2022 Fiscal Framework and Revenue Proposals: public hearings

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Finance Standing Committee

02 March 2022
Chairperson: Mr J Maswanganyi (ANC) and Co-Chairperson: Mr Y Carrim (ANC, KZN)
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Meeting Summary

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2022 Budget Speech & Key Documents

In this virtual meeting, the Standing and Select Committees on Finance held public hearings on the 2022 Fiscal Framework and Revenue Proposals. Nine organisations presented brief oral presentations.

The South African Institute of Chartered posed a number of questions of Parliament relating to the fiscal policy framework, specifically Parliament’s mandate as an oversight body in holding the Executive to account. Concerns were raised about the accuracy of the debt level estimates, considering the historical inability of government to keep to expenditure/debt levels.

The South African Institute of Taxation was concerned about the loss of interest in depreciation, since depreciation incentives were well targeted. Questions of taxpayers rights were raised, particularly where the South African Revenue Service was concerned.

PricewaterhouseCoopers presented its submission on the 2022 Fiscal Framework and Revenue Proposals. The continued policy commitment to avoid tax rate increases, by expanding the tax base through stronger economic growth, employment and enforcement, was fully supported. The objective of fiscal and debt consolidation was welcomed. Permanent expenditure increases would need to be matched with permanent revenue or expenditure reductions elsewhere. A mitigating factor was the conservative revenue forecasts of the 2022 Budget.

The Congress of South African Trade Union welcomed the R350 Social Relief of Distress Grant extension. The Congress supported the Presidential Employment Stimulus but was disappointed about the funding cut from R24 to R18 billion. It suggested that the pension relief legislation needed to be fast-tracked. Concern was raised about the billions lost to corruption and wasteful expenditure, given that no plans were in place to tackle it.

The Healthy Living highlighted that the Health Promotion Levy had already proved to be an important, cost effective and evidence-based preventive mechanism. However, its current form carried serious weaknesses that needed to be addressed. Despite increases in 2019 and 2022, there was a lack of consistent annual increases to the levy, which meant that it had decreased slightly in real terms since 2018.

Members of the Committee asked a number of questions. Clarity was requested about the reduction needed to avoid a fiscal cliff. It was asked what the South African Institute of Taxation would recommend in relation to tax incentives for investments and if there needed to be tax reductions. The work of the South African Revenue Service was noted, however the need for taxpayer rights was welcomed, particularly where timeframes were concerned. A number of Members agreed with the suggestion that there needed to be a list of all State Owned Enterprises as it would be important in determining future risks for the Country. Concern was raised about the declining value of State-Owned Enterprises in South Africa. Clarity was requested about the matter of e-tolls which was not given much attention in the Fiscal Policy. It was asked that the survey conducted by the Healthy Living Alliance be shared with the Committee. A Member asked what role the Healthy Living Alliance played in the school nutrition programmes. It was suggested that generalisations should not be made about the situation of farmworkers on farms, wherein ‘isolated events’ occurred. A member suggested that the issues raised by the Women on Farms Project be directed to the Minister of Employment and Labour and the Portfolio Committee on Employment and Labour. It was noted that the loan for Small Medium and Micro Enterprises had not been maximally used in 2020, it was asked how proper use of this could be guaranteed in future.
 

Meeting report

Opening Remarks
Co-Chairperson Carrim made brief opening remarks. Each organisation would be given 10 minutes to present. In addition, he suggested that organisations should supply a summary of their key points by Thursday 03 March 2022.

The apologies of Members were noted.

Presentation by the Fiscal Cliff Study Group
Prof Jannie Rossouw, of Wits Business School, made brief introductory remarks to the presentation.

Dr Stephanus Joubert, Senior Lecturer in the Department of Economics at the University of South Africa (UNISA), presented the Fiscal Cliff Study Group’s submission on the 2022 Fiscal Framework and Revenue Proposals.

South Africa had been running historically large deficits (4.5 percent GDP average) during the last decade. The budget deficit of 10 percent of Gross Domestic Product (GDP) in 2020/21 was one of largest on record. Expenditure (3.2 percent) and debt (9.5 percent) continued to rise. Social grant beneficiaries would increase by more than a million over the medium term and the special grant was extended for another year. All of this was evidence of a highly expansionary fiscal stance. Reality was that South Africa (SA) had reached its fiscal cliff/ fiscal limit; thus making it appear as if measures (similar to austerity) were being implemented.

South Africa’s potential growth had slowed significantly after reaching a peak in the mid-2000s. Anvari, Ehlers, and Steinbach (2014) estimated that the country’s potential growth declined from around 4 percent at its peak in the mid-2000s to around 2 percent after the global financial crisis. There were estimates of the natural growth rate in the 1.9 percent to 2.3 percent range. However, there was also evidence to suggest that the rate was under considerable downward pressure in the post-2010 period. The strongest decline was in the real sectors of the economy (Manufacturing, Mining), the greatest resilience in the service sectors (financial in particular).

