ATC150625: Report of the Standing Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B15 - 2015] (National Assembly- section 77), dated 23 June 2015
Report of the Standing Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B15 - 2015] (National Assembly- section 77), dated 23 June 2015.
The Standing Committee on Finance, having considered and examined the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B15 - 2015] (National Assembly – section 77), referred to it, and classified by the JTM as a Money Bill, reports the Bill with amendments [B15A – 2015].
The Committee received a letter from the Minister of Finance, dated 12 June 2015, which proposed amendments to effect two technical corrections identified in Clause 6 and paragraph 6 of Schedule 1 in the Bill after it was introduced. In terms of section 14 of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009), the Committee may consider an amendment proposed by the Minister to make technical corrections. The corrections are as follows:
- The first relates to the formula for calculating exempt foreign dividends, to effectively tax foreign dividends that are not exempt from tax at a rate of 15% which is in line with dividends tax on local dividends. The current ratio is: “the number 25 to the number 41”. This ratio gives an incorrect result of an effective tax rate of 15.99% which is higher than the current dividends tax rate by 0.99%. In order to get an effective dividends tax rate of 15%, it is proposed that the number be increased from 25 to 26, to read as follows: “the number 26 to the number 41”.
- The second relates to the rates of normal tax for micro businesses. This is a typographical error whereby the amount of R355 000 has been used instead of R335 000. It is proposed that the typographical error be amended and the correct amount of R335 000 be inserted.
The Committee notes the following concerns regarding tax policy and the administration of taxes for the consideration of National Treasury and the South African Revenue Service (SARS):
- The tax treatment of middle-income earners, specifically how taxes impact differently on different strata of middle income earners. For example, sections of the newly emergent African middle class believe that the tax regime discriminates against them by not taking into account their historical exclusion from belonging to the middle class. They believe the tax regime should not treat them in the same way as the established middle class, which was privileged under apartheid. The Committee believes their case should be considered, while also recognising that the urgent need of the country to reduce inequalities requires all those who are better off, whatever their backgrounds, to contribute through fair and reasonable taxes to reducing these inequalities, even if there are a variety of other ways in which to reduce inequalities, including through economic growth, job-creation and development. The Committee has decided to organise a briefing on the fairness and other related aspects of the tax regime on different strata of the middle class. This will be held in the third quarter of the year and will include some relevant civil society stakeholders, the NT, SARS and other relevant parties.
- The Committee is concerned about some reports of IRP 5 forms reflecting overstated income, which leads to the individual taxpayer incurring higher tax liabilities. In terms of tax administration, the onus is on the individual taxpayer to provide SARS with proof that the information stated in the IRP5 form is incorrect. The Committee is of the opinion that it should not be the sole responsibility of the individual taxpayer to provide proof but that the employer should make every effort to ensure that the information contained in the IRP5 form is correct and, in addition, provide proof of salary slips and PAYE deductions. If this practice of overstated income is significant it may be necessary for SARS to have some sort of public awareness campaign on it.
- The Parliamentary Budget Office noted that effective personal income tax rates have declined since the 1990s and there is therefore some scope for increasing these - as proposed in the Bill. However, the rationale for using this mechanism, rather than (or in addition to) increases in the corporate tax rate and other measures, is unclear. While raising corporate tax rates may discourage investment, increasing personal income tax rates may reduce household demand and place further strain on households in the current economic environment. It would be useful to get more information on National Treasury's rationale for such proposals in future.
The Committee further reports that the Democratic Alliance (DA) reserves its position on the Bill.
Report to be considered
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