Tag Archive | standing committee on finance

FICA Bill could meet new task force deadline

OECD money task force waiting for SA  

….sent to clients Feb 7…. Chairperson of the Standing Committee on Finance, Yunus Carrim, made it quite clear in terms of parliamentary rules that further debate on the FICA Bill aligning SA to global money laundering task force requirements are confined to the President’s reservations about the Bill’s constitutionality on the issue of warrantless searches. Nothing else was to be debated or considered despite attempts, he said.

After a “suspicious delay”, to quote the Democratic Alliance, of over five months during which the President unexpectedly failed to sign the Bill into law, it was suddenly returned to Parliament with the query a few days before closure for the Christmas recess.

Playing for time

It is suspected that the President’s office might have been making a pitch for more debating time on the Bill in 2017 and to allow the Bill to be re-scrutinised thereby causing further delay or even allowing for an ANC motion to reject the Bill.  This is according to one Opposition member on the Committee.

Following this, in a meeting hastily convened before Parliament closed, parliamentary orders were changed and Chair Carrim re-scheduled the Committee’s last meeting which was to be held on the Insurance Bill.  He instead scheduled an urgent meeting to debate the President’s move, calling for both legal opinion from the State Law Advisor and the attendance of National Treasury to learn of implications caused by the delay.

Next move

As of the result of this last-minute meeting, Parliament and Carrim have to some extent countered what seemed the purposeful delaying tactic.    The Committee agreed to call for written submissions only, preferably containing legal opinion, on only the constitutionality of Clause 32, section 45B (1C) on warrantless searches, saying only such will be allowed and no generalised observations on any other clauses or the rationale behind the Bill will be heard.

In the meeting, MPs expressed anger at the waste of public money and even Chair Carrim expressed his frustration of having to go back to the drawing board on a Bill that had already been passed. “I am getting too old for these kind of games”, he said.

Carrim concluded, “This Bill was approved by Parliament in its entirety and by a majority vote after many months of debate. Legal opinion was called for on many aspects and its signature into law was urgently required to meet international deadlines. In terms of the Joint Parliamentary Rules therefore, only the one aspect that the President has queried could be considered and the Bill was to be returned with the opinion of this Committeeafter a vote in the NA.

Advice sought

It was agreed by the Committee that legal counsel specifically would be sought on the constitutional aspects raised and this would be returned together with the Bill as it stood for signature in an attempt to convince the President not to refer the matter to the Constitutional Court and further delay implementation of a law approved by Parliament.

Adv. Jenkins, State Law Advisor, told Yunus Carrim that he could see no grounds for the contention that the circumstances of warrantless searches were not properly circumscribed in the Bill and were thus legal. It was established that FICA had already conducted some 380 warrantless searches.

Adv. Jenkins pointed out that in terms of the Constitution and Parliamentary rules the President could only return a Bill once to Parliament, whatever the specific subject or subjects.  Thus, this was the only issue that should be debated and considered by Parliament.

It would also be preferable, he said, to return also legal opinion based on supporting input from public hearings, but he advised that once again this should be confined to the subject matter, i.e. warrantless searches.

Country exposed

Meanwhile, President Zuma’s obviously purposeful delays have exposed South Africa to further detrimental opinion from the Financial Action Task Force (FATF) who are holding a plenary meeting of the OECD in Paris in February, Treasury deputy director-general Ismail Momoniat told Chair Yunus Carrim.

South Africa could well be slapped with a warning letter or even a fine at taxpayer’s expense for failing to sign into law amendments to the Financial Intelligence Centre Act, he said, and added that this would not be helpful at the time of a Standard and Poor financial rating exercise to be carried out in the New Year.

Local banks at risk

Even a mild rebuke from the Task Force could have significant consequences for SA, DG Momoniat said, since it would raise concern among foreign regulators and banks about SA’s commitment to vigilant financial regulation.     This in turn would have a ripple effect throughout the economy since correspondent relationships between the global network of banks are vital to effect payment for South Africa exports and imports.

Carrim responded that of the two bad options resulting from the President’s actions, the least damaging was to ignore OEDC opinion for the moment, take proper legal counsel on the issue and await the opening of a new session in late January/early February 2017 for a water-tight case to go back to the President’s office. DG Momoniat acknowledged that Treasury noted the course that was being adopted.

