Mr. Speaker, it has become customary in this House for the Minister of Finance, when replying to the more important financial debates, to concentrate as far as possible on financial and economic affairs. I shall try to do the same thing today. Particularly in view of one or two of the speeches to which we listened yesterday, you will realize, Mr. Speaker, that I, too, am sorely tempted to talk a little politics today. However, I shall try to refrain from doing so as far as possible. [Interjections.]

†I want to say immediately and without qualification that the speeches made in this debate by the chief spokesmen for the two Opposition parties—the hon. member for Yeoville and the hon. member for Amanzimtoti—were most certainly the worst I have ever had the misfortune of listening to in a financial debate. [Interjections.]

Just wait until the third Opposition party arrives here. [Interjections.]

I want to make it absolutely clear. I shall substantiate it and I shall quote in support of my contention. The speeches delivered by the two hon. gentlemen were the worst I have ever had the misfortune of listening to in a financial debate in either this House or indeed in the now defunct State.

[Inaudible.]

The hon. member for Yeoville should not become hysterical. I have not even started with him yet.

I am not becoming hysterical.

He should just be quiet now. I did not interrupt him when he delivered his speech.

You started to insult me.

The hon. member should just keep quiet now. [Interjections.] I think it is a great shame that this should be so. After all, over many years a great tradition of financial prudence and responsibility has been built up in our financial affairs, a tradition which has, until comparatively recently, broadly characterized the approach and attitudes of all parties. I personally can remember listening in this House, while they were at different times in Opposition, to men like Havenga, Hofmeyr, Sidney Waterson, Harry Oppenheimer, Frans Cronjé and Sonny Emdin. Whether one agreed with what they said is completely beside the point. What is of the utmost relevance and importance is that they took their positions seriously and responsibly and that they tried to be fair and objective, however critical they may have been.

I have taken the trouble to look up some of their speeches in Hansard again, and I will stand by what I am saying. All this has changed, however. For the sake of cheap and petty, but thoroughly misguided politicking, the hon. member for Yeoville and the hon. member for Amanzimtoti have sought to cast a reflection on the Treasury and the Reserve Bank—two of the finest institutions in this country—and in the process they have thoroughly discredited themselves.

You always shelter behind other people. That is despicable.

I refer, of course, to their completely unsubstantiated allegation of mismanagement on the part of our fiscal and monetary authorities. In this they are at least original, unless one has to couple with them a misguided economist in Pretoria who, after two years, has suddenly found fault with the budget which I introduced as long ago as March, 1980. He has suddenly woken up after a deep dream of peace.

Mr. Speaker, on a point of order: Is the hon. member for Yeoville entitled to refer to the conduct of the hon. the Minister of Finance as “despicable”?

Did the hon. member for Yeoville use that expression?

Mr. Speaker, I said that what the hon. the Minister was saying was despicable, and I stand by that. Of course it is despicable. The words he used were despicable. When I say that it has nothing to do with him as a person. [Interjections.]

Mr. Speaker, on a point of order: The hon. member for Yeoville stated that the hon. the Minister of Finance always sheltered behind other people and that that was “despicable”. That is what he said. [Interjections.]

Order! Is that what the hon. member for Yeoville said?

With great respect, Mr. Speaker, what I said—and I repeat it—was that the hon. the Minister was sheltering behind other people and that it was despicable. That was what I said. That is also true.

Harry, why do you not just shut up? [Interjections.]

Mr. Speaker, the respect which the hon. the Minister of Finance shows to the Chair reflects the kind of conduct in which he indulges. [Interjections.]

Order! The hon. member for Yeoville must withdraw the word “despicable”.

Mr. Speaker, what must I withdraw?

The hon. member must withdraw the word “despicable”.

Mr. Speaker, I withdraw it. I do think, however, it is something to be deprecated.

Order! The hon. the Minister may proceed.

His conduct is shameful. [Interjections.]

Order!

Mr. Speaker, the most extraordinary thing about this mismanagement allegation is that, in stark contrast, my files are full of the most laudatory references to the quality of our financial management from literally scores of the most eminent authorities within South Africa and a whole number from countries abroad. Those files are in my office.

In fairness to me and my splendid team at the Treasury and the Reserve Bank—and we work as a team—I will quote but one authority, a leading economist and banker in Switzerland who knows South Africa extremely well and who recently, in a well-known publication, said that what the Minster of Finance—and I take this as an equal commendation for my team—in South Africa had achieved recently amounted to an “economic miracle”. Then we have to put up with this sort of reaction here in this House. I will also refer to the authoritative reports on the state of the South African economy submitted from time to time by visiting missions from the International Monetary Fund. Those thus far submitted since I became Minister of Finance are, I can say without the slightest qualification, a credit to the Republic. There is no other way I can put it.

Furthermore, if there has been financial mismanagement here, how does it happen that our credit rating in the thoroughly informed international capital markets is probably as high today as it has ever been in our history? Only recently, the well-known BERI evaluation in the USA rated South Africa as eleventh out