2019 Budget: public hearings

Meeting report

Financial Matters Amendment Bill

Mr Carrim welcomed everyone and indicated that following consultations with powers that be, the view was it would not be possible to process the Financial Matters Bill fully in time before the National Council of Provinces rises on 28 March, given the National Assembly rises on 20 March. There have been endless debates about which Bills are doable or not. There are five aspects on the said Bill and the most challenging appeared to be the proposed amendments to the Auditing Profession Act, the search and seizure requirements following the call for greater power over errant auditors by the Independent Regulatory Board for Auditors (IRBA). This obviously requires a lot of processing- it raises some constitutional issues and for the NCOP to rush this would be inappropriate. Following the engagements that have occurred, from the National Assembly side the proposal was that instead of proceeding with the entire Bill, the Committee would only process the amendments to the Military Veterans Act- which are straightforward, as well as the amendments to the Banks Act, which had been extensively discussed in the Private Members’ Bill brought forth by Mr F Shivambu (EFF). Therefore the proposal was to process these two aspects and forego the rest to be dealt with by the next Parliament.

Mr A Lees (DA) agreed to the proposal as presented. IRBA should just be patient so that the search and seizure issue is dealt with thoroughly and Members would need to apply their minds carefully.

Ms T Tobias (ANC) felt there were no substantive reasons why there should be further delays in processing the Bill, particularly the auditing profession aspects of it given IRBA had been asking for this Bill for more than three years. Robust regulations to ensure the independence of auditors were crucial and delaying implementation was not the ideal.

Mr De Beer said the Select Committee on Finance has had engagements with the NCOP leadership and the general understanding was that it would not be possible to process the Financial Matters Bill before Parliament rises. The Select Committees of Finance and Appropriations are constituted by the same Members so the budget process needed to being dealt with as well. The NCOP was trying to create space to see what was possible.

Ms P Nkonyeni (ANC) expressed her agreement with the proposal as presented by Mr Carrim.

Mr Carrim said he would write to stakeholders to notify them of the aforementioned proposal. He invited submissions on the budget from stakeholders.

Submissions on the 2019 Budget

COSATU submission

Mr Tony Ehrenreich, Deputy Parliamentary Coordinator, COSATU, said COSATU notes government’s 2019/20 Budget delivered by Finance Minister Tito Mboweni in Parliament. Considering the fiscal, revenue, corruption and expenditure crises facing the nation, COSATU believes that the budget was very underwhelming. The budget does not go far enough given the extent of the many crises facing government, workers and the economy as a whole.  The reality is that the country is in an economic crisis and this current crisis can only be understood by looking at the root causes in a holistic way. The solution to the economic problems lies in bold measures of transformation, not in marginal programmes and projects. The budget is a reminder that the country still lacks a developmental vision, does not have a comprehensive development strategy and totally lacks the necessary coordination of activities of various economic agents.

COSATU was deeply worried about the way forward after this placid policy statement at a time when a much bolder and decisive leadership from government was expected. This represents another missed opportunity because what is contained in the statement is nothing new. It is also obvious that there is no plan to wean people off social grants because this budget will not transform the economy and the low baseline wage regime that has kept many people dependent on government. There is nothing in the budget that will provide the possibility to change the outcomes of the economic development trajectory. There is no clear strategy to help stimulate growth and regenerate the economy. This will leave more people isolated from the mainstream economy and still dependent on the government for their survival. The survivalist informal economy that feeds and clothes many families has again been abandoned in this underwhelming budget. In short, COSATU believes that government did not rise to the occasion.  This was a missed opportunity to stabilise the state, save the SOEs, grow the economy and create jobs.

On growing the economy, protecting and creating jobs, COSATU proposed: a clear plan (inclusive of targets, time frames and resource allocation) by all departments, provinces, municipalities and state-owned entities (SOEs) to ensure that government meets its jobs and investment summit commitments and a commitment to engage the South African Reserve Bank (SARB) on measures they can undertake to support economic growth and job creation whilst managing inflation levels. Further, COSATU believes that government can significantly increase revenue and thus providing more resources in support of economic stimulus, job creation and developmental objectives by: cancelling the VAT tax hike to 15%; fast tracking the implementation of the South African Revenue Service (SARS) Commission of Enquiry and its recommendations; fast tracking the engagement on and implementation of progressive tax proposals from the Judge Davis Tax Commission; and the introduction of a progressive tax system.