The country needed to protect institutions that functioned well, but refrain from helping non-essential failed State-Owned Enterprises (SOEs), e.g., Alexkor, Denel, SA Express, SA Airways. There was a need to limit/reduce the remuneration and bonuses of executives at SOEs. Spending limitations were inevitable, as South Africa did not have austerity budgets for the past decade. Civil service wage restraint needed to be retained.

(See the Fiscal Cliff Study Group’s presentation for more information)

Presentation by the South African Institute of Chartered Accountants (SAICA)
Dr Sharon Smulders, Project Director: Tax Advocacy, SAICA, presented on behalf of SAICA to the Committee. The presentation posed a number of questions of Parliament relating to the fiscal policy framework.

The accountability and credibility of macro-economic and fiscal policy frameworks were with Parliament, as the Constitutional oversight body. It was questioned if Parliament was meeting its mandate of holding the Executive to account on behalf of the people. Was the current tax-to-GDP calculation methodology used by National Treasury appropriate to inform Parliament of the impact on the macro-economic of the fiscal policy?

Did SARS have sufficient resources to meet the optimistic revenue forecasts, so it could target non-compliant taxpayers and ensure acceptable service delivery to compliant taxpayers, so as not to affect their tax compliance behaviour? What was the progress on the implementation of GRAP adopted in 2012 by ASB, considering the concerns with the current reporting framework and was the delay in its implementation acceptable? Given SARS’ necessary draconian powers and the outcome of the Nugent Commission, was Parliament satisfied with its level of oversight over SARS’ service delivery and treatment of taxpayers? Were debt level estimates accurate considering concerns? Given the historical inability of government to keep to expenditure/debt levels, why did Parliament believe the estimates were credible?

(See SAICA’s presentation for more information).

Presentation by the South African Institute of Taxation (SAIT)
Prof Keith Engel, CEO, SAIT, presented SAIT’s submission on the 2022 Fiscal Framework and Revenue Proposals.

SAIT appreciated that National Treasury was continuing to show restraint. The Personal Income Tax (PIT) rate relief was supported. The Excise tax stability was likewise appreciated. It was suggested that sin taxes were not as inelastic as supposed.

SAIT supported well-designed business incentives. SAIT was concerned about loss of interest in depreciation since depreciation incentives were well targeted. A review of depreciation and investment allowances would take place during 2022/23, followed by the release of a discussion document. SAIT would appreciate engagement and research, e.g, R&D incentive, Energy Efficiency which should be linked to Carbon rather than Income Tax, etc. Savings ‘incentives’ for individuals only mitigated anti-selection and were really deferral mechanisms.

SAIT valued continuous engagement with SARS. The inroads made into the largely non-compliant, was noted. Where were taxpayer rights? Was the reverse charge on VAT getting the real culprits?

(See SAIT’s presentation for more information).

Presentation by the PricewaterhouseCoopers (Pwc)
Mr Kyle Mandy, Tax Technical Partner and Tax Policy Leader, PwC, presented PwC’s submission on the 2022 Fiscal Framework and Revenue Proposals.

The Budget Review 2022 was welcomed. The continued policy commitment to avoid tax rate increases, by expanding the tax base through stronger economic growth, employment and enforcement, was fully supported. The objective of fiscal and debt consolidation was supported by PwC.

Significant risks from both revenue and expenditure perspectives included lower commodity prices, suppressed GDP growth (power interruptions, new Covid-19 variants, etc.), while expenditure risks included “temporary” expenditure morphing into “permanent” expenditure (e.g. SRD), the public sector wage bill and additional SOE support. Permanent expenditure increases would need to be matched with permanent revenue or expenditure reductions elsewhere. A mitigating factor was the conservative revenue forecasts of the 2022 Budget. Budget 2022 estimated tax revenue growth forecast was only at 3.3 percent. The 2022 tax base was conservative. The drop in the Corporate Income Tax (CIT) forecast to 15.2 percent was noted. It was an understandable and prudent budget approach, given the risks.

(See PwC’s presentation for more information).

Discussion
Dr D George (DA) noted that the Fiscal Cliff Study Group had raised a point about ‘tough-talk’ on managing the public sector wage bill – suggesting that there was just talk and no action to contain or reduce it. Had the Fiscal Cliff Study Group done research on what size reduction was needed on the public sector wage bill, if one was to avoid the fiscal cliff as it was defined by the Fiscal Cliff Study Group.

He noted that SAICA had asked a number of interesting questions. It sounded as if SAICA was suggesting that Parliament was not effectively holding the executive to account and that the tax to Gross Domestic Product (GDP) ratio was too high and climbing. Was SAICA proposing tax reductions? If so, where would SAICA propose cuts be made first or was SAICA particularly concerned about the levels of irregular expenditure that occurred without consequence.

SAIT had mentioned that tax incentives for investments were not particularly successful. How would more success be achieved on this, particularly if one considered that a significant amount of money was available in the economy but not invested. The economy would grow if both local and foreign investment was attracted and domestic savings were encouraged. The more people saved, the more would be available for investment. What would those incentives be? There had been a lot of discussions about that, but it did not seem to work.

