Hon Speaker, I would like to thank the hon Shivambu for this question. What he has asked about is not a new phenomenon for developing countries, and particularly for many of our countries on the African continent. Speaking for us as a country, let me say since 1994 our government has worked hard to ensure that we have systems, structures and institutions such as the SA Revenue Service, Sars, and the SA Reserve Bank, SARB, to look closely at the matters that he has raised.
Working together with these institutions as well as the prosecuting authorities, we have made, I would say, a great deal of progress in closing the loopholes that can be used for tax evasion. As I indicated in my previous response, the legal and financial regulatory framework to deal with illicit financial flows has been significantly improved in South Africa. It is sound and effective, and the SA Revenue Service continues to expand its revenue collections as a result of this. At the continental level, the recent report of the high-level panel on illicit financial flows from Africa aims to assist the continent to deal with this problem in a collective manner and to take steps to radically reduce those outflows and ensure that Africa's development resources remain on the continent.
The report itself recommends that existing laws which have proven successful in combating illicit financial flows should be replicated as global best practice and standards. It is noteworthy that the very same report makes mention of how South Africa's tax laws enabled our country to deal with a case of abusive transfer pricing and successfully reclaim up to US$2 billion of unpaid taxes.
As indicated by Minister Nene during his Budget speech, the government is taking a lot of steps to enforce our efforts to combat financial leakages. Thank you very much.
Hon Speaker, I think there might be some degree of conceptual confusion about tax evasion and aggressive tax avoidance.
The question that we have posed to the Deputy President is in relation to aggressive tax avoidance. The high-level panel on illicit financial flows says that the US$2 billion - that is, more than R20 billion - was recovered only from one multinational company and not from the whole phenomenon of transfer pricing and illicit financial flows.
As you know, the phenomenon of transfer pricing and illicit financial flows defines virtually all practitioners in the mining sector, including Lonmin in which Shanduka - his company - has shares.
Just over a very short period of time, R2,1 billion was lost in some subsidiary company of Lonmin, in a Bermuda type of situation. What exactly are the proper pieces of legislation that are in place to deal with that because we don't have a framework which combats that phenomenon?
If there were a framework, the crisis of transfer pricing and illicit financial flows would not be deepening. If you are saying it was there from 1994, then why is the crisis deepening? If there is legislation and prosecuting authorities are paying attention, why then is the crisis deepening?
Over R600 billion rand is lost to illicit financial flows. In South Africa this goes up to trillions of rands - that is R600 billion annually - that are lost because of mining operations of which some of you are beneficiaries as directors of these companies. What exactly is happening with regard to legislation, because what you are giving us now is a reflection of conceptual confusion and wrong information in terms of the actual phenomenon?
Hon Speaker, I don't know where the conceptual confusion comes from. The Minister of Finance addressed this issue, but much more than that, there are quite a number of initiatives which are under way.
The Davis Tax Commission is dealing with this matter and we will be coming up with a number of proposals that are going to make sure these illicit financial flows, be they in the form of transfer pricing or invoicing that is often incorrect, are actually dealt with.
I think we need to applaud our SA Reserve Bank as well as Sars, including the Financial Intelligence Centre, FIC, in that they have been able to keep a very close watch on these flows on an ongoing basis. And I think with the legislative proposals that the Minister will be coming up with, we will find many ways of combating all these problems. As the member is so well informed about all these matters, what I think will also be most helpful is for him to come up with suggestions on how all these things that he is aware of can be stopped and combated.
This is an area where, I would say, we all need to work together to come up with the bright ideas, which he seems to have, and put them on the table so that the Minister of Finance, as he brings forward legislation, can actually act on such wonderful suggestions. So, this matter is being addressed and there are legislative instruments that are going to be put in place. Thank you, Madam Speaker. [Applause.]
Speaker, Deputy President, what are the estimated amounts which could have been added into our economy through a legitimate inflow of taxes - noting the illegal transfer of monies and nonpayment of taxes by more than 500 multimillionaires and multibillionaires in our country? We just want an estimate.
One other area that we would like to know about are the types of legislative measures that are being put forward - I noted that the Deputy President stated that there are lots of measures - to stamp out the outflow of illicit finances. Maybe he could give us about three or five examples of these.
Also, what sanctions, through legislation, are in place to bring all culprits to book, noting the reports that came out in the newspapers two to three weeks back about a lot of people who have money in some of the banks outside the country?
Hon Speaker, the amounts that are involved in all of this are actually quite startling. They are huge amounts. The good thing is that they are now on the radar screen. In some cases they mention up R1 trillion that could have left the country in the past decade alone through the activities of large corporations and wealthy individuals, as well as criminal syndicates.
