Deputy Speaker, in his keynote address to the Economic Society Conference on Monday, Prof Dominick Salvatore said that politicians are not grounded in theory. They do things that look good and, therefore, do not properly understand the consequences of the choices they make.
In amending the tax laws, it is useful to bear his comments in mind. The purpose of taxation is to collect money to enable governments to deliver services. Parliament has already considered the expenditure side of the Budget. We now need to consider the income side.
Given the depth of the current recession, the tax shortfall is likely to exceed R60 billion. To resolve this, income can be increased or expenditure can be decreased. In his introduction last week, the Minister committed government to existing spending commitments. This means borrowing to fund a primary deficit.
Government needs to ensure that short-term expenditure doesn't become long- term liability. As debt obligations increase relative to Gross Domestic Product, GDP, revenue available for service delivery is crowded out. Government needs to spend the people's money wisely.
The DA supports the view that government spending provides an important fiscal stimulus at this point in the economic cycle. There is excess in current budget expenditure, and government must ensure that its spending is appropriate and that austerity measures are in place.
Spending on infrastructure is appropriate, because it will facilitate economic growth after the recession. It will also provide employment that otherwise would not exist. Spending on the social security net is appropriate, because it provides at least some relief to those who are most vulnerable. Spending on effective government department programmes is appropriate, because people expect service delivery. Wasting the people's money and spending it on luxury vehicles is not wise, nor is it appropriate.
The DA's wasteful expenditure monitor currently stands at R120 million. This is a reflection of known government disregard for the people's money and it will no doubt continue to climb. The Taxation Laws Amendment Bills amend 14 Acts and cover a number of issues crucial to the operation of our economy.
Several provisions are very complex and require technical expertise to fully comprehend the implications. For this reason, the DA agrees with the Minister that only one set of major taxation amendment Bills should be tabled each year. This will also relieve pressure on participants in the industry who have raised concerns that our tax regime is too complicated and has led to noncompliance through ignorance, rather than the intention to commit tax evasion.
The adjustment to personal income tax thresholds will provide some relief to the 5,2 million individual taxpayers who still contribute more to the revenue pool than corporate taxpayers. Although there has been no recent progress on the long-awaited retirement reform process, taxation applicable to preretirement withdrawals has been simplified and the R300 000 tax-free withdrawal permitted on retrenchment will provide some relief from economic hardship.
A further window period to permit the transfer of a permanent residence from a company or a trust provides the opportunity for homeowners to extract themselves from a transfer tax evasion scheme that has became difficult and expensive to maintain.
Donations to the Financial Services Board Consumer Education Foundation are now tax deductible, and hopefully will encourage donations so that the Financial Services Board, FSB, can make long-awaited progress on its mandate to provide consumer education - the best form of consumer protection from financial predators.
There is a need for fiscal decentralisation so that other spheres of government can properly execute their mandates. Special features relating to the sharing of the general fuel levy revenue do not achieve this objective and should be reviewed. The DA does not support tax increases when our economy is in recession.
During the public participation process, stakeholders raised their concern over provisional tax estimates. This was resolved through the introduction of a two-tier system. Concern was also raised that the "pay now, argue later" provision could be abused to the detriment of taxpayers. Sars is committed to a process that it will follow when it implements this provision, particularly to avoid making the environment more difficult for corporate taxpayers to deliver the R165 billion that they currently contribute to fund government activity.
The film industry's concerns regarding incentives to it were not resolved. From these submissions, it appears that existing incentives are not effective and that our economy could benefit from additional measures to develop this viable industry. National Treasury has committed to continuing its conversation with the film and related industries, and we look forward to progress in this regard and the outstanding list on deductions applicable to people with disabilities.
In its deliberations, the committee remained aware of the tax amendment's impact on economic behaviour. The committee encouraged stakeholders and National Treasury to hold detailed technical discussions so that the most optimum outcome could be achieved. The current noisy debate on labour brokers requires a similar sober analysis of potential consequences. Fundamental change without sufficient thought that would put jobs at risk during the deepest recession in living memory is the failure that Prof Salvatore was talking about. National Health Insurance, NHI, and a single Public Service are similar examples.
In conclusion, the DA supports the Bills although the results would be a deficit. It is possible for government to generate more income by facilitating an increase in economic activities, and this is where it should focus its attention. Thank you. [Applause.]