Mr D Ryder (DA, Gauteng) appreciated the presentations, it allowed the Committees to ask the right questions of the right people in the right places. He asked for further input from SAIT, in particular on the current balance of power in the relationship with the South African Revenue Services (SARS) that many people were struggling with. SAIT had spoken about taxpayer rights and that people and entities were being steamrolled by SARS. The work of SARS needed to be applauded. SARS was on the road to recovery and doing a particularly good job under the circumstances, perhaps due to the economic upturn in certain sectors. There was more discipline coming back into SARS and people were getting back to what needed to be done.

Many people did not like to pay tax and avoided it as far as possible but many understood that there was a need to pay tax and have a good relationship with SARS. The balance of power in that relationship was currently very skewed. Whenever a business lodged a query with SARS, one would likely not get an answer within 21 days. That would then be escalated, which took another 21 days. If one did not get a response or the response was inadequate, one was then advised to lodge a complaint. The complaint period took another 21 days. One was then ‘effectively three months down the line’ and the issue had not been resolved. This had been an issue in the case of some of the larger Value Added Tax (VAT) refunds where there were audit requirements. It was problematic when a small business was out-of-pocket for three to four months on the basis of these investigations. SARS seemed to be very reluctant to communicate via email, which made it difficult to establish a paper trail and to have a sequence of events that was easily referred to.

SARS often expected one to respond to their queries in a far tighter timeframe than 21 days. Taxpayer rights was a matter that needed to be considered. He acknowledged that the Ombudsman could also get involved, but this also took 21 days.

Mr W Aucamp (DA, Northern Cape) agreed with the Fiscal Cliff Study Group that there should be a list of State Owned Enterprises (SOEs). It was important to look into that and check where there may be future risks for the country.

He noted that the Fiscal Cliff Study Group dealt with debt service costs, that had been discussed amongst the Committees on numerous occasions; everyone was worried about the trend that the debt service costs would take. The day before it was stated that in 2025 there would be debt that would be equal to total GDP. The ability of SOEs to borrow money needed to be limited. If SOEs simply borrowed money all the time, there would be a larger debt service cost. For SOEs that were managed poorly – what would be the best turnaround strategy for SOEs? What did the organisations think the effects of privatisation of those SOEs would be? Most of the SOEs were losing value day by day. The SOEs could still be sold into the private sector. Once government came to the point where they wanted to sell, the SOEs might not have any value.

He was worried about the fact that the war in Ukraine had not been worked into South Africa’s budget. It was not known what the effects of that war would be. Fuel prices might increase drastically and everything else would follow suit. What could the influence of this situation be or was it too early to say?

It was concerning if protection and security services cost almost as much as the National Prosecuting Authority’s (NPA) budget. There needed to be a huge change there. People who were guilty of corruption needed to be brought to book. He agreed that the mistake made the year before, was that the Budget had not contained agreed wages.

He noted the points about the audit findings and consequence management – he asked that the organisations emphasise the importance of consequence management as this was not seen. One saw that municipal managers, Members of the Executive Council (MECs) and directors stayed in their posts even after receiving bad audit findings.

Mr G Skosana (ANC) asked a question of SAICA; it had taken a different approach this year. SAICA had asked questions of Parliament as opposed to the other way round. It seemed as if SAICA was questioning if Parliament was playing its role in terms of the Constitution as far as the issue of budget was concerned. Parliament was holding the executive accountable to the budget unless SAICA could identify Parliament’s weaknesses. Parliament was not ‘allergic’ to criticism. He noted the questions asked by the organisations if the budget was accurate and implementable. These public hearings were part of the broader process that was done by Parliament to get views from various stakeholders, particularly experts in the field of budget, finance and the economy. It was difficult if SAICA came and expected Parliament to answer these questions – this process invited organisations to express their views and criticise the budget.

Whatever issue was raised with National Treasury would be responded to on Friday 04 March 2022. After those responses, one would be able to sit down and look at the issues raised and the responses from National Treasury. He noted the concern about the allocation of more resources to departments and municipalities that had not consistently operated within their budgets. It was a crucial point. This needed to be reconciled with the issue of service delivery. Service delivery needed to benefit the people on the ground. If budgets were not being spent as required, there needed to be other mechanisms to deal with that.

Co-Chairperson Carrim noted the request that National Treasury needed to list all SOEs, he thought this was sensible, it had been requested in previous years. This was something that the Committees could put into its report.

He stated that the matter about cars should perhaps be discussed offline. He suggested that this time the Committees should go to the Director General and raise this. He had explained previously that the Committees could not impose on the Executive that ‘their cars be bought locally’ but an answer could be demanded. The issue had come up in Cabinet, for other reasons, but it should be put back in the report as it was an outstanding issue and was ‘really embarrassing.’

