ATC201111: Report of the Standing Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B26 - 2020] (National Assembly- section 77), dated 11 November 2020
Report of the Standing Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B26 - 2020] (National Assembly- section 77), dated 11 November 2020
The Standing Committee on Finance, having considered the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B26 - 2020] (National Assembly- section 77), referred to it, and classified by the JTM as a Money Bill, reports the Bill with amendments [B26A – 2020] as follows:
- INTRODUCTION AND BACKGROUND
- The Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Rates and Monetary Amounts) was tabled in Parliament by the Minister of Finance, together with the 2020 Medium-Term Budget Policy Statement. The draft version of this Bill was part of the 2020 Budget announcements on 26 February 2020. Together with other annual tax bills, the Rates and Monetary Amounts Bill gives effect to changes in rates and monetary thresholds to the income tax tables, adjustment of transfer duty rates to support the property market and increases of the excise duties on alcohol and tobacco.
- The Draft Rates Bill was published by National Treasury for the second time on 31 July 2020 in order to solicit public comments on it, with a closing date of 31 August 2020. National Treasury and SARS hosted workshops with stakeholders to discuss their written comments on it, together with other tax bills, on 9, 10 and 11 September 2020.
- The Rates and Monetary Amounts Bill is a section 77 of the Constitution Bill dealing with national taxes, levies, duties and surcharges.
- The National Treasury and SARS briefed the Committee on the Draft Bill on 19 August 2020. Subsequently, oral presentations by taxpayers and tax advisors on these tax bills were made at hearings held by the Committee on 7 October 2020.
- On 13 October 2020, National Treasury and SARS presented its detailed responses to the Draft Bill to the Committee, addressing all the comments made during the public hearings and Committee deliberations.
- PUBLIC PARTICIPATION
- Before briefing Parliament on the Draft Tax Bills, including this Bill, NT reported that it received 112 written submissions from the public and responded to these comments. It also hosted workshop which ran for three days on 09, 10 and 11 September.
- After receiving the initial briefing from NT and SARS on 19 August, the Committee called for public comments and received comments from the South Africa Tobacco Transformation Alliance, British American Tobacco South Africa, Black Tobacco Farmers Association, Limpopo Tobacco Processors, and Phillip Morris. On the other Bills, the Committee received comments from Smartfunder, South African Institute of Tax Professionals, PwC, South African Institute of Chartered Accountants, South African Institute of Professional Accountants, Minerals Council, International Zinc Association, ArcelorMittal, Copper Development Association Africa. Metal Recycler’s Association of South Africa, Scaw South Africa, Tax Consult, EdNVest, Solidarity, Bowman’s, South African Petroleum Industry Association and, South African Informal Traders Alliance.
- The Committee held public hearings on 07 October 2020 and received oral presentations from the above stakeholders and the National Treasury and SARS made responses on 13 October 2020.
- OVERVIEW OF THE TAX PROPOSALS IN THE RATES AND MONETARY AMOUNTS BILL
- The Rates and Monetary Amounts Bill contained proposals to: fix the rates of normal tax; amend the Transfer Duty Act, 1949 in order to change transfer duty thresholds; amend the Income Tax Act, 1962 to change and fix the rates of tax and monetary amounts; amend the Customs and Excise Act, 1964, in order to do a number of this including to change rates of duty in Schedule 1 to that Act, insert new tariff items, delete tariff items, delete rebate items and insert rebate items; amend the Carbon Tax Act, 2019, in order to amend the rate of tax; and to provide for matters connected therewith.
- On transfer duty, the proposal is to increase the monetary values for Transfer Duty. This would make properties below R1 million (from R900 000) to incur no transfer duty, providing relief in the property market. The changes progressively affect other property values, providing similar relief.
- On fixing the rates of normal tax, the proposal was to provide relief on personal income tax through an above-inflation increases in the tax brackets and rebates. The fixing of these rates and benefits, including medical tax credits, are contained in Clauses 2 to 7 of the Bill and some are detailed in Schedule 1 of the Bill, affect individuals, companies and trusts.
- On Customs and Excise, the main proposals are to increase excise duties on alcohol and tobacco or inflation. Most of the public comments were on excise duties on tobacco and are discussed on paragraph 4 below.
- On Carbon Tax, the purpose was to increase the amounts imposed on greenhouse gas emissions per ton.
- KEY ISSUES RAISED DURING THE PUBLIC HEARINGS
- The main key issue on the proposals of this Bill in the public hearings was an issue of an increase of excise duties on tobacco. A proposal was made to increase the excise duty on tobacco from 16.66/20 packet of cigarettes to R17.40/20, with effect from February 2020. As a result of this the excise burden for tobacco is slightly above the targeted 40% of the retail selling price of the most popular brand.
- Most comments were in opposition to the increase in duty above the set 40% excise incidence. Other stakeholders submitted that tobacco and tobacco products should be exempted from any increase citing the challenges of COVID-19 and the need for industry to recover and citing the rampant illicit trade in tobacco. They emphasized the need for government to deal with illicit trade in tobacco. With regards to the increases above the 40% excise incidence opposition, NT responded that the 40% excise incidence was merely a policy guideline and that part of the policy was to increase the excise rates on tobacco by at least inflation or an amount to move towards the targeted incidence, whichever is higher, on an annual basis. The National Treasury further stated that the year-on-year increases on cigarettes prices by manufacturers had in the past been lower than excise rate increases.
- The Committee believes that SARS and law enforcement agencies should step up measures to curb illicit trade in tobacco, which is costing the fiscus billions of Rands every year in lost revenue. On 19 November 2019, the Committee hosted a meeting on illicit tobacco trade and highlighted its views that if nothing is done to curb the illicit trade, the legal tobacco industry will collapse. The COVID-19 lockdowns and rampant illicit trade has emphasised the urgency with which government has to move to curb the illicit trade on tobacco and strengthen its enforcement mechanisms. The Committee will continue to play its oversight role to ensure that enforcement measures are enhanced. The Committee however believes that this does not mean that there should be no increases in the excise rates, as the tax regime for tobacco products is aimed at dealing with the harm caused to health by consumption of tobacco.
- The Committee notes the mixed views on the proposed imposition of excise duty on e-cigarettes/vaping products. The Committee will deal with these proposals when they are presented in the form of a Bill in future.
- AMENDMENTS AND COMPLIANCE WITH THE MONEY BILLS ACT
- On 11 November 2020, the Minister of Finance, Mr Tito Mboweni, addressed a letter to the Committee to request technical corrections to clause 4 of this Bill, in line with section 14 of the Money Bills Amendment Procedure and Related Matters Act, 2009. The technical amendment corrects the paragraph numbers in line with the 2018 amendment to section 6A of the Income Tax Act, 1962. There is no request to amend the amounts of the medical aid credits.
- The Committee agreed with this technical amendment.
- The Committee reports the Bill, with amendments.
Report to be considered.
The DA reserves its position.
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