In conclusion, COSATU hoped that highlighting of the conditions faced by its members’ children and proposals for interventions by Parliament in the Budget will be taken into account during the Committees’ deliberations.

Budget Justice Coalition (BJC) submission

Mr Daniel McLaren, Section 27, said as the Fifth Parliament draws to a close, the BJC had opted to provide an overview of the key budgeting trends of the past five years, as well as the impact of these on two elements of the social wage: health and education.

During this Parliament, BJCs submissions have been concerned with the pursuit of regressive and counter-productive austerity policies that have become increasingly entrenched. The fact that the tax-mix has not been shifted back from the unsustainably low path established by the Growth, Employment and Redistribution (GEAR) policy was also a major concern, given the obligations on the State to maximise its available resources to fulfil the rights in the Constitution. Instead, fuel levy and VAT increases combined with social spending cuts have been implemented to plug holes in the fiscus and to bail out captured SOEs. BJC believed that reshaping SA’s current tax-mix towards a more tax justice, a better oversight of state expenditure and an increased focus on fighting tax evasion and avoidance could relieve the burden that has been imposed on the poor and working class. It is also crucial that alternative options are considered for debt management. The BJC called for genuine engagement by the State with a wider range of strategies including those that would limit its reliance on local and international capital markets.

Mr Erwan Malary, Alternative Information and Development Centre (AIDC), urged Parliament to hold the executive accountable to the recommendations of the UN Committee on Economic, Social and Cultural Rights. On macroeconomic policy, the recommendations were as follows: more awareness of the ‘quality’ of the economic growth that is aimed for; much greater focus on employment and economic growth in monetary policy, including a investigating new approaches to interest rates, exchange rates and inflation targeting that are best suited to the social and economic conditions facing South Africa; much greater policy coherence and more active collaboration between the National Treasury with the Departments of Trade and Industry, Economic Development Labour, Social Development and the Reserve Bank, and as per the UN Committee Recommendation 17(e): Re-examine its growth model in order to move towards a more inclusive development pathway.

Further to these recommendations, BJC called on Treasury to take action to end austerity by, inter alia: ensuring real per capita annual increases in non-interest government expenditure over the medium-term expenditure framework; measuring the cumulative impact of previous and existing budget cuts on rights enjoyment by disadvantaged and marginalized individuals and groups, in particular women, children and persons with disabilities; instituting, where necessary, cost-containment measures that comply with the human rights standards of equity, non-retrogression and minimum core obligations, while supporting departments to contain costs in a manner that enhances rather than undermines service delivery. On revenue and debt management policy, BJC recommended the review the tax regime, in a transparent and participatory manner, with a view to increasing fiscal revenue and advancing a more equitable distribution of resources, including by increasing tax rates on personal income, corporate income, and wealth. More ambitious reforms are needed to deal with tax evasion, not least to close legal loopholes still existing in the tax law.

In conclusion, BJC wished to see a revitalised Treasury, devoted to transparent processes and plays a progressive role in the development and oversight of national macroeconomic and fiscal policy. Treasury must be able to carry though a vision for sustainable and inclusive growth, a coordinated attack on joblessness, poverty and inequality, and a vastly improved level of performance by government departments.

Pietermaritzburg Pensioners Forum submission

Ms Thoko Ngubane, Pietermaritzburg Pensioners Forum, said as grannies they listened to the Budget Speech. They all sat together, and saw that only R80 was added to their grant. This showed them very clearly that they were not important. The years are moving on but the money is going down.

Ms Ngubane said it is the grannies who knew about the ANC struggle and the history of apartheid; they lived it. They taught children about history. They held this memory.

As grannies, they have been to Parliament and had also written many letters to Members, the ANC Caucus, Minister Mboweni and President Ramaphosa. They have been calling on government to provide all pensioners with a 13th cheque equal to double the monthly pension annually in December (starting in December 2019), and as a start towards equalising the pension with the National Minimum Wage and towards a living wage, for the monthly old-age grant to be increased to R2 500 in April 2019. Last year, the Standing Committee on Finance, having considered the 2018 Medium-Term Budget Policy Statement for the revised fiscal framework of 24 October 2018, and having listened to a submission from the Pietermaritzburg Pensioners Forum recommended that “…National Treasury considers a higher increase in grants than is usually the case by reprioritising expenditure …” Treasury did not listen. R80 has been given to pensioners. That was even less than the R100 increase last year. It was so disappointing and upsetting. It means that government does not care about pensioners. Government does not care about 3.5 million pensioners and their families. Pensioners cannot make it through the month on their pensions and most of them are in terrible debt. R1 780 is far too low. They will continue to stand in the queue to collect the old age grant and then go and stand in the line to borrow money from omashonisa. They will continue not being able to bring money home. Increasing the child support grant by R10 - which is not even enough to buy toothpaste - puts even more pressure on our pension.