He appreciated SAICA’s ‘snazzy’ PowerPoint presentation. The Executive should be held to more vigorous account. His own view was that more had been done to hold the Executive to account than was known in the public domain, despite it being less than what should have been done. He noted that it seemed as if SAICA did not ‘buy’ the statistics, the Committees also did not always believe them, as was contained in the Committee reports. It had been consistently said that some of the projections were consistently low on economic growth.

The Financial and Fiscal Commission (FFC) had presented the day before, that the situation was cautious today but it would result in issues later down the line. He agreed that the forecast of revenue was conservative, as put forward by PwC.

Dr Joubert stated that nominal growth needed to be seen in the value of zero percent over the next three years which would lead to a real decline in the wage bill. It was important to note that the line item, ‘compensation of employees’ analysis was done on that and there had been some changes there, for example changes in wages. There were also changes in the actual employment numbers, salary levels, promotions etc. Once one looked at the overall line item, one needed to delve deeper to look at where changes could be made. In the past it had been raised that the Executive was too heavy. This was a ten to 15-year problem that had been brewing. Between 2009 and 2012, the economy went through a recession. The compensation bill was rising by an average of 15 percent per annum. This happened ten years before and was biting the country now.

The Fiscal Cliff Study Group agreed with the statements made by Mr Aucamp about the turnaround strategies for SOEs and the interest and debt service costs. In the Budget, it spoke about the primary budget surplus, that was a bit of a nonsensical argument to strip out the debt service costs that needed to be paid. It was becoming such an important part of the expenditure. Salaries at the SOEs needed to be looked at as part of a turnaround strategy. That research had not been done. That linked to the clarity in the Budget, and the list of SOEs.

Issues around the Southern African Customs Union (SACU) payments had been raised in the past, specifically how those formulas were made so as to provide clarity.

Co-Chairperson Carrim noted that SAICA had raised the point that the Committees had agreed to do research – he asked for clarity on this and if SAICA could provide this in writing, specifically when/what was agreed to or adopted in a report. The Committee Secretary would then trace that. The Committees got flooded with work and he had argued in the past that a third committee was needed for oversight, appropriations and fiscal framework issues. These issues were interrelated but it was difficult for the two committees to follow-up on everything, there was just not the capacity, resources nor time.

Dr Smulders stated that the issue around requesting reduced taxes was not really SAICA’s concern. It was a concern, but it was not known if it was too high at this stage. The concern was not about cutting taxes. Taxes had been coming in, but the revenue was not the problem, the problem was that tax could not keep being increased as it would not necessarily result in increased tax revenue coming in.

SAICA’s concern was on the expenditure side, where there was irregular expenditure and no consequence management. No one would have a problem with the amount being spent in the budgets, for example on education, if there was value for money. That was the concern. That led into the issue of accountability. The results were not being seen on the money being spent. That led into the question about holding the executive accountable. It was not just these Committees, it was also the appropriations committees. Parliament was required to exercise oversight over the Executive, the Executive had various levels of accountability as well. What was being seen was that the accountability was not there.

SAICA had looked at three departments, The Department of Education, Treasury and the Department of Water and Sanitation. The Ministers’ performance agreements were considered, these were available on the website for everyone to see. Their Key Performance Indicators (KPIs) had no dates for some requirements, while some only had dates set in 2024, with no interim measures to monitor targets. Some of their targets were qualitative rather than quantitative. Had anyone looked into that? No one was being held accountable, it was not doing what it was meant to be doing.

She noted Mr Skosana’s point that there was no service delivery and people would suffer, if National Treasury withheld the funds – the people were suffering as it was. That was SAICA’s concern. Money was being paid, and people were still not getting services. Communities had taken municipalities to court to get services, and then running the services themselves. Nobody seemed to be doing anything about this and there was no accountability. The Constitution put the responsibility on National Treasury and Parliament, who held the executive to account. It should filter down from the top. The country was trying to do it from the bottom, which was just not working.

Co-Chairperson Carrim stated that all committees would meet to consider their respective portfolio budgets. He suggested that SAICA’s study be sent to the relevant committees, as the Committees (in this meeting) could not exercise power over the other committees.

Prof Engel noted that there were questions about incentives and how to make them more effective. There were business incentives and savings incentives. With business incentives, the problem is that there was a ‘go-alone’ strategy, where Treasury would come up with an incentive but the rest of government was not going along with it. If one wanted to make one’s business incentives effective, it needed to be multi-departmental, it did not help to have a tax incentive, where the regulations were oppressive. One area to keep an eye on was special economic zones. These worked in China, not because it was just tax, but it gave a lot of regulatory relief outside of the normal system. Unless there was an inter-departmental approach on a lot of these incentives, it would simply not work. These incentives were often done in isolation, where money was simply thrown away. Savings incentives in South Africa were largely reasonable. The retirement overall was pretty good, the only issue was that it had not been adjusted for inflation, and it was beginning to bite a little more into the upper-middle and middle class. The point to note about savings incentives was that government was conflicted. On the one hand government wanted to promote savings, but if one did promote savings, one would be promoting the wealthier more than the middle and lower income brackets. History had shown that the most effective savings, were retirement. If one was too restrictive – this was being seen with retirement, one needed to ensure that savings stayed within the domestic economy.

