The main issue to be considered today is tax and the vigorous opposition of almost all stakeholders to the 1 % VAT increase. The ACDP shares these concerns.
One needs however to take a step back and consider how the country landed up in this situation of reduced revenue collection resulting in this unpopular decision, and indeed in an erosion of tax morality in the nation.
What we do know from extensive evidence heard at both the Zondo and Nugent Commissions of Inquiry, is the impact that state capture has had on SARS. Yesterday Minister Pravin Gordhan testified at the Zondo Commission that former President Zuma had insisted on appointing Mr Moyane - and would not subject this candidate through the usual process.
We know about the troubled relationship between Mr Gordhan and Mr Moyane. We also know that one of the few, if not the only, purported prosecution under the PFMA was of Mr Gordhan, after a complaint was laid, we understand, by Mr Moyane. This was part of the attempt to get rid of Mr Gordhan and capture National Treasury and was also dealt with earlier today by Mr Gordhan in the Zondo Commission.
Back in May 2016 Mr Gordhan stated that, “No one should be subjected to the manipulation of the agencies (NPA and Hawks) … to conspire and intimidate me and my family”. He added at the time that “there will be less money if this subversion of democracy is allowed to continue.”
This is indeed what we saw. No one can say you were not warned or were unaware - yet state capture continued, in some cases aided and abetted by those in this house.
Mr Nugent in his first Interim Report on 27 September states the following: “SARS reeks of intrigue, fear, distrust and suspicion. The trajectory of modernisation, that had been in the making for a decade, was summarily stopped when the current Commissioner, Mr Tom Moyane took office on 27 September 2014, and the systems are degenerating as technology advances. .. in exasperation many skilled professionals have left. Measures to counter criminality have been compromised and those who trade illicitly in commodities like tobacco operate with little restraint. … SARS is isolated from its former high status amongst international bodies.”
The broader impact of state capture on lower economic growth and job creation has been articulated - with some estimating that the loss to the economy could be as high as a trillion rand over the past decade. The narrower focus has been on the revenue shortfalls which have widened over the past four years. This has been the subject of the Nugent Inquiry.
Under-collections have risen from R7,4 billion in 2014/15 (coincidentally when Mr Moyane was appointed) to a staggering R49 billion in 2017/18. This is expected to continue as the technical recession has begun to feed through to revenue collection. Weaker economic growth, alongside a once-off payment of overdue VAT refunds, will result in an in-year revenue shortfall now estimated at R27,4 billion, relative to the 2018 budget estimate.
Again the reason why the backlog of VAT refunds occurred was to inflate revenue figures under Commissioner Moyane’s tenure. Lower refund payments would obviously boost SARS’s overall tax collection levels.
This is projected to continue over the next three years with revenue projections set to fall short of the 2018 Budget estimates by R27,4 billion in 2018/19, R24,7 billion in 2019/20 and R33 billion in 2020/21.
The ACDP shares the view expressed in the report that more revenue must be secured through considerably strengthening SARS capacity raise more, drastically reducing wasteful expenditure and more effectively tackling the illicit economy and corruption. More revenue will also flow from investment, economic growth and job-creation. We welcome the steps that have already been taken by Acting Commissioner Mr Kingon, including the re-establishment of the Large Business Unit. Much more needs to be done.
It is important to note that Judge Nugent stated emphatically that “it is imperative that a new Commissioner be appointed without delay to remove the uncertainty at SARS and enable it to be set on affirm course of recovery so as to arrest ongoing loss of revenue.”
That was on 27 September – it is now almost two months later.
As far as the Taxation Laws Amendment Bill is concerned, the Committee Report states that “it has not experienced such widespread opposition to a tax proposal … and that “it may well be that it has been one of the most contested tax provisions since 1994…”
The VAT Panel appointed by the Minister considered eight further items for zero-rating. These were baby food (mainly milk), bread flour, cake flour, disposable nappies, poultry, sanitary products, school uniforms, and white bread.
At the end of the process, the Committee recommending that the VAT increase “has to be reluctantly accepted.” While the ACDP welcomes the increase in the zero-rated items, we cannot accept the VAT increase.
Why must the poorest of the poor suffer as a result of the ANC government allowing state capture and allowing SARS to be rendered inefficient?
It is not sufficient to say that the increase must be reviewed at the end of three years – on 1 April 2021. Political responsibility must be accepted now. I have not heard one ANC speaker acknowledge the role how it allowed SARS to degenerate - and how the party has featured prominently at the Zondo commission. The evidence was clear, yet very little or no action was taken during the looting and plundering.
Lastly, the ACDP supports the proposal to deregister tax practitioners, who were themselves non-compliant with their tax return and payment obligations.
The Taxation Laws Amendment Bill deals with very technical taxation issues, including dealing with the debt allowance in respect of non-bank lenders; closing abusive tax structures using the venture capital regimes, and amendments to the Mineral and Petroleum Resources Royalty Act, 2008, (regarding the meaning of the tax base for purposes of calculating the royalty).
I thank you.
ISSUED BY: STEVE SWART MP
20 November 2018