The Pietermaritzburg Pensioners Forum called for Minister Mboweni to reconsider his decision and offer pensioners something that they will be able to live on and create a better future for themselves, their children and grandchildren.

Discussion

Ms Nkonyeni appreciated the Pension Forum’s presence. Members were well-aware of the plights of the elderly. However, government’s funding capacity is not as limitless as some people imagine it to be. She pointed out that there were quite a number of initiatives government was taking to address the plight of pensioners and their families. These would include the schools feeding scheme for their dependents. It was not up to these Committees to make decisions on the appropriation of the budget.

Dr D George (DA, Western Cape) appreciated the Pietermaritzburg Pensioners Forum’s presence. His understanding was that promises were made by the Committees to the pensioners, but nothing had happened- this was very unfortunate. Vulnerable people came to Parliament last year and made a presentation to say they hoped that they would get extra relief given their circumstances. However their hopes had been dashed. If the pensioners keep voting the same way, and for the same people, they would get the very same outcomes. Nothing will change.

Mr N Nhleko (ANC) interjected and said it was nonsensical and unacceptable for Dr George to insult the pensioners in full view of everybody else. The DA Member could not be allowed to insult the intelligence of African people by saying if they vote a certain way this is what they will get. The Member should deal with the issues at hand. He took an exception to this kind of articulation which basically insults the intelligence of an African person. Dr George had got to withdraw his statement because it could not be correct.

Mr Carrim said it was unfair for Dr George to distort facts. There was absolutely no promise made when the pensioners appeared before the Committees at the end of last year. Members only expressed their sympathy and empathy, which might have led to expectations on the pensioners’ part. The Committees pointed out that within the existing budget constraints, it was unlikely that old age grants would be doubled. However, in their reports, the Committees urged government to cushion taxpayers from the VAT increase. The disagreement between Dr George and Mr Nhleko was a separate matter and should be dealt with outside the meeting.

Dr George asked if the pensioners still had an expectation that government would consider their plight.

Mr M Chabangu (EFF, Free State) said the elderly deserved decent pensions to sustain their livelihoods. An R80 increment was an insult to pensioners. Pensioners should not be travelling all the way to Parliament all the time for them to not get anything.

Ms N Ntantiso (ANC) appreciated the pensioners’ presence. She gave assurance that government is well-aware of the fact that the grant pay-out was not enough, but because of the fiscal constraints it was difficult to double the pension as per their submission. However government was doing everything in its capacity to address their plights.

Mr Nhleko said, far beyond the submission by the pensioners, there was something that had to be understood at a broader policy level. The question was how do policymakers begin to address and earnestly deal with the social gaps in society. For how long should it be that the elderly must come begging, and for how long should the dependency syndrome be relied upon to deal with socio-economic problems? These were the real issues which needed to be interrogated as opposed to trivialising the pensioners’ appearance before Committees. It was a matter for both government and the society at large to interrogate.

Mr Carrim said the Committees empathised with the pensioners. Morally, Members were with them but practically the thinking was that it would be impossible to double old age grants given the fiscal position of government. The Committees would propose to the Appropriations Committees that this whole matter be dealt with in the MTBPS framework. The issues raised by Mr Nhleko were correct. Currently, a review was underway and spearheaded by the Department of Social Development to look into the fundamental issues underlying this challenge. He thanked the pensioners for coming and indicated that with the existing budget constraints, there was limited room to manoeuvre. On the BJC request for extension for submissions, received by the Chairpersons, the Committees consider submissions fully up to the day of voting for each and every Bill. Stakeholders have substantial time to process the element of the budget. It would therefore be incorrect to say there was not enough time. Many of the sentiments expressed by COSATU were consistent with the democratic transition that the ANC envisages. There has to be a tactical sense about what is doable. He pleaded with stakeholders to have a tactical sense of what was doable given the economic realities. Some of the proposals were quite radically Marxist. On SOEs, the Committees would broadly support concerted negotiations by the created forums.

Mr McLaren said the BJC did not consider its proposals radically Marxist as similar conclusions were drawn by the UN Report on South Africa. The Coalition was working with Treasury to ensure budget participation by stakeholders is strengthened. The austerity measures are not the solution and there was need for fresher thinking to get the economy growing.

