I wish to remind members that there is no speaker's list for the First Reading debate. After the introductory speech by the Minister, members who wish to participate in the debate must press the to-talk button - hopefully, it will be working - on their desk and, when recognised by the presiding officers, may speak from the floor microphones. Members may speak for not more than three minutes each and can speak only once. I also want to indicate that the total time for the debate is one hour. That includes the reply by the Minister, should he so wish.
Hon speaker, Deputy President and hon members, let me also join all of us in bidding farewell to the great patriot and democrat, Prof Asmal, and extend my condolences to Mrs Asmal and the family.
Tax legislation comprises of two different aspects. The first relates to the establishment of the tax liability, in other words, how much tax you owe, while the second relates to the administration of the tax. In constitutional terms, the first aspect is the money Bill aspect, while the second can be thought of as the administrative Bill aspect. Both aspects are essential to the success of an effective tax system and it is the administrative aspect that we are dealing with today.
The Tax Administration Bill, that we table today, takes the administrative aspects of several different tax Acts - for example, the Income Tax Act, the VAT Act and other similar legislation administered by the SA Revenue Service, Sars - brings these administrative elements together, rationalises them, makes them common, if you like, and updates them.
The aim of the Bill is to promote certainty, simplicity and coherence in the administrative aspects of the South African tax system to the benefit of taxpayers and Sars alike. This aim is reflected in the Bill's very structure. It follows the life cycle of a taxpayer, starting with registration and running through to the supply of returns and other information, assessment of tax, resolution of disputes that may arise and the collection or refund of amounts that are due.
The Bill will enable business sustainability by improving consistency in administration of tax laws and cutting down on red tape. Equally, it will protect the fiscus and compliant taxpayers from the corrosive effects of noncompliance by dishonest taxpayers.
Taxpayers will, we believe, welcome a broad range of measures that will underpin efforts to simplify their interactions with Sars even further. Greater access to third-party data will enable the further pre-population of returns. The basis for a phased move to a single registration number across all tax types has been put in place, as has the basis for modernising and transforming Sars's accounting systems. Taxpayers at the moment will have a VAT number, a PAYE number, an income tax number, and so on. In the near future they will have one number for all of these tax obligations and interactions that they have.
The Bill seeks to strike a balance between Sars's powers and duties and taxpayers' rights and obligations. Thus, while Sars's information gathering powers are extended, the requirement is introduced that requests for information be reasonably specific and that requests to third parties be limited to information that they would reasonably be expected to maintain. Taxpayers who are the subject of an audit will be entitled to regular reports on its progress and the findings of its conclusion if an adjustment to their tax liability is proposed.
Taxpayers who discover that they are noncompliant and wish to correct the situation before being detected will be able to make use of a permanent voluntary disclosure programme. Those taking advantage of the programme will find their understatement penalties reduced substantially and Sars will not pursue criminal prosecution. I should note that this programme is not as generous as the existing voluntary disclosure programme that is scheduled to close on 31 October 2011. The temporary programme allows for the complete waiver of understatement penalties and of interest due on late payment. Those who are noncompliant and are considering their options would be well advised to come forward under the temporary programme while they still can.
This Bill largely carries over the dispute resolution system for substantive tax disputes that was introduced in 2003. The Bill does, however, propose a significant change when it comes to service, procedural or administrative matters. This is the creation of a Tax Ombud, who will be able to review and mediate taxpayer difficulties relating to tax matters. The Ombud is not intended to usurp the role of Sars's existing internal mechanisms, the Public Protector or the courts. The Ombud is an additional low-cost avenue to resolve the difficulties, located between Sars's internal mechanisms and the external mechanisms that are already available, such as the courts. The proposal for the Ombud's office is based on this approach and draws on comparable institutions in Canada and the United Kingdom, among others.
This Bill has benefited from an extended public consultation process. The process started with a closed workshop with tax practitioners and organisations in May 2009. It was continued with the release of a first draft Bill for public comment that year, followed by workshops with commentators and other stakeholders in 2010, the release of a second draft Bill for public comment in 2010 and further workshops in 2011.
The Bill has further benefited from a constitutional review by external senior counsel, as well as a constitutional and technical review by the state law adviser. An informal briefing on the second draft Bill to the Standing Committee on Finance late last year provided additional feedback.
