TLAB, TALAB and Rates Bills: voting and Committee Reports

Meeting report

The Chairperson welcomed everyone in attendance.

The Committee Secretariat noted apologies from Mr G Hill-Lewis (DA) who is in his constituency for the by-elections, Mr W Wessels (FF+) and Mr G Skosana (ANC).

Rates and Monetary Amounts and Amendment of Revenue Laws Bill

Mr Ismael Momoniat, Deputy Director General: Tax and Financial Sector Policy, National Treasury, warned Members that in reviewing the bills, an issue that tends to come up is whether there were any changes from the draft bill to the tabled bill, that differed from the Committees’ expectations. Treasury will highlight the changes to Members.

Ms Yanga Mputa, Chief Director: Legal Tax Design, National Treasury, stated that there was a technical issue in clause 4, consisting of renumbering of paragraphs. The paragraphs should be numbered in roman numerals and it was agreed that the changes can be resolved in the Budget next year.
 
Mr Momoniat assured Members that there were no additional changes since the Draft seen by Members

The Chairperson asked if the technical issue cannot be corrected within a day, as some Non-Governmental Organisations (NGOs) can take government to court on the matter or an article can be published on the technical issues in the Bill.

Mr Momoniat stated that it can be done. National Treasury will have to obtain a letter, in terms of section 14 of the Money Bills Amendment Procedure and Related Matters Act. The letter will then be submitted to the Committee by the end of the day.

Ms Yanga Mputa read the exact amendment to Members. The proposed amendment in clause 4 reads
“Section 6A of the Income Tax Act, 1962, is hereby amended by the substitution in sub-section 2B, for sub-paragraphs 1,2 and 3 of the following sub-paragraphs respectively” The proposed amendments, will change the roman figures 1, 2 and 3 to have AA, BB and CC.

The Chairperson went over the clauses of the Bill, including the amended clause 4.

Members agreed to the clauses in the Bill. 

The Chairperson proposed the adoption of the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, with the amendment on clause 4.
 
Ms M Mabiletsa (ANC) moved for the adoption of the Bill
Ms Z Nkomo (ANC) seconded the motion
Dr D George (DA) stated that the DA reserves its position on the Bill.

The Bill was approved by the majority.

Committee Report on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill
The Chairperson read over section 4 of the report, the key issues raised in the public hearings. He noted the strong opposition from the Tobacco industry on the increase in excise tax, and the argument to tackle illicit trade instead of increasing excise duties. He asked NT how it justifies the increase in tax on tobacco.

Mr Momoniat stated that nobody likes it when there is an increase in tax. Treasury meets with members of the industry more than once in a year, and supports its argument to be strict with the illicit trade of tobacco. He pointed out that in dealing with the tobacco industry, government also has to consider alignment with health policies. During COVID, the concern has been whether to make the tax even greater, however, Treasury has considered the impact of enforcement, especially on illicit trade.

Mr Christopher Axelson, Chief Director: Economic Tax Analysis, National Treasury, stated that Treasury has been explicit in its policy that it is targeting a percentage of the most popular category in tobacco. It has also made it clear that the increase will be a minimum of inflation, which has been the policy for a long time. It would go against policy to declare no increase. The increase is part of government’s tax measures to raise revenue as part of its fiscal consolidation efforts.

Mr Momoniat explained that with sin taxes, the increase in tax is firstly for revenue raising reasons, and to also discourage certain behaviour such as smoking.  

The Chairperson proposed the adoption of the report with the inclusion of the amendment to clause 4.

Ms Mabiletsa moved for the adoption of the report with the amendments.
Ms Nkomo seconded the motion.
Dr George stated that the DA reserves its position on the report.

The report, with the amendments, was adopted.

Taxation Laws Amendment Bill (TLAB)
Ms Mputa stated that there was a technical error on clause 17. That was discovered during the finalisation of the Tax Bills. It was agreed that it would be corrected in the Budget next year. The technical error pertains to the dates. In Section 12J of the bill published for public comment, the effective date was 31 July 2020. It is a provision aimed at assisting the public. During printing, the date printed on the final bill was 31 July 2021. The problem is that if comes after the sunset date of 30 June 2021. It is absurd for a provision to be made after the sunset date of the legislation.

