these zones. This report should be submitted within 90 days of the adoption of this report by the House;

7.14 National Treasury should report back to Parliament on the budgeted surpluses in the Unemployment Insurance and Workers Compensation Funds and the options for handling them. T his report should be submitted within 90 days of the adoption of this report by the House;

7.15 The Minister of Finance should ensure that National Treasury and SARS are adequately resourced, and should report to the House on the vacancies and measures available to fill critical positions specifically within the legal drafting unit. This report should be submitted within 90 days of the adoption of this report by the House; and

7.16 SARS should ensure that the 2014 Taxation Laws Amendment Bill makes provision for an increase in tax deductable for employees from the announced R350 000 annual ceiling, as contained in the 2013 Taxation Laws Amendment Bill.

8. References

Budget Expenditure and Monitoring Forum (BEMF), The People’s Budget Speech 2014, Cape Town, Parliament of RSA, 04 March 2014.

Business Unity South Africa, (BUSA) Submission to the Standing and Select Committees On Finance Fiscal And Revenue Proposals for 2014, Cape Town, Parliament of RSA, 04 March 2014.

Ernst & Young, (2014). Budget Speech 2014 Commentary on tax proposals , Cape Town, Parliament of RSA, 04 March 2014.

Federation of Unions South Africa, 2014 Budget submission to the Joint Standing and Select Committees on Finance, Cape Town, Parliament of RSA, dated 04 March 2014.

National Treasury, (2014), Medium Term Budget Policy Statement, Pretoria: Government Printers, also available online at:

Financial and Fiscal Commission, (2014), Briefing To The Standing And Select Committees of Finance On The 2014 Fiscal Frameworks And Revenue Proposals, Cape Town, Parliament of RSA, dated 04 March 2014.

Gordhan, P. (2014), National Annual Budget 2014’s Speech, Parliament of RSA, Cape Town, available online at: , dated 27 February 2014.

National Union of Mineworkers South Africa, (2014), NUMSA Response to the 2014/15 Budget, Cape Town, 04 March 2014.

PPC, submission to the Parliamentary hearings on the 2014/15 Budget, Cape Town, Parliament of RSA, dated 3 March 2014

Price Water House Coopers, (2014), Budget 2014 Tax Proposals, Cape Town, Parliament of RSA, dated 04 March 2014.

South African Institute of Tax Practitioners, (2014), Call for comment on the Fiscal Framework and Revenue Proposals: 2014 Budget , Cape Town, Parliament of RSA, 04 March 2014

South African Institute of Chartered Accountants, SAICA’s Comments on the Fiscal Framework and Revenue Proposals, Cape Town, Parliament of RSA, dated 04 March 2014.

The Manufacturing Circle, (2014), Submission to the Standing and Select Committees on Finance on The Fiscal and Revenue Proposals and Documentation regarding the 2014 National Budget, 04 March 2014.

Unlisted Property Funds Working Group (Metope Investment Purchasers). Presentation to the Finance Committee. Cape Town, Parliament of RSA, dated 4 March 2014

Report to be considered.


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