The Bill is the first instalment in a set of rewrite legislation that we intend to bring before Parliament. The Customs Duty Bill and Customs Control Bill, which were first released in draft form for public comment in 2009, are currently with the state law adviser for review. I anticipate that they will be introduced later this year. The Income Tax Act of 1962 will lose approximately 25% of its volume once the Tax Administration Bill has been passed by Parliament. So it is the next Act to be redrafted. A consolidation of the Act is planned for 2012.
To close, the Tax Administration Bill, 2011, before us today represents the outcome of several years of intensive work. It has involved a range of people from Sars staff to international experts in the field in its drafting and a wide range of stakeholders in its two-year-long consultative process. I thank all those who have been involved in this process to date, and I hope that this Bill will get the support of all the parties concerned. I hereby introduce the Tax Administration Bill, 2011, for the Assembly's consideration. [Applause.]
I thank the hon Minister for his introduction. I now wish to indicate that I have the following names on my screen and the list is closed. I have the honourable members B Ntuli, J J van der Linde, G L Mahlangu-Nkabinde, Mdaka, D T George, N J J Koornhof, Mufamadi and Swart. The list is closed. Please resist the temptation to keep pressing the talk button. The list is now closed. The Minister will not be speaking or replying. Okay, there are people who want to be scratched off the list. Are there any other volunteers?
The hon Mrs Mahlangu is off the list. Are there any other volunteers? No? Okay.
The MINISTER OF PUBLIC WORKS (Ms G L Mahlangu-Nkabinde): Hon Speaker, may I please be taken off that list?
I will, with pleasure, hon Minister. The hon J J van der Linde has also been scratched off the list. Mrs Ntuli, please speak from the mike where you are seated.
Hon Speaker, may I be removed from that list, please? [Laughter.]
THE SPEAKER: With pleasure. Also, hon Mdaka has volunteered to be removed from the list. Okay, I recognise the hon D T George.
Thank you, Speaker. Minister, I thank you for your introduction of the Tax Administration Bill. The DA welcomes this Bill that, we hope, will address the often confusing relationship between taxpayers and the tax authorities, as currently demonstrated by the so- called suspension of section 45 of the Income Tax Act. The DA believes that our tax laws have become extremely complex and complicated and that a consolidation and simplification process is necessary.
We welcome the Minister's commitment to this process and to making the laws easier for taxpayers to understand. Although we have not yet studied the Bill in detail or received the inputs that are due from the public participation process, we welcome the appointment of a Tax Ombud and the clarification of the rights and obligations of taxpayers.
We are particularly concerned about provisions for Sars officials to search premises not identified in a warrant and to search without a warrant, especially in the light of a recent Constitutional Court ruling that warrants must be crafted in a way that enables the person on the receiving end to know why his or her rights have to be interfered with in the manner authorised by the warrant. This is impossible without a warrant at all. However, this is a debate for the Standing Committee on Finance to conduct and the DA will be an enthusiastic participant.
Mr Speaker, Cope welcomes the start of this process as the first step to rewriting the Income Tax Act. In the memorandum to the Bill, it is stated that international experience has demonstrated that if taxpayers perceive and experience the tax system as fair and equitable, they will be more inclined to fully and voluntarily comply with it. Add to that that they trust government to spend it wisely and you have a happy taxpaying family, if something like that is possible.
In 1776, Adam Smith said that one of the fundamental principles of taxation was certainty, meaning that the amount of tax which each individual is bound to pay must be certain, and not arbitrary. We, as the Finance Committee, had a nasty experience with the recently tabled Taxation Laws Amendment Bill, when the National Treasury and Sars clearly overreacted in the way they have suspended section 45 of the Act without notice, leaving a scar and a slight mistrust among committee members. So, be warned, we shall closely watch the contents of this new Bill. Although the memorandum to the Bill puts a high value on equity and fairness, certainty and simplicity, time will tell whether this Bill ultimately achieves this.
We welcome the introduction of the Office of the Tax Ombud and we further welcome the extended powers to deal more effectively with tax invaders who demonstrate certain behaviour. We look forward to a more efficient tax-law era in South Africa and shall play our part to achieve it. I thank you.
Hon Speaker, from the preliminary engagement we have had with the South African Revenue Service officials, it is quite clear that optimum revenue collection is not an imperative but is essential to underpin government programmes to meet the socioeconomic priorities as outlined in the state of the nation address and the budget proposals we are about to conclude later today.
We must appreciate, at all times, the leadership of this institution, under the guidance of the National Treasury, for introducing and making sure that our budget focus remains consistent, reliable and brings about certainty and transparency in our country. Of course, to achieve all these objectives, Sars must at all times secure the most efficient, effective and widest possible enforcement of national tax and customs legislation.