Jeremy Gauntlett S.C. was to be contacted and the question of warrantless searches be considered by him, the wording revised if necessary according to counsel given and the Bill returned to the National Assembly for adoption based on any revisions, if made.

Rules for submissions

The final position was therefore that all submissions to Parliament had to only deal with the constitutionality of section 45B (1C) dealing with warrantless searches in clause 32 of the Bill and those making submissions were requested to provide legal opinions for their arguments .

It was suspected that Black Business Forum and other groupings would make a determined effort widen the scope of the deliberations.

Any submissions on other provisions of the Bill, not the subject of the hearings, had to be made separately in more public hearings to be held on “Progress on Transformation of the Financial Sector”, tentatively set for 14 March 2017. Those additional hearings will be advertised separately, said Carrim’s parliamentary notice when published.

Previous articles on category subject

FICA Bill : Hearings on legal point – ParlyReportSA

FIC Bill hold up goes to roots of corruption – ParlyReportSA

Red tape worries with FIC Bill – ParlyReportSA

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FICA Bill : Hearings on legal point

President Zuma vs Parliament on FICA Bill

…..editorial……The convoluted thinking that is taking place in South Africa to avoid the consequences of the law has once again become evident in the ongoing battle between the Presidency and the Standing Committee on Finance with the return  of the Financial Intelligence Centre Amendment (FICA) Bill  by the President to Parliament and therefore unsigned into law.

Worried by warrants

The President claims that for representatives of the Financial Intelligence Centre (FIC) to visit business premises and even homes under special circumstances without a search warrant and in cases where obtaining a warrant would defeat the purpose of the search, may be unconstitutional.   FIC, meanwhile, has confirmed in Parliament that between the years 2011 and 2016, 930 warrantless searches with the consent of those searched had been carried out by its inspectors.

Rare happening


The move
by the President, after five months of inaction, has now forced Parliament to seek the opinion of senior counsel to reinforce their views that warrantless searches are indeed acceptable in terms of the Constitution.   The FICA Bill was originally recommended for signature into law and sent to the President by no lesser body than the National Assembly, then concurred to by the National Council of Provinces, both on the advice of Parliament’s own legal counsel on constitutional issues.   This is normal procedure with every piece of legislation.


This reason for further delay on the President’s part must have raised a few eyebrows at the Organisation for Economic Co-operation and Development (OECD) centre in Paris.     As those in financial circles are aware, the Bill was tabled by the Minister of Finance with the objective of not only aligning South Africa’s banking and financial institutions with global financial advances but to counter growing and localised corruption and money laundering.

Hurry up and wait

This august body, the OECD, much maligned by the Minister of Mineral Resources in tandem with his opinions on the SA banking system, is currently awaiting South Africa’s confirmation that it will comply with the latest round of requests for compliance with the fourteen rules, now amended, to counter international financial terrorism and extend the OECD’s ability to combat international money crime.

Warrantless searches are allowed in most major countries where compliance with OECD conditions are sought but in the same countries, as has been worded in the FIC Bill, the circumstances to allow this only in cases of suspected money laundering are specifically worded and this includes cases where the application for a warrant or a delay in obtaining a warrant would remove the element of surprise.

Treasury wanted immediacy

The request for South Africa to conform is more specific in terms of the requirements of the Financial Intelligence Task Force (FATF), better known by banks as the criminal investigation department of OECD.    A date for compliance was set by them in February 2017 and agreed to by South Africa. The banking sector is ready to implement the new rules both in staffing terms and with systems and procedures waiting. Minister Pravin Gordhan and some senior ANC party members have been vocal with their suspicions for the delay.

Mystery motives

In what appears to be almost Machiavellian in political terms, the President, with the knowledge that he must have that Parliament was about to close for business, might, according to some MPs, have lodged his further objections to the Bill in the hope that further support for his views could be garnered from subsequent hearings, submissions and more debate.

Chair of the Standing Committee on Finance, Yunus Carrim, countered the President’s unexpected move by cancelling urgent meetings on the Insurance Bill, scheduled for debate and hearings on the last two days of parliamentary business, and called for an urgent meeting of his Committee.  