Fiscal Cliff Study Group submission

Prof Jannie Rossouw, Co-Director, Fiscal Cliff Study Group, highlighted that the expenditure on ministries was exorbitant – spend for the ministry of Defence and Military Veterans was the most at R137.7million, while Treasury spent the least on its ministry at R4.4 million. If all of the 35 departments cut down expenditure to that of Treasury, then R1 billion could be saved. Thereafter government could start looking to reducing the size of the Cabinet. SA was closer to the fiscal cliff than ever before. He also suggested that the tax returns of the President, Deputy President, Cabinet ministers and their deputies should also be made publicly available as a start in rooting out corruption.

The precarious state of SOEs was a further concern that will move the fiscal cliff closer. In respect of Eskom, which is the biggest headache, the following interventions should be made: cut costs in the midst of continuous declining demand (alternative power sources); stop all bonus (bogus) payments; reduce employment and publish employment numbers every Friday on the website; open Eskom’s Board meetings to the public and the media (it is a monopoly owned by the Government, so nothing can be secret); improve transparency at all other SOEs. Transparency at SOEs and specifically Eskom should be improved- there should be no holy cows.

Further, government should respect taxpayers; South Africa cannot increase taxes any further as the top of the Laffer curve has been exceeded.

Prof Rossouw said there was no scope to raise taxes further because the tax buoyancy ratio is less than 1. The tax buoyancy ratio measures the pace of tax revenue growth against economic growth. The ratio is 1 when revenue growth matches economic growth. In 2017/18, SA's tax buoyancy ratio was 0.96 and in 2018/19 it was 0.98. He questioned the credibility of Treasury's forecasts for economic growth – which have been overstated in the past few years. This has implications for the revenue projections and forecasts for debt-to-GDP ratios. Treasury's forecasts are bad and make weather forecasters look good. He called for Treasury to be more conservative in its economic growth forecasts to regain public confidence. The fiscal cliff has deteriorated significantly compared to the 2018 Budget. However it did improve marginally between the MTBPS 2018 and 2019 Budget, assuming that these figures are credible. If the fiscus continues on its current trajectory, SA will run out of money by 2042.

PwC submission 

Mr Kyle Mandy, Tax Policy Leader, PwC, said revenue collection has consistently fallen short of budget revenue forecasts since 2014/2015, raising questions over the reliability of Treasury’s forecasting models. This raises the danger that the budget deficit will be higher than the Treasury’s forecast for 2019/2020. Revenue forecasts have fallen short of budget forecasts by a total of R141 billion between 2014/2015 and 2018/2019. The revenue shortfall of R42.8 billion in 2018/2019 compared with the 2018 budget forecast was attributed by the Treasury to weaker than anticipated economic growth, higher VAT refunds, and problems with tax administration at SARS. Gross tax revenue is forecasted to rise from R1.3 trillion in 2018/2019 to R1.4 trillion in 2019/2020. The consistently significant shortfalls against forecasts have, in PwC’s view, now resulted in a credibility concern with regards to the accuracy of revenue forecasting. PwC was concerned that there is a significant risk that the revenue forecast for 2019/2020 could, once again, be overestimated.

Mr Mandy believed that tax buoyancy constitutes a significant fiscal risk for the next fiscal year, and noted that the Treasury used a tax buoyancy ratio of 1.31 in forecasting its revenue for 2019/2020. When the base effects of clearing the VAT refund backlog and the proposed tax increases for 2019/2020 and 2020/2021 are reversed out, this translates to tax buoyancy ratios of 1, 1.1 and 1.1 for 2019/2020, 2020/2021 and 2021/2022, respectively. To put this in perspective, a tax buoyancy of 1 has not been exceeded in any of the past three years, even with the very significant tax increases in those years. Should a tax buoyancy of only 1 be achieved for 2019/2020, this would result in a tax shortfall of R29 billion or 0.5% of GDP and would see the deficit increase to 5% of GDP, holding GDP and expenditure stable. One gets the sense that the Treasury is placing too much faith in the ability of SARS to substantially improve its performance in the next year and for levels of tax compliance and morality to improve significantly. It will take a number of years to rebuild SARS and recapacitate it to the point where it is able to substantially improve its performance, even with the best will in the world. At the same time, SA has run out of space for further tax increases to fund its expenditure demands and to reduce the budget deficit, which is expected to grow to 4.7% of GDP in 2019/2020. He stressed that the constant increase in the tax burden is unsustainable in the long term.