As we know, our economy is an integral part of the globe. Therefore we require taxation laws that are adoptable and consistent with the fast and developing world economies. The harmonisation of these various generic administrative provisions in different tax Acts will go a long way in making sure that Sars continues to execute its responsibilities in a consistent manner. On the side of the ANC and the committee, we therefore welcome the introduction of this Bill and we're really looking forward to engaging the public on these particular issues.
With regard to section 45, which hon members from the other side have spoken about, I must say that we must not jump the gun and pre-empt the discussions. The process is ongoing, the committee will have an interaction with the public and National Treasury will come back to the committee to report on the outcome of such a process. There is no crisis in so far as that particular legislation is concerned. [Applause.]
Speaker, the ACDP welcomes the introduction of this Bill. Effective revenue collection is essential for any government to meet its socioeconomic priorities such as health care, education, infrastructure, employment and growth. This Bill deals only with matters related to tax administration and, as pointed out by the Minister, balances the powers and duties of Sars with the rights and obligations of the taxpayer and thereby enhances equity and fairness of tax administration. Nobody likes paying tax, but we all undoubtedly derive the benefits from revenue collection and it will be a preliminary step to the rewriting of the Income Tax Act.
We, as the ACDP, look forward to a simplified and harmonised system which will benefit Sars and taxpayers. We are also aware that the majority of the taxpayers are tax compliant. However, there is still a minority who seek to evade tax or defraud the government. Tax evasion, as we know, undermines the morale of compliant taxpayers and places an unfair burden on compliant taxpayers if not counted effectively. Therefore we as the ACDP agree that Sars needs stricter enforcement powers to target increasingly sophisticated tax evaders. We must increase the tax net.
This Bill will also allow generally compliant taxpayers to be subjected to less stringent measures and to be given better service while tax invaders will face stricter enforcement, assessment and collection powers. The ACDP will be closely studying the provisions of this Bill.
Thank you very much, hon member. Are there any other speakers on this topic? No? Then I call the hon Minister.
Deputy Speaker, let me thank the hon members for their general support on this. I think hon Swart captured the essence of this Bill and the general approach of the South African revenue system and the tax system more broadly, and that is that we want equity and fairness in our system. He says that of course nobody likes to pay tax, but let us just remind ourselves that our own salaries get paid by the tax that is collected. The majority are compliant taxpayers - hon Swart is absolutely right. We need to increasingly do what we can to make it easier for them to comply.
Two hon members raised the question of section 45. Let me clarify this for the House. Section 45 is a technical provision which allows for mergers, acquisitions and reorganisation within companies without a tax liability. This is put in place in the Income Tax Act so that these activities can be conducted for commercial purposes - that was the original purpose. What we discovered more recently is that there is a tremendous industry out there which has been engaging in what we can call "creative tax planning", which is resulting in potentially billions of rands being lost to the South African fiscus.
There is no overreaction in what we are doing. When you see losses to the extent of a few billion rands, both the policy makers and the tax administration have a responsibility to intervene. We have a responsibility to say to those who are organising their thoughts around this kind of planning to stop it because we are living in difficult economic times. What they are asking this House and taxpayers in South Africa to do is to allow them their creative activities, which rob the fiscus of millions, if not billions of rands, and then tell us to go and borrow the money and pay interest on that money and increase the debt of this country so that they can carry on with their creative exercises. Surely the South African public will not and cannot allow that.
So, the suspension of section 45 will be for a limited period of time. What hon members should remember is that tax administrations and policy makers are generally 10 steps behind tax planners. In other words, it takes them a long time to discover what tax planners are really up to.
The second problem we are confronted with is that there is minimal disclosure by those who are involved in these schemes. We hope that you will persuade those who have been appealing to you in the committee to come forth and put all the information on the table. They must be completely transparent and engage in full disclosure of the schemes and not ask us and the tax administration to behave like eternal dentists, pulling one tooth at a time - provided you can discover where the tooth is, in this case. [Laughter.] The truth often gets mixed up in this process as well.
And there are holes too!
So, hon members can be assured that section 45 will be dealt with in such a way that legitimate transactions will be processed as quickly as possible. Those who are robbing and raiding the fiscus, so to speak, must be stopped. We hope that all parties will join us in that. We look forward to the debate on the Tax Administration Bill.
Debate concluded.
Bill read a first time.