Advocate Frank Jenkins, Parliament’s legal adviser, was asked to attend and give opinion, together with manager of FIC, Pieter Smit.   Also attending was the Deputy Minister of Finance, Mcebisi Jonas and National Treasury deputy DG responsible for FIC matters, Ismail Momoniat.

Carrim firm on subject

Adv. Jenkins confirmed the sections of the Constitution provided for a Bill to be returned but only once and on specific issues.  He saw the President’s action as unusual in that a Bill, worked on for two years with every clause scrutinized and with input from constitutional experts, could be returned at such a late stage with so much time having elapsed during which an objection could have been easily submitted.

He then explained to MPs how the Constitution does indeed allow for warrantless searches in terms of the Constitution’s specific wording on the subject matter. He listed six precedents of Bills passed into law recently where warrantless searches are allowed in certain prescribed circumstances in terms of the Constitution.   He said this was not a complicated issue at law in view of precedent.

No good choices

Chair Carrim said he had no choice but to treat the FATF issue as the least worst of bad scenarios and he was forced to apply parliamentary rules to the issue in order that the President’s move could be countered with indisputable legal fact and by applying parliamentary rules objectively and strictly. He wanted to observe protocol so that the matter could become “de-politicised”.  

He said the media had called him “brave” to stand in the way of the President’s obvious wish.   This was not the case, he said, but just a matter of following the rules and respecting the fact that Parliament was the final arbiter in such matters since Parliament represented each and every citizen of South Africa.

The response

The rule, Adv. Jenkins explained to the Committee, was that should a Bill be returned to Parliament by the President, having been beforehand approved by the House on every issue in the Bill, then only the specific point, i.e. warrantless searches, could be discussed and debated subsequently and altered if seen fit. This was stated in the Constitution.   The Bill could then be returned to the President with Parliament’s view on the subject matter alone.

He said that should the Committee decide that the President’s view was a baseless argument then they could probably avoid the President referring the matter to the Constitutional Court with further long delays by supplying advice from counsel.  Chair Carrim agreed with this suggestion and with Committee approval across all parties the call for legal submissions in the form of submissions in the New Year and the matter down for hearings and debate in Parliament after it opens in February/March 2017.

Hands off the Bill

Parliament could then return the Bill to the President, Carrim explained, with full legal constitutional opinion and throughout the whole process, only the issue at hand, i.e. warrantless searches, would be allowed for debate.   No other substantive issues could be raised, debated or voted upon as the Bill had been approved by Parliament, Carrim said, and only one issue was under scrutiny.

He said, this would be clearly advertised when calling for submissions and the Speaker asked to observe the rule in any subsequent National Assembly debates.  Any other comments and observations would be regarded as irrelevant.  As far as the OECD was concerned, this was a risk that Treasury would have to handle in their meetings with OECD but this route, Yunus Carrim felt, was the better option.

Believe it or not

For the five months that President Jacob Zuma has been refusing to sign the Bill into law
and refusing to give any reason other than finding the time to “apply his mind to the issue”, any amount of publicity on the need for speed must have landed up on the President’s desk
, even if  just legal advice on the subject instructed by the President.   Lying to Parliament has now become a presidential practice, cartoonists Jonathan Shapiro, Neale Blandan and Jeremy Nell having turned President Zuma’s relationship with Parliament into an art form. 

The “G” factor

As far back as 2009, the OECD published a list of countries divided into three parts, all depending on how or whether they complied to “internationally agreed tax standards”, in select jurisdictions, tax havens or other financial centres of interest and whether they had implemented appropriate legislation in line with OECD requests.   

The procedures are now part of standard international banking procedure but now relate specially to identifying money movements of “prominent persons” and where money laundering seems possibly to be evident.

Whether the President, as the most elevated and “prominent person” in the country, might be trying to protect himself or other “prominent persons” including friends and associates alike against investigation into money movements is not, however, the main issue.