He noted the issue of taxpayer rights. On the one hand, the Commissioner was aware of this issue and there was more of an effort being made on this than previously. The problem was targets. If one had targets, one did it in the easiest way one could. Unfortunately, that often meant picking on small things, such as customs, and going through small mistakes on invoices. The same was the case with VAT. This meant that the wrong people were being hit. At other times, assessments were given and people did not agree with them, but it was too expensive to fight it and simply better to pay it. People felt oppressed by this. One did not want to have a ‘Stalingrad defence’ against the guilty – but there needed to be something done on the matter of taxpayer rights.

When in Parliament, not enough time was spent on tax administration issues. When SARS presented, if the issue was debated, it just got shut down. SARS was very reluctant to make changes and Parliament did not always have enough time because it was focusing on other issues. The Tax Ombudsman had been effective. SAIT wanted to see the Ombudsman have a little more power or say. The Ombudsman should perhaps be present in parliamentary sessions and be able to submit reports and be more vocal.

Co-Chairperson Carrim asked that any further responses from SAIT be provided in writing due to the time constraints.

Mr Mandy stated that on the one hand, there was no question that SARS was making progress, and there had been some significant improvements over the past couple of years however, there was still a lot of work that needed to be done. When it came to taxpayer rights, it required refinement in the selection of persons to be audited; one did see the same taxpayers year after year being subjected to audits. There was a substantial tax gap in the country. This was estimated at about four percent of GDP or around R240 billion at the bottom end. SARS estimation at the top end was about R360 billion or six percent of GDP. That was a substantial tax gap. No country in the world was without a tax gap, however the United Kingdom’s tax gap sat at about five percent of theoretical tax revenues, South Africa’s sat around 13 to 20 percent of revenues. It was more than double what it should be sitting at. If the tax gap was reduced by half, one was talking about additional tax revenues of between R120 and R180 billion per year. This could be used to increase spending, reduce taxes where it made the most sense or make a virtuous circle in terms of economic growth and tax revenue growth. SARS was losing the battle on various elements of the tax gap. There needed to be a hard focus going forward about what was being done to close the tax gap. Those hard questions needed to be asked of SARS, particularly by the Committees.

Presentation by Road Consulting
Mr Ernie Lai King, Tax Consultant with Road Consulting, presented Road Consulting’s submission on the 2022 Fiscal Framework and Revenue Proposals.

South Africa remained in a debt trap with gross debt projected at 75.1 percent of GDP, by 2024/25. Real GDP growth for 2022, 2023 and 2024 was estimated to be a woeful 2.1 percent, 1.6 percent and 1.7 percent respectively. South Africa’s economic future was by no means assured. South Africa's unemployment rate had reached the highest recorded level due to low economic growth and decades of decline in investment.

Taxpayers’ cash flows were significantly compromised and may be driven into insolvency. SARS acts as judge, juror and executioner. There was no law to compel SARS to issue a revised VAT Assessment within a specified period and dispute resolution cannot commence. All the while, VAT refunds were withheld.

(See Road Consulting’s presentation for more information).

Presentation by the Congress of South African Trade Unions (COSATU)
Mr Matthew Parks, Parliamentary Coordinator, COSATU, presented COSATU’s submission on the 2022 Fiscal Framework and Revenue proposals.

The Fiscal Framework was critical to address multiple crises simultaneously; it could not be solely to focus on reducing the debt levels. It provided relief to the unemployed, it stimulated economic growth and rebuild state, SOEs and municipalities amongst others.

COSATU welcomed the R350 Social Relief of Distress (SRD) Grant extension. It should be retained as it would narrow the gap of the food poverty line. It laid the foundation for a Basic Income Grant. COSATU supported the Presidential Employment Stimulus but was disappointed about the funding cut from R24 billion to R18 billion. It was hoped that the R35 billion funding for SMMEs would not be suffocated by banking lending criteria. The pension relief legislation needed to be fast tracked.

Billions were lost to corruption and wasteful expenditure, yet no plans in place to tackle it in the Budget. It was suggested that taxes be increased on the wealthy e.g. income, estate,
inheritance and luxury imports. The budget COASTU feared was another demonstration of the depressing culture of endless dithering, shifting of deadlines, and a fear of taking decisive and bold action

(See COSATU’s presentation for more information).

Presentation by the Healthy Living Alliance (HEALA)
Mr Lawrence Mbalati, Programme Manager, HEALA, provided brief introductory remarks to the presentation.

Ms Zimbini Madikiza, Community Engagement Specialist, HEALA, presented the organisation’s submission on the 2022 Fiscal Framework and Revenue Proposals.

The Heath Promotion Levy (HPL) is severely limited by being introduced at half the recommended rate, limiting its effect on reducing sugar intake, and improving public health outcomes.