A Washington DC research and advocacy group, which is called Global Financial Integrity, believes that South Africa suffered illicit financial flows totalling more than US$122 billion - and that was between 2003 and 2012. Although they say not all of this money would have found its way into the state's coffers, some of it should have benefited the fiscus. That is what they say.
So there is quite a lot of money that should have found its way into the fiscus. This is precisely why I am saying that the Minister of Finance and indeed, the SARB, Sars and the Financial Intelligence Centre have this on their radar screen. Already the Davis Tax Commission has latched onto this matter and it is going to be addressed.
There will be legislative instruments or proposals that will come forward to combat this. This is money that should not be leaving the shores of our country. Now the important thing is that, on a global basis, this has now become an area of focus, and in our country as well, various institutions are beginning to focus on this and look at it.
Hon Gamede.
Hon Speaker, mine was pressed on the second question for a follow-up question and I am subject to your ruling.
The second question, the one that we have already passed?
Yes, hon Speaker. Hon Speaker, you skipped it.
No, your name didn't appear there so we now move on to hon George.
Speaker, South Africa seems disinterested in exercising the political will to tackle the problem of illicit financial flows. The Deputy President said, in the NCOP, that capital flows are necessary for economic growth and that the Reserve Bank and Sars regularly monitor the inflows and outflows of capital.
Illicit financial flows also relate to and fund human trafficking, possible terrorism networks and other illegal activities. Given recent reports that have painted South Africa as a hive of terrorist activity with wanted militants freely going about their business in the country, how and why have our financial intelligence services, police, security and intelligence services not prioritised the goal of shutting down these illicit financial flow conduits in the country? Thank you.
Hon Speaker, I think it is safe to say that this matter is under regular consideration. Also, as I have said, there are those institutions that are continuously looking at this and they literally go beyond the SA Reserve Bank and Sars. They also involve our security agencies. Those agencies are keeping a close watch on a continuous basis on all these matters, including human trafficking as well as illicit financial flows.
I would like the member to rest assured that the government, through its various agencies and institutions, is keeping a close watch with a view to making sure that our resources are kept safe. Soon we will be closing all the loopholes, or as many loopholes as we possibly can, because we are dealing with criminals and criminal syndicates that always reinvent themselves and reinvent new ways of doing things.
We are also going to keep on making sure that South Africans continue to lead their lives in safety and security. So, all these things are being closely looked at.
A number of my colleagues here, who are dealing with security matters, are on a daily basis seized with such matters and are looking out for people and institutions that want to flout our laws and do a whole number of things with regard to our laws. So I would like to give him that assurance that we are looking at all these issues.
Hon Deputy President, notwithstanding the fact that the Standing Committee on Finance has dealt extensively with profit-shifting, price transfer, illicit trading and tax avoidance in its exercise of fiscal oversight, and that such a matter can't be dealt with in unison within this current environment, would you kindly unpack the additional measures that the SA Revenue Service, Sars, and possibly the SA Reserve Bank, SARB, have put in place to curb elicit financial flows in a manner that will boost our current economy, as it is contracting. Thank you.
Hon Speaker, the SA Revenue Service, Sars, and SA Reserve Bank, SARB, have a number of measures as things stand now. What is now under way is that we are taking advice and proposals from various institutions, including the Davis Tax Commission, which is an important institution - as I have said, and I have said this a few times.
Together with Sars and the SARB, the government is going to examine all those proposals and measures. If these measures are not curbing tax avoidance, illicit financial flows and transfer pricing and if they are not doing the work effectively, the measures will be tightened up.
The advice and proposals that are coming from the tax commission are going to be very helpful indeed. To this end, the work of the portfolio committee is also commendable because as they exercise their oversight role, they do come up with a number of proposals that need to be taken up at the executive level.
However, also at the legislative level, that is, at the parliamentary level, members are free to come up with suggestions. There is no monopoly of wisdom in regard to this matter. We would like to put all the ideas on the table so that we can conserve the national resources of our country. Thank you very much.
The last Question was asked by hon E M Mthethwa.
Hon Speaker?
Yes, hon Shivambu.
I thought that in terms of the follow-up questions, there are supposed to be four. The hon member up there forfeited his time to ask a question. Is it possible that we take the name that is coming immediately ... [Interjections.]
No, hon member, we have taken four supplementary questions already. So, we are moving on to the next one. [Interjections.]
Hon Speaker, it was four including the hon member. [Interjections.]
No, hon Shivambu, please take your seat.
Measures to promote use of all official languages
4. Mr E M Mthethwa (ANC) asked the Deputy President:
Given the importance of the preservation and promotion of our diverse cultures and languages in the pursuit of socio-economic transformation, what (a) practical and positive measures has he planned or does he envisage to ensure that all indigenous languages are promoted to the same level as those given preference under apartheid and (b) measures does he envisage to encourage the private sector to provide a platform for the use of all the official languages?