ATC201202: Report of the Select Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B26B - 2020] (National Assembly- section 77), dated 02 December 2020

NCOP Finance

Report of the Select Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B26B - 2020] (National Assembly- section 77), dated 02 December 2020

1.Introduction and background

Section 77 of the Constitution requires all money Bills to be considered in accordance with a procedure for passing revenue Bills established by the Money Bills Amendment Procedure and Related Matters Act, 2009 (Money Bills Act). Section 11 (1-3) of the Money Bills Act states that, in amending the revenue Bills, the Committee must ensure that the revenue raised is consistent with the fiscal framework; it considers equity, efficiency, certainty and ease of collection; the composition of tax revenues; regional and international tax trends and the impact on development, investment, employment and economic growth. Section 11 (4) further requires the Committee to hold public hearings on the revenue Bills and report to the house.

The Minister of Finance first introduced the draft version of the 2020 Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Rates Bill) during the February 2020 National Budget tabling. The Rates Bill was formally tabled in Parliament on 28 October 2020, together with the Medium Term Budget Policy Statement (MTBPS).

On 12 November 2020, the National Council of Provinces (NCOP) formally referred the Rates Bill to the Select Committee of Finance (SeCOF), for consideration and report, after the Standing Committee on Finance (SCOF) voted on it on 11 November 2020. The National Assembly (NA) passed the Bill on 17 November 2020 and on the same day, the Committee received a briefing from the National Treasury and the South African Revenue Service (SARS) on 17 November 2020.

The Committee held virtual public hearings on 24 November 2020. It received three oral submissions from Phillip Morris Pty (Ltd), Ms Corne Van Walbreek of the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town (UCT) and the National Council Against Smoking (NCAS).

2.Overview of the amendments to the 2020 Rates Bill

The objective of the 2020 Rates Bill is to fix the rates of normal tax; to amend the Transfer Duty Act, 1949; so as to amend transfer duty monetary thresholds; to amend the Income Tax Act, 1962, so as to amend rates of tax and monetary amounts; to amend the Customs and Excise Act, 1964, so as to amend rates of duty in Schedule 1 to that Act; to insert new tariff items; to delete tariff items; to delete rebate items; to insert rebate items; to amend the Carbon Tax Act, 2019, so as to amend the rate of tax; and to provide for matters connected therewith.

3.Key issues raised on the 2020 Rates Bill

The 2020 Rates Bill proposes an increase in the excise duty on tobacco from R16.66 per 20 cigarettes to R17.40 per 20 cigarettes, effective from 26 February 2020. The proposed price adjustment slightly increases the excise burden for tobacco above the targeted 40 per cent.

A concern was raised that the excise duties on tobacco is too low, and that it should be increased substantially to mobilise additional revenue and reduce consumption of cigarettes to improve health outcomes. Furthermore, it was argued that the threat that there will be greater illicit trade in tobacco with higher excise duties does not hold as non-price factors are more important in terms of the size of the illicit market.  The National Treasury’s response was that the Minister of Finance only announces changes to excise duties on tobacco in the Budget in February each year and that amendments will consider the impact of illicit tobacco, the administrative capacity of the SARS and the negative health impacts of tobacco.

A stakeholder argued that moving away from the full weight of the heated tobacco stick as the basis for excise towards a fixed R/c amount per stick is open to manipulation and the recommendation was made that the National Treasury should amend the base for the excise rate on Heated Tobacco from per kilogram to per kilogram “net”, to provide a level playing field for all participants in this market segment. On this matter, the National Treasury’s response was that the exclusion of the word “net” was not done erroneously as the application of the rate based on the weight of each heated tobacco stick would result in a tax per pack of 20 sticks that is close to 75 per cent of the tax paid on a regular pack of 20 cigarettes. It further explained that the initial classification of including heated tobacco products is broad and further refinements are expected to be made in the 2021 Budget.

4.Observations and recommendations

The Committee noted the concerns raised and the proposals made by the stakeholders. We have noted the National Treasury’s arguments that tax is a blunt instrument, that a substantial tax increase may not solve the health issues or entirely stop people from smoking and that to effectively address the tobacco problem, cooperation is required from other stakeholders such as the education and health sectors and law enforcement. The Committee further notes that the Standing Committee on Finance focussed on the illicit tobacco trade in the last term of Parliament and National Treasury, SARS and other agencies agreed on a programme of action on this to be reported on to Standing Committee on Finance, and that this matter has become part of National Treasury’s and SARS’ quarterly briefings to the Standing Committee on Finance. Stakeholders should consider approaching Standing Committee on Finance to raise their concerns further with that Committee.

Having considered the issues raised by the stakeholders and the responses of National Treasury, the Committee accepts the amendments. It further recommends:

4.1National Treasury, the South African Revenue Service and other relevant agencies significantly increase their efforts in addressing the illicit tobacco trade, especially in view of its upsurge with the Covid-19 lockdown restrictions and the even greater health challenges that the illicit tobacco trade poses.

4.2National Treasury should monitor the implementation of the policy on heated tobacco products to assess the outcomes.


The Select Committee on Finance, having considered and examined the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B26B - 2020] (National Assembly – section 77), referred to it, and classified by the JTM as a Money Bill, accepts the Bill.


Report to be considered.


The Democratic Alliance, Economic Freedom Fighters and Freedom Front + reserves their position on the report.



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