As regards the public sector wage bill, it is acknowledged in the Budget Review that compensation accounts for more than 35% of consolidated public spending, and that this has, by itself, been a major driver of the fiscal deficit. It does, however, appear that some progress in reducing the wage bill has been made by government, with recent data showing a decline in employee numbers (owing to natural attrition) at a rate sufficient to absorb wage agreement pressures. In addition, PwC welcomes the steps announced in the Budget Review to manage growth in compensation and create a more sustainable wage bill through natural attrition and active measures, such as the scaling up of early retirement without penalties and the change to the performance bonus payment system. The only reservation PwC has in this regard is that this process should include measures to ensure that valuable skills, possessed by experienced, senior employees, are not lost to the public sector. However, more does need to be done to drastically reduce the wage bill which, along with increasing debt service costs, is crowding out other expenditure in respect of social spending and infrastructure.

South African Institute of Chartered Accountants (SAICA) submission

Mr Pieter Faber, Senior Tax Executive, SAICA, said policy uncertainty in all the fundamentals remains one of the biggest hurdles to economic growth. Businesses find an environment with long term policy uncertainty a very difficult place to build sustainable business, jobs and contribute to economic growth. Policy uncertainty was again a criticism of SONA 2019 as SA shares common views on the problems but seem to not share a common view on the future and how to get there. Policy certainty is in many instances more important than the actual policy and government needs to do much more in expressing its plans on how it is going to address concerns.

Revenue collection in relation to estimates continues to decline. As per the 2018/19 Medium Term Budget Policy Statement (MTBPS), the initial revenue shortfall for 2018/19 was estimated at R27.4 billion as compared to the 2018 Budget estimate. The revenue collections shortfall had now increased to R42.8 billion compared to the 2018 Budget estimate – which represents an increase in the expected shortfall between October and now, by R15.4 billion. National Treasury attributed the shortfall to the economic weakness thereby resulting in lower than estimated corporate and personal income tax collections and poor tax administration. It was interesting to note that approximately half of the additional R15.4 billion shortfall has been attributed to the higher than expected VAT refunds. Taxpayers and tax practitioners will no doubt feel vindicated for their continued complaints that they have consistently raised in this regard over the last few years. However, the promised R20 billion reduction in the VAT debt book (delayed refunds) in the Medium Term Budget Policy Statement 2018 did not occur and only half of that happened which means there is probably some explaining to do.

The ability to accurately forecast economic growth and the revenue it produces is of critical importance. A worrying trend is that SA seems to materially overestimate growth and revenue in the medium term, which when adjusted is not followed by an adjustment to expenditure. This problem is compounded with what was now confirmed by the Nugent Inquiry as SARS pre-collection practices, i.e. SARS retaining monies legally due and crediting it as collections or deferring it to its debt book. This practice to a large extent seems to have led to three years of narrowly “achieving” budget in 2014-2016.

Employment Tax Incentive (ETI) threshold increases

The President in 2018 approached business to employ more young people to give them experience and the challenge was accepted. However, the ETI threshold increase of only R500 to R6500 is not enough to ensure that more young people are employed in semi-skill required sectors of the economy.

Policy of retrospective amendments without clarity

Mr Faber noted that the Minister announced that in respect of certain dividend stripping avoidance arrangements amendments will be proposed back dated to 20 February 2019. Though retrospectivity has been debated quite liberally in recent years, what has become more concerning was that Treasury, like in 2011 with section 45, makes very unclear and broad statements which result in all similar commercial transactions being halted as there is too little information to decide whether your transaction is in scope. This creates an untenable system with Treasury implementing a green, orange and red bucket system in 2011, arguably the green should have been excluded in the Budget already. Bucket systems don’t work in SA irrespective of where they are used. Treasury should ensure that it has sufficient detail and knowledge of the avoidance and what principles it would apply to ensure legitimate transactions can proceed without having to wait for the final legislation.

South African Institute of Tax Professionals (SAIT) submission

Mr Piet Nel, Tax Faculty and Technical, SAIT, pointed out that the Minister, in his Budget Speech, highlighted that revenue collection continues to underperform as a result of weak economic growth and tax administration concerns. Improving collections hinges on restoring the efficiency of SARS. In the short term, such improvements may be more effective in raising revenue than further substantial tax increases.

On tax proposals in the budget, SAIT views this year’s tax proposals as a holding pattern. It is clear that the lack of a personal income tax (PIT) inflation increase was to cover for the lost revenue SARS should have made.