All suffer

The far more serious issue is that the President’s seeming neglect in responding for months has exposed the country’s banking and financial systems to risk.  This is quite outrageous.  The President may or may not have a good argument that it is constitutionally inviolate for the FIC to search without a warrant and possibly with or without warning beforehand  but it seems a stretch of the imagination, given his track record, that he is morally indignant.

Parliament has now issued a gazette calling for comment with the following proviso: “All submissions must therefore only deal with the constitutionality of section 45B (1C) dealing with warrantless searches in clause 32 of the Bill.     As the hearings are on the constitutionality of warrantless searches, those making submissions are requested to provide legal opinions for their arguments if possible.  No consideration can be given to submissions dealing with any other provisions of the Bill.”

Hearings are promised as well in mid-March 2017 for  generalised input on the legislation, part of Chair Yunus Carrim’s call for Parliament to investigate “transformation in the financial sector.” 

 

FIC Bill hold up goes to roots of corruption – ParlyReportSA

Red tape worries with FIC Bill – ParlyReportSA

Madonsela: state capture and corruption linked – ParlyReportSA

 

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PIC comes under pressure to disclose

Unlisted investments of PIC queried….

matjilaWhen asked for information on how the Public Investment Corporation (PIC) had invested its funds, Dr  Daniel Matjila, Chief Executive Officer, told parliamentarians that the most he could do, even with ‘listed’ investments, was to give only names. Any terms and condition of any investment agreement could not be made public. On ‘unlisted’ investments, he held back completely.

He was then formally asked by David Maynier (DA) if the PIC had invested, directly or indirectly, any funds in any Gupta-owned enterprise. He was also asked for details of any financial implications upon the Government Employee Pension Fund (GEPF) and other pension fund assets resulting from the dismissal by the President of former Finance Minister Nene.

Confidentiality

Dr Matjila responded that the fund “could not cross the line of disclosing private information” and the members ofPIC logo.2 the Standing Committee on Finance, before whom he was appearing “should not read into his statements any insinuation that the PIC was protecting information.” He noted that he was totally aware of the fact that the PIC was under investigation for passing funds to the ANC and any such idea “was totally false”.

As far as funds to any Gupta owned business was concerned, Dr Matjila replied that the organisation stood by its earlier answers to the media that it had not invested directly in any Gupta owned enterprise. Following this remark, ANC MPs stood by Dr Matjila and told Opposition members that the PIC could not become “entangled” in such questions which were veiled with gossip and insinuation. It was the word “directly” used by Dr Matjila that caused the question.

Sub-judice

yunus carrimThis point was emphasised by Yunus Carrim, Chairman of the Committee, that most of the questions that were concerning Mr David Maynier should only be dealt with after the investigation of the possibility of ANC funding by the PIC had completed its course. He said that Dr Matjila was bound by circumstances to say nothing.

Present at the standing committee meeting was Deputy Minister of Finance, Mcebisi Jonas, who said the reporting process of h a pension fund to the committee should not get side-tracked with politically motivated questions. Maynier had asked this time about the possibility of “indirect” investments by PIC of any Gupta businesses.

On the issue of the effect of the ‘9/12 issue’, as referred to by Dr Matjila when Nhlanhla Nene was fired, he reported that the impact of this event had caused “significant losses” to the PIC portfolio. The GEPF lost R95bn, the Unemployment Insurance Fund lost R7bn and the Compensation Fund had lost R3bn – all managed by PIC and the event had been most worrying.

However, he said that the performance of all the funds had been subsequently excellent in the sense that recovery was achieved quite quickly – in fact “the recovery represented more than all the PIC funds lost within those two days of crisis.”

Information withheld

David Maynier (DA) remarked that funding was still shrouded in mystery and that he was “extremelydavid maynier uncomfortable” that the PIC would give no information at all on the “unlisted” investments of PIC.

Reporting generally, Dr Matjila said the fund had benchmarked itself and its operations compared favourably with “top private sector investment companies”. The GEP Fund “had shown over five years a 14.3% interest factor compared, he said, to a global median of 9.9% and a local investor median of 10.1%.” It had invested approximately R33.9bn in numerous portfolios aimed to drive transformation and create jobs, he said.