An HPL of 20 percent was estimated to save over 72 000 lives and R5 billion in healthcare costs over 20 years (this estimation excluding major effects such as unforeseen epidemics like Covid). The policy in its current form, still excludes certain key unhealthy foods and beverages that should be considered within its scope. Expanding the strategy to confront the rise of NCD’s in SA required multiple mechanisms, which could be supported from the revenue of the HPL itself. However, there were immediate ways to strengthen the HPL currently.

The State must act with urgency to utilise policy and regulatory tools to create a healthier food environment for all, so we can realise our full potential, by immediately doubling the HPL tax rate to 20 percent, committing to annual adjustments of this tax rate to account for
Inflation, Widening the scope of SSBs to include fruit juices and consider lowering the taxable threshold from 4g per 100ml in the longer-term.

(See HEALA’s presentation for more information).

Presentation by Amandla.Mobi
Ms Tlou Seopa, Author at Amandla.Mobi, presented Amandla.Mobi’s submission on the 2022 Fiscal Framework and Revenue proposals.

She said that National Treasury and some members of the Committees claimed there was no money for social grant increases or Basic Income Support, while at the same time were failing to increase taxes that could reduce poverty. If a net wealth tax been implemented the year before, researchers estimated it could have raised between 70 and 160 billion Rands. If National Treasury had stuck to their original proposal of a Sugary Drinks Tax of 20 percent, how many additional funds would our health budget have money would have been saved.

She posed several questions to MPs: had the committees made any recommendations to find money in the public purse to increase the old-age grant to a living wage, such as suggesting cuts in the salaries of the members of parliament, allowances, etc? As far as we know, an MP has the position and power to push for a pro-poor budget, no matter the size of a political party they belonged to. The largest political party determined who was in the Cabinet, and the Cabinet gave input and approved the budget. As there were Committee Members who were part of the largest political party, what had they done to influence how much was in the public purse by calling for taxing the rich?

(See Amandla.Mobi presentation for more information).

Presentation by the Women on Farms Project (WFP)
Ms Kara Mackay, Coordinator, WFP, presented the organisation’s submission on the 2022 Fiscal Framework and Revenue proposals.

Ms Louise Fontein and Ms Charmaine King, representatives of Women on Farms in Stellenbosch, gave personal accounts on their experiences of working on farms. These accounts illustrated the conditions of work and the abuses of farmers.

Members were informed that a Wealth Tax would redress structural wealth inequalities. South Africa was the most unequal country in the world, with 1 percent of the population (approximately 356,000 people) owning 55 percent of the country’s wealth. Women farm workers and dwellers, however, remained landless, experienced evictions, and earned low wages for the increasingly precarious seasonal work they did on farms. With poor health outcomes arising from generations of inadequate nutrition, exposure to pesticides, gender-based violence, and the legacy of the ‘dop’ system, farm-women also had low levels of formal education and literacy. A Wealth Tax would be progressive and redistributive, and would thereby, reduce South Africa’s growing inequalities. The richest South Africans were currently under-taxed.

A Wealth Tax will generate significant additional revenue: The World Inequality Lab, affiliated to the University of the Witwatersrand, found that a Wealth Tax of 3 percent to 7 percent on the richest 1 percent of South Africans could raise about R70 to R160 billion per annum. We believe that such revenue must be ring-fenced to finance redistributive spending such as land redistribution, a Basic Income Grant, universal, quality healthcare and free quality education, especially at tertiary level, for poor South Africans, including farm workers and dwellers. A Wealth Tax could both contribute to the financing of the R44 billion required to extend the Social Relief of Distress Grant for the next 12- month period, as well as pave the way to a permanent Basic Income Grant.

In his Budget Speech, Minister Godongwana reminded the country that the tax relief offered (e.g. maintaining existing VAT and fuel levy tax rates) and the social development and income support (e.g. the 12-month extension of the R350 Social Relief of Distress grant) are conditional on a stable or decreasing fiscal deficit. WFP agreed with Minister Godongwana that permanent increases in spending cannot be made on the back of fluctuating commodity prices. We argue that such social spending should instead be underpinned by a permanent, progressive Wealth Tax on the richest 1 percent of South Africans.

(See Women on Farms Project presentation for more information).

Discussion
Mr Ryder stated that during Road Consulting’s presentation, the thought struck him, that most people listened to respond, rather than listening for understanding. Without trying to be condescending, he urged Treasury to hear the inputs from the tax practitioners on SARS and try to understand some of the issues that were raised during the meeting. He asked that Treasury not just respond on Friday 04 March 2022, but try and internalise some of the issues raised – it would be constructive, especially as the inputs were given in that manner.

He thought the Constitutional Court had resolved the 2020 wage agreement – but that was clearly a matter open to some dispute. There was no real indication in the Fiscal Policy on e-tolls. There had been a comment from the Minister recently – but nothing firm, the matter continued to be kicked down the road. This was the same with South African Airways (SAA), where the Minister made some announcements in the public space.

He asked that the link be provided to the recent survey conducted by the Healthy Living Alliance – this made it easier for the Committee to comment on the credibility of the comments put forward. He felt that the Healthy Living Alliance had contradicted its own argument by stating that increasing the levy caused reduced consumption but also said that increasing the levy would have brought in X amount of revenue. He heard what was being said and he did not necessarily disagree with the Alliance. There was just a bit more work that needed to be done.

He stated that there was a big difference between an excuse and a reason – this was directed at Amandla.Mobi. He noted the points made by Amandla.Mobi. He enjoyed the Women on Farms Project’s presentation and perspective. Some of those inputs could be referred to the Minister of Employment and Labour and he suggest that the organisation make a presentation to the relevant parliamentary Committee.

Mr E Njadu (ANC, Western Cape) emphasised the credibility and the importance of public hearings. The inputs added value. He made a comment about the presentation given by COSATU. COSATU made a number of valuable points for consideration on the process of the budget. He noted the struggles of farmworkers on farms. This highlighted issues of basic conditions of employment – in the case of temporary, casual and seasonal workers.

Mr M Moletsane (EFF, Free State) asked a question to HEALA. He noted its statements about good nutrition. Was the Alliance playing any role in school nutrition to ensure that learners got a balanced healthy diet from an early age. What was COSATU’s view on the potential loss of jobs resulting from Clover – given that workers were promised training etc.

Ms P Abraham (ANC) stated that the earlier groups had empowered the Committees on issues of oversight and the issues that could be raised with the Department. She appreciated this as the Committees had an oversight role. She noted that COSATU had mentioned that Home Affairs had suffered a budget cut. The departments should have an opportunity to make a case for their purse to be increased. The Home Affairs offices were not dispersed properly across the country. Many travelled far to the main centres to access such services, and faced long queues or an offline system. She had personally experienced this. The Committees needed to advocate for departments but the departments needed plans on how to spend those funds.

In the joint meeting with the Ministry, she had checked on the question of the loan for small business. That loan was not maximally used in 2020. How could it be guaranteed that it would be fully spent in future? What was it that National Treasury was doing to ensure transformation of institutions so that ordinary people could access these funds? The private sector could also ensure that jobs were created in the country. Departments needed to transform the way things were done. Instead of creating ‘one billionaire,’ one should create ‘a few millionaires.’ The tender system needed to be looked at and be either dropped or changed.

Mr S du Toit (FF Plus, North West) suggested that one needed to avoid making generalisations, as were made in the WFP presentation. He assumed what the presenter experienced might have been an isolated event. It was everyone’s free will to decide where one wanted to work. Organised farming and agriculture were treating employees with respect and were keeping to the labour legislation pre-scripts. The Department of Labour had appointed additional personnel to focus on industries and farms to see that best practices were being practiced there. Free education was a reality in South Africa - both primary and secondary education. One needed to be careful of casting a shadow over the entire sector, he believed this was an isolated event.

Co-Chairperson Carrim agreed with what Ms Abraham had said. Parliament might not be as effective as it should be but there were efforts being made to make it more effective and to be held accountable – however this was not the forum. It was less a lack of will than constraints. He noted the points raised by Road Consulting. He wanted to hear SARS speak on Friday 04 March 2022, he suggested Road Consulting be present for that. He appreciated the presentation by COSATU, particularly the impact of knowing the number of workers that would be losing their jobs at a time when there had been significant job losses. He hoped COSATU was engaging with government and SOEs. Given the importance of the post-office, job losses were concerning. Many of the issues fell under the control of the Select Committee on Appropriations. He noted the points made by the Healthy Living Alliance.

He stated that the Committees did not have different values to that of Amandla.Mobi – the majority of Members were aligned to the same goals. The only issue was tradeoffs and what was viable and possible. National Treasury could explain its constraints and why it had not met with the members of Amandla.Mobi. Updates were needed to where the process was to overhaul the whole social security system, which government had put on the agenda. The decision on the basic income grant would not be made by Treasury alone. The Appropriations Committee and the two Finance Committees had stated that in principle it supported the basic income grant. The Executive had been asked to explore this.

He suggested that the Women on Farms Project should go to the Portfolio Committee on Employment and Labour to address the issues raised; the Committees empathised with the issues. The way had been eased for the take up of a small business loan – but on Friday 04 March 2022 he asked if Treasury could spell out how it sought to do that and how progress would be monitored.

Given the number of tax issues that were being raised and that many of the issues were raised previously, he suggested that National Treasury and SARS be asked to spend 50-60 percent of the time responding to the SARS issues. Those stakeholders who raised issues by SARS should attend.

Mr Njadu suggested that the Committees needed to emphasise the importance of public hearings. Parliament wanted to know what was happening so as to be able to carry out oversight effectively and efficiently. This was said on the matter of instructing what public stakeholders said or did not say.

Mr King hoped he did not give the impression that he was accusing SARS of reverting back to the state capture era. He was not suggesting that. He had raised that as it had unfortunately happened before, where the economy had suffered from the constant VAT withholdings. SARS had an important job and this was understood. Taxpayers however also had rights.

Co-Chairperson Carrim stated that this was understood. He suggested again that the Ombudsman could appear before the Committee in future. He noted that previously the Committees had suggested that Road Consulting meet directly with Treasury, he asked if this had taken place.

Mr King stated that one meeting was held with Treasury, unfortunately SARS had not been at that meeting, which would have been very useful.

Co-Chairperson Carrim stated that this would be followed up and arranged via the Committee Secretary.

Mr Parks stated that basically the bill of corruption of wasteful expenditure for mismanagement of SOEs had been dumped on workers. It damaged employer, government and employees. If government, as the biggest employer, was allowed to undermine collective agreements – all employers would simply follow suit. This could spark labour market instability strikes etc. It would take some time to repair that relationship. Workers sought a compromise in the 2021 wage agreement, that was why it was the lowest in many years, however workers felt that government was not treating the engagement in good faith. The Minister did well in the Budget Speech to state that he supported collective bargaining. It was hoped that this would begin to rebuild the relationship.

COSATU had not gone into the issue of e-tolls because it was felt this was dead. COSATU felt there was value in engaging with Parliament. The extension of the Social Relief of Distress (SRD) grant and pension relief was positive, despite the lack of speed. 10 000 Jobs were lost at SAA and many were lost at SA Express – it was hoped that new jobs would be provided. It was concerning how long it was taking. The SOEs all made a contribution to the economy until a decade before, when the ‘demons’ of state capture were let loose. There needed to be turnaround plans and a new funding model. Alternatives needed to be found for retrenchments.

Other committees did not hold such hearings on their specific budgets – this would be helpful. Home Affairs had a critical role in serving South Africans, it was a frontline servicing department. Some of the appropriations issues were raised to give the Committees a feel of the impact of the fiscal framework on the key frontline service departments. There were some ‘reckless’ cuts to specific departments.

COSATU welcome the issues raised by the Women on Farms Project – some farmers were good and some bad. There were laws in place. Employers found wanting needed to be held accountable in terms of the law. It was in the mutual interest of the farmer and farmworker for good labour practices to be applied.

Ms welcomed the Committee’s acknowledgment that the public consultations were important. It would be great to get commitments from both the Committee and Treasury about how to work on improving the accessibility of the public hearings and consultations. Amandla.Mobi was fully behind the issues raised by the Women on Farms Project. These issues were not generalised, these issues existed and had been there for a long time.

Ms Mackay stated that the comments made came from continued labour research. It was a systemic problem. Farmworkers faced abuse on farms because there were closed systems. Despite the laws, farmers had power. The Women on Farms Project worked with farmworkers and trade unions.

Ms Louise Fontein spoke in Afrikaans [Timestamp: 03:02:30].

Ms Kara Mackay stated that it was not a generalisation. It was a systemic problem and any support was welcomed to address the issues.

Ms Eunice Montso, Projects Intern, HEALA, stated the study referred to was contained in their written submission and the reference list thereof could be considered. It was not a contradiction to state that if the HPL was sitting at 20 percent, then this year there would have been an amount R200 billion for 2022.

She acknowledged government’s effort on the national school nutrition programme. For many children it was the only meal they received. The impact of this was seen particularly during the pandemic. HEALA worked with one of their coalition members, being Equal Education. HEALA helped Equal Education enforce the norms and standards of the kind of food given to children, to ensure that the food was not empty of nutrition.

Co-Chairperson Carrim stated that presumably COSATU was taking up these issues with the Portfolio Committee on Public Enterprises on the issue of job losses. He asked that Members consider including this in the Committee’s report. He suggested that the time in the meeting on Friday 04 March 2022 mainly be used to respond to the SARS issues. He was impressed by the inputs and the time management of stakeholders.

Co-Chairperson Maswanganyi made brief closing remarks and thanked the various stakeholders. He noted that the process of public participation had become more inclusive in the online meetings, as previously it was only those that could afford to fly down to attend, who made oral submissions. He suggested that advertisements should not only be in newspapers and on radios. Advertisements should reach out to media houses and community newspapers in outlying areas.

The Minister had presented a positive Budget, given the challenges and unemployment situation. The issue of loadshedding was a serious concern. It had a big impact on the economy, most especially small businesses. Many lost revenue during those hours. He noted that there was an increase in petrol that week, it would undo what the Minister had said, it would trigger inflation, food costs, school fees and grants etc. The issues of petrol and loadshedding needed to be addressed. The debt issue was dampening the spirits of the Country. It did not seem as if government was containing the debt service costs. It had gone beyond the R300 billion mark this year. That money should have gone to education and address unemployment etc. He noted that not enough progress had taken place since 1994.

He noted that full disclosure took place for Members of Parliament (MPs) – if certain information was not disclosed, SARS would find out. That system had been developed. The consequences were heavy in Parliament and SARS. When MPs applied for loans, they were exposed to a rigorous process as a Politically Exposed Person (PEP). Government, under difficult circumstances, had made an effort to cut the Corporate Income Tax (CIT). There were issues of economic growth that Treasury needed to brief the Country on. That would be the solution to some of the challenges the Country was facing.

The meeting was adjourned.

 

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