The budget recognises this. SAIT applauded the efforts of the Acting Commissioner, Mark Kingon. In particular, the resurrection of the Large Business Centre, is appreciated. The efforts towards the appointment of a new Commissioner were supported. SAIT was of the view that good tax administration cannot be dependent on persons - it must be institutionalised. 

On improving collections, everyone fully understands that revenue can only be satisfied with proper administration. The danger was that pressure on SARS could lead to audit aggression. However, it was SAIT’s view that the innocent should be treated fairly. Money must be taken from the right sources; not from the most visible. Artificial revenue activation measures (such as the failure to pay-out refunds) kills the economy and will worsen tax morality. The aim should be at parties contracting with government. Corrupt contractors (‘tenderpreneurs’) often don’t pay their taxes, amongst other evils. Procurement and the tax office may have to work together in this respect. It should be clear whether they are paying the taxes rightfully due by them, or they are claiming non-deductible expenses. It should also be clear whether their books match their income. There is a loss of revenue for the State when they do not report their income. Companies are artificially set-up to get a Government contract, but then simply disappear and the income from the contract is not declared and taxed. The concern was that otherwise legal taxpayers are simply not reporting correctly or keeping two sets of books. 

In terms of illicit flows, the focus should not be limited to tobacco/alcohol (i.e. sales generating excise taxes) but to high net worth individuals that underreport.  This will require forensic audit skills as opposed to financial accounting skills. Tobacco and alcohol is not simply an excise problem. It appears that there are many businesses simply operating outside the tax base in this area. Cross-border remains a concern but there is need to target those parties outside the traditional audit system of SARS. It appears that Treasury keeps coming back to the most visible companies. They are mainly the listed companies who are mainly compliant. There is a concern that the unlisted companies simply do not care about base erosion and profit shifting (BEPS) enough. 

On VAT refunds, the 2018 MTBPS announced that SARS would pay out overdue VAT refunds, which rose from R30.4 billion at the beginning of the fiscal year to R41.8 billion in September 2018. In subsequent months, SARS has been working to reduce the VAT credit book, which shows the total amount of refunds owed, by paying out an average of R22.2 billion each month. The position has certainly increased. But, there is a concern that the payment of interest due to the delay is not automatic. A weak revenue service is a dangerous revenue service. It will target the wrong things to get the revenue. A good example is the failure to pay VAT refunds. This is not just an SA trend but also a developing country trend. Paying legitimate VAT refunds to taxpayers is not a privilege - it is a right. Failure to pay legitimate VAT refunds can eat to the death of many small businesses.

Amendments to the Tax Administration Act

Mr Nel pointed out that the Minister of Finance will introduce legislative amendments to implement the recommendations of the SARS Commission and to strengthen tax administration and the capacity of SARS. A slightly stronger Tax Ombud was needed. The Office of the Tax Ombud should have freedom to investigate without asking for Ministerial approval. SAIT also believed that the Tax Ombud should be part of the Parliamentary process – when the Tax Administration Act is amended. 

Discussion

Mr M Monakedi (ANC, Limpopo) sought clarity about the economic growth and revenue forecasts which were said to have been off the mark for quite some time. He asked for comments from Treasury. On the call for the review of ministerial expenditure by the Fiscal Cliff Study Group, the President announced that there would be a reconfiguration of ministries and departments. Stakeholders should note that there was already progress on that front.

Prof Rossouw said the cost of ministries was not understandable. The commitment to reconfigure ministries and departments was noted but something was wrong if the cost of running ministries could range from R4.4 million to R137 million within the same year. Something was clearly broken and the Committees ought to take it up. He reiterated that with cost rationalisation, an annual saving of R1 billion would be realised.

Mr Ian Stuart, Acting DDG: Budget Office, National Treasury, said Treasury had made sure forecasts were reflective of credible bodies. Treasury will formally respond to this and the rest of the matters raised on Friday.

Ms Tobias wanted to know from SAIT how one arrives at a legal presumptive tax. The revenue authority must be given the authority to follow the money.

Mr Nel, in response, said the challenge with a presumptive tax was that the cash economy does not keep records. He however believed there were people who were unjustifiably deflating their incomes to ensure they fall below the taxable income threshold.

Mr Carrim appreciated the engagements and indicated the Committees would meet on Friday for formal responses from Treasury to the submissions. Stakeholders were welcome to attend.

The meeting was adjourned.