He told parliamentarians that the PIC “had invested approximately R33.9bn in numerous portfolios aimed to drive transformation and create jobs.” He said any risk taking was carefully managed and remained on the conservative side. Furthermore, he assured MPs that PIC did not take any risk that could not be “managed”.

Listed investments growing

Dr Matjila said that for all investments, the total allocation was now R400bn and “partners were always sought that would make positive returns”. ‘Listed’ investments in the last five years had grown from R495bn to R892bn recording a growth factor of 12.5% per annum.

vodacom logoThe PIC always held to principle, he said, that there was always a need for BEE compliant businesses to be considered so that it attracted a portion of government expenditure. ‘Unlisted’ investments, nevertheless, had large share of the market holdings, he said, with roughly R55 billion allocated to this form of investment. The total allocation for PIC investments, including GEPF and UIF, was approximately R400bn.

On investment policy, Dr Matjila said that his team liked to look at partnering with other stakeholders that added value and knowledge to make sure that maximum benefits and input from any arrangement were received.

Downstream SMME outlets

On SMME development, Dr Matjila said that PIC was “in discussion with groups such as Spar and Woolworths to ensure that small business was represented in their current growth patterns.” He said it would seem important for PIC to participate further in the Barclays Africa “sell down”. PIC, he noted, had invested in many international and local companies with assets within South Africa “in order to drive economic growth and increase job creation.”

Dr Matjila turned finally to ‘unlisted’ investments and said PIC had a slate of roughly R55bn to work from. Such investments were usually international, he said, and were not necessarily BEE compliant. David Maynier (DA) asked whether the GEP Fund management was “comfortable with the fact that a confidentiality clause existed on so many investments and the fact that disclosure to Parliament was denied.” Some ANC members also mentioned disquiet on this issue. Maynier said he intended to pursue the issue of non-disclosure of “unlisted” investments further.

Previous articles on category subject
Retirement savings subject of treasury probe – ParlyReport
Treasury calls for “Twin Peak System” with two financial bills – ParlyReportSA

 

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Africa Money

Davis Tax Committee Estate Duty report for comment

Estate Duty report follows VAT proposals….

JudgeDennisDavisThe Davis Tax Committee (DTC), formed by previous Minister of Finance, Pravin Gordhan, in 2013 to assess South Africa’s tax policy, has released the Second Interim Report on Estate Duty for comment by 30 September 2015.

This follows the release of an earlier interim report on Value Added Tax during the first part of July.

In issuing the most recent report, the Estate Duty Sub-Committee said it had “consulted widely and took into account seven submissions from the public as a result of the invitation being made at the beginning of June”.

Wide coverage

The areas covered include avoidance; the formation of trusts; interposal requests; donations tax; capital gains tax; abatements and retirement funds. As a result of the submissions and further submission, the results for further comment are to be found on the government website.

The Value-Added Tax Interim Report, published a few weeks ago by the DTC, has a submission final datenene 2 also of 30 September and in this case 23 submissions were considered – finance Minister Nhlanhla Nene having seen the results already.

Looks like 1%

This report covered taxpayer compliance and the tax gap; structural features such as zero-rating; dual rates; exemptions; place of supply rules and e-commerce; and the macroeconomic impact of a hike in VAT.    The media has so far made extensive comment on VAT and a figure of 1% increase has been debated in public. No official confirmation of this at parliamentary level can be found.

In presenting to Parliament, the DTC recommended that raising VAT would be a more efficient way of boosting revenue than increasing direct tax. The DTC recognised that a VAT increase would also hurt the poor but, in contrast, by increasing personal or corporate tax rates such would cause less inflationary pressure.

The DTC said “It is thus clear that from a purely macroeconomic standpoint, an increase in VAT causes less distortion than an increase in direct taxes”. The Standing Committee on Finance were told, upon the release of the first interim report, that government may have to consider compensatory mechanisms, such as increasing social grants, to help shield the poor if the VAT rate was raised. No opposition to such measures were recorded at the time.

Zero food ratings misplaced

foodThe committee, headed by Judge Dennis Davis as usual, strongly recommended that no further zero-rated food categories be considered, noting there was clear evidence that zero rating certain foods – such as fruit and milk – benefited richer households more.

In general terms, experts on the subject have noted that the DTC recommended that the introduction of a capital transfer tax should be postponed pending further research on its suitability in the South African context.

They say the DTC also would like to see foreign trust distributions to be taxed as income; a review of criminal offences under the Tax Administration Act and inter-spouse exemptions and “roll-overs” and the all procedures involved either to be dropped or limited.

Basic tax rates maybe stay

Africa MoneyA call was made for the primary abatement be increased to R6m per taxpayer and that the current flat rate of 20% should not be increased. Comment by the DTC on these latter issues is awaited.

In all likelihood, these issues will finally reach Parliament in the form of Money Bills tabled by Minister Nene.  As such, this would mean that Parliament may hold hearings, debate the Bills and even call for submissions but any recommendations by Parliament would have to be referred back to the Minister who retains the final say as to what is submitted for vote. Final assent remains with the President.

This current period of public participation is therefore the most critical in terms of contributions to be made.

Other articles in this category or as background
SARS understaffed to deal with transfer pricing – ParlyReportSA
Transport ministry studies taxi, e-tolls and rail – ParlyReportSA
Treasury’s plan for carbon tax – ParlyReportSA
Treasury calls for “Twin Peak System” with two financial bills – ParlyReportSA

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Five Rand

Parliament steps up its financial oversight role

Nene briefs parliamentary oversight chair Carrim…

Commencing its work for the fifth Parliament, the standing committee on finance passed a resolution, before the recent recess, following a strategic plan briefings from SARS and Statistics SA, to step up its oversight on treasury and all other government institutions concerned with finance.

Whilst Parliament’s oversight role on the executive is a constitutional requirement, new chair Yunus Carrim, a diligent parliamentarian who has a record of running a particularly “tight shop”, appears to be fully aware of the mood of the public on state funding and that consequently the current oversight situation is not “business-as-usual” .

Reporting to Carrim and the joint standing committee, finance minister, Nhlanhla Nene, said South Africa’s economy was growing at a moderate pace but was still performing below expectations.

Picture changing

He said South Africa had to grow faster in a way that advanced the interests of the poor and which eliminated poverty. He also asked MPs to be aware that treasury’s strategic plan had been developed at a time of a better global outlook.

He said that whilst the global economic environment is showing signs of improvement, it also remains below optimal levels.   “South Africa is not an island, cut-off from the rest of the global economy”, he said.  “So our economy is performing way below the level of growth that is required to deal with the country’s triple challenges of unemployment, poverty and inequality”.

SARS, he said, was poised to collect R1 trillion in revenue but the volume of national government debt would increase from between R1.4 trillion to R2 trillion in 2016/17, the equivalent of 43% of GDP.  Projected growth figures, minister Nene told parliamentarians, would be provided when the Medium Term Budget Policy Statement was tabled later this year.

At this stage he saw no cutting back on budget votes as provisions were in place to cut back should the situation demand it.

Big backing for state lending

In the current financial year, minister Nene said, the government will recapitalise the Land Bank with R500m and DBSA with R2.5bn.    He said he would also “continue to engage with the various unions and stakeholders to in an attempt to enable a government retirement system to offer good value and protection for retirement savings.”

Finally, he said, he was committed filling all vacant positions in treasury “in order to enhance the functioning of the institution” which he saw as a pillar of the economy.   However, “stringent measures” were already in place to control over-spending or wasted expenditure by the public sector.

Treasury DG, Lungisa Fuzile, in presenting detail of treasury’s plan for the next five years, said there would be more reform of the financial sector so that it was more tightly regulated.

Down the line purchasing

In the coming year, national treasury department planned to implement an upgrade of the management of state financial systems which would allow government to control its supply chain business more efficiently. A new office of Chief Procurement Officer had been given an elevated function in line with reforms in order to centralise procurement and to save costs, in the meanwhile reducing financial leakages.

It was part of the strategic plan to immediately create a technical support programme for infrastructure, he said, and a technical advisory centre was to be completed, which had, as its mandate, oversight of major capital projects on a top priority basis.

DG Fuzile also told the MPs that further priorities were the completion of financial agreements with BRICS countries.  An example of this was the recently much publicised  establishment of a bank and a pool of virtual reserves, not in competition with the IMF, but giving alternative propositions.

Pensions to be re-engineered

Also important, he said, was that public service pensions, both civil and military, administered by the government pension fund would have their business processes “re-engineered and modernised.”

Members of the standing committee expressed the view that the deficit on the current account was of concern to them, as was the balance of payments position. Chair Yunus Carrim requested that parliamentarians be updated immediately on the work of the Davis Tax Review Committee.

Other articles in this category or as background
http://parlyreportsa.co.za//cabinetpresidential/lock-parliament/

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New taxation regimes before Parliament

Introducing DTI’s SEZs….

A Taxation Laws Amendment Bill, with its tandem enabling Bill, the Tax Administration Laws Amendment Bill, are both before the standing committee on finance giving effect to most of the tax proposals announced in the 2013 budget review.

Probably the most important for economic growth is the proposed beneficial tax regime for companies that decide to take advantage of the new Special Economic Zones Bill introduced by minister of trade and industry, Dr. Rob Davies, and now almost finalised by Parliament.

Export incentives

Other tax proposals are to back up the cabinet wish to revitalise South Africa’s maritime sector with an attractive tax regime to encourage exports, mainly using Africa coastal routes.

Minister of finance Gordhan Pravin’s tax proposals also include moves to discourage profit-shifting through excessive interest deduction and the use of artificial debt and the payment of certain dividends which gain tax deductions.

Provident funds

Retirement fund deductions are affected as from next year, as will be certain matters regarding provident funds. Most important are the easing of conditions under which low-income employees are acquire houses at below market value without tax being payable under the current fringe benefit system

Foreign e-commerce suppliers are to register for VAT.

There are a number of changes affecting the completion of tax forms  and there are new regulations for tax practitioners, mostly involving the principle of “accountability”.

Treasury has promised specific legislation on the employment tax incentive and waste discharge incentive charges later this year and comments on both Bills will be close early in August in order for the money Bills in question to be processed by September.
Refer previous articles in this category
http://parlyreportsa.co.za//finance-economic/dividends-withholding-tax-arrives-on-time/
http://parlyreportsa.co.za//cabinetpresidential/pravin-gordhan-best-budget-vote-speech-of-the-year/

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Treasury sticks to its guns on carbon tax

2015, only if implementable….

nattreasury logoNational Treasury is still planning to introduce a carbon tax on January 1, 2015, but chief director for economic and tax analysis, Cecil Morden, told business that government will only move ahead when it is satisfied implementation possibilities.

In Parliament, when asked by members of the finance standing committee if this was “yet another revenue tool”, he said the primary objective of implementing carbon taxes was to change future behaviour before it was too late.

Doing our own thing

“The clock is ticking”, said Morden.   He asked parliamentarians not to diminish South Africa’s role as a potential leader on the issue with carbon tax. “The USA is paralysed and if we do nothing because China and the USA does nothing, we would have lost the opportunity to start at a lower level, do things slowly and sensibly, with marginal steps towards inevitable change.”

Confronted at a National Business Initiative meeting in Johannesburg calling for more information on the tax and answering further queries as to such a tax was necessary at this stage of South Africa’s development, Morden said that more clarity would be provided in the draft legislation.

At the moment a policy document on the tax has been published by Treasury for public comment.

Phasing in

The tax is proposed at a rate of R120/t of carbon dioxide equivalent, increasing at 10% a year during the first phase, from 2015 to 2019 and the legislation, of which a draft has yet to be published as a result of the current public comment period. This would give the detail, Morden said. It would describe the tax-free thresholds for each sector and possible offset structures.

Morden acknowledged that there might still be gaps, but encouraged stakeholders to highlight these in their written responses and to make proposals on how these could be filled.

We’re not tax collectors

Again he denied, as he did to opposition members in Parliament, that the carbon tax was nothing more than a revenue-generation exercise and disagreed flatly with the argument that such tax proposals were not a priority in the context of the country’s other socio-economic, skills and infrastructure problems.

Morden countered his Johannesburg questioners in the same manner as he did in Parliament on to why the tax was necessary; saying, “We do not have to have a carbon tax to raise revenue as suggested and the gradual introduction of a carbon tax should been seen as a contribution to the international agreements on climate response that South Africa has already agreed to and the consequent necessity to reduce South Africa’s greenhouse-gas emissions.

Tax to be fed back somehow

The National Treasury would not, however, entertain “hard” earmarking or ring fencing of the revenue accumulated but would consider other recycling mechanisms, including “soft” earmarks in future Budget undertakings; reducing other taxes and levies; and the introduction of new incentive schemes.

More background articles on subject
http://parlyreportsa.co.za//energy/gigaba-to-line-up-eskom-for-carbon-tax/
http://parlyreportsa.co.za//cabinetpresidential/carbon-tax-not-popularly-received-by-parliament/
http://parlyreportsa.co.za//energy/parliament-briefed-on-new-climate-response-policy/

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Carbon tax not popularly received by Parliament

Public comment still open…

emissionsgraphicNational Treasury has released more on carbon tax with the publication of a policy paper making at the same time a final call for public comment on the whole issue of carbon tax before the expected draft bill becomes reality.

Furthermore, the policy paper has again been re-presented to the standing committee on finance in its updated form. It was not popularly received by opposition members and some ANC Alliance critics. Details on these meetings will follow on this website after client reports have been digested.

Not necessarily a done deal

The updated carbon tax policy paper, “Reducing greenhouse gas emissions and facilitating the transition to a green economy” is now in circulation and includes input from the previous round of public comment.

Still calling for an initial tax rate of R120 per ton of CO2 emissions in the first phase of five years starting 1 January 2015 and staying until 31 December 2019, this will be followed with yet another phase but 60% of actual emissions will not be taxed initially.

According to departmental calculations, this will mean the effective tax rate will range between R12 and R48 per ton of CO2e during the initial phase, it was said.

Treasury insists tax is to change behaviour

During the first phase the agricultural and waste sectors will be exempt and a tax free threshold of up to 70% will also apply in the electricity sector. Treasury stated in their recent presentation to Parliament that the intention behind the tax is to change behaviour, meet international obligations and not so much to raise additional revenue.

Opposition members said that industry would not agree with this potential investors.

Written comment is invited until 2 August 2013.

The following articles are archived on this subject:
http://parlyreportsa.co.za//energy/parliament-briefed-on-new-climate-response-policy/
http://parlyreportsa.co.za//uncategorized/integrated-energy-plan-iep-is-not-crystal-ball-gazing-says-doe/
http://parlyreportsa.co.za//energy/manufacturing-fighting-to-survive-in-sa-mps-told/

Posted in Cabinet,Presidential, Energy, Enviro,Water, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, Land,Agriculture, LinkedIn, Mining, beneficiation, Public utilities, Trade & Industry, Transport0 Comments

Parliament debates three financial market and tax Bills

A series of three pieces of financial legislation have been tabled in Parliament by the minister of finance, Pravin Gordhan, namely the Financial Markets Bill, the Credit Rating Services Bill and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

The standing committee on finance originally called for written comments by the end of May on the Financial Markets Bill, numbered B12, heard on 30 May 2012, the purpose of the Bill being stated to:

• Provide for the regulation of financial markets; • Regulate exchanges, central securities, clearing houses and trade repositories • Regulate and control securities trading and the administration of securities • Prohibit insider trading and other market abuses • Provide for the approval of nominees • Provide for codes of conduct • Replace the Securities Services Act, 2004 for the reasons given.

The same committee called for written comments by the same date on the Credit Rating Services Bill, numbered B8, now also heard, the purpose of the Bill being to:  • Provide for the registration of credit rating agencies; • Provide for the regulation of certain activities of credit rating agencies; • Provide conditions for the issuing of credit ratings and rules

The third Bill  tabled before the Standing Committee on Finance is the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, numbered B10, public hearings having taken place and deliberations now scheduled.   The purpose of this last Bill is to: • Fix the rates of normal tax; • Amend the Income Tax Act, 1962, amending rates and monetary amounts • Amend the Customs and Excise Act, 1964, so as to amend rates of duty

Deliberations by the finance committee on all three Bills will continue in June.

 

Posted in Finance, economic, Trade & Industry, Uncategorized0 Comments


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