The Chairperson requested that the error be corrected before passing the Bill in Parliament, as it can be misleading to taxpayers.

Ms Mputa stated that it is a technical correction in terms of section 14. It can be included in the letter for the amendment of clause 4 of the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

The Chairperson went over the clauses in the Bill, including the amended clause 17.

Members agreed to the clauses in the Bill. 

The Chairperson proposed the adoption of the TLAB, with the amendment on clause 17

Ms Mabiletsa moved for the adoption of the Bill with the amendments.
Ms Nkomo seconded the motion.
Dr George stated that the DA reserves its position on the Bill.

The Bill was approved by the majority.

Committee Report on Taxation Laws Amendment Bill

Dr Hlophe pointed out that one of the most commented-on issues was the export duty on scrap metals. The Committee report includes support for excise duty on scrap metals, to replace the price preference system. The report also addresses some of the calls for a complete ban over scrap metals.

Ms Mputa pointed out that paragraphs 1.1 and 1.2 should be collapsed, as the TLAB was published for public comment on 31 July 2020, which was the first time.  

Dr Hlophe noted the correction. He highlighted that the next issue that received much attention was the one in 4.2.

The Chairperson asked for clarity on the issue of bursaries

Ms Mputa explained that NT is not taking away the exemption of bursaries provided to employees. If the employer provides a bursary to the employee, the exemption will still remain. Treasury is only removing the exemption if the bursary is provided through means of salary sacrifice. A salary sacrifice essentially means it is no longer a bursary, as the employer takes a part of the employee’s salary before paying tax.

Mr Axelson stated that the original objective of the amendment was to stop cases in which employers would provide an additional amount or bursary to an employee, who would then be taxed on the additional benefit. The employees tend to receive a shock at the end of the tax year when having to pay tax on the additional amount. The original exemption was meant to stop lower-income employees from having this tax penalty applied to them, when an employer provides an educational benefit. In the case of salary sacrifice, the employer does not provide any additional benefit.

The Chairperson proposed the adoption of the report, with the amendments. He noted that a letter will be written to the Minister of Finance on the change to clause 17.

Ms Nkomo moved for the adoption of the report
Ms Mabiletsa seconded the motion
Dr George stated that the DA reserves its position on the report.

The report, with the amendments, was adopted.

Tax Administration Laws Amendment Bill (TALAB)

The Chairperson went over the clauses of the Bill

Members agreed to the clauses.

Dr Hlophe highlighted an issue with the removal of the phrase “wilfullness” in some of the offences in clauses 8, 21 and 35 in the Bill, which has been included in the report.  It was opposed by almost all stakeholders that made a comment on the amendment. It affects the Income Tax Act, Value Added Tax (VAT) and Tax Administration Act. The Committee did not come to a position on the matter.

The Chairperson asked if there were changes made to the draft bill in that regard.  

Mr Franz Tomasek, Head: Legislative Policy Tax, Customs and Excise, SARS, stated that in SARS’ response document, it was indicated that the offences have been split into 2. The original proposal was to remove the phrase ‘wilfully’ from all the offences and retain the concept of ‘just cause’. Commentators were uncomfortable with this, and SARS looked at the offences at stake. The concession proposed was to split offences into 2 sets, one set with offences where ‘wilfulness’ is required and the other set where ‘wilfulness or negligence’ can come into play. For instance, in 234(1) states that “any person who wilfully…”, meaning that negligence does not come into play. Therefore, there is only a criminal offence if there is a wilful submission of false documents. It already contains implicit protection from making a mistake in document submission or the negligence of a reasonable person. Subsection 2 pertains to ‘wilfulness or negligence’, meaning that negligence can be penalised in this case.

The Chairperson proposed the adoption of the Bill. 
Ms Mabiletsa moved for the adoption of the Bill
Ms Nkomo seconded the motion.
Dr George stated that the DA reserves its position on the Bill.

The Bill was approved by the majority.

Committee Report on TALAB

The Chairperson proposed the adoption of the report.  
Ms Mabiletsa moved for the adoption of the report
Ms Nkomo seconded the motion
Dr George stated that the DA reserves its position on the report.

The report was adopted.

Closing remarks
The Chairperson, in closing, thanked everyone in attendance.

The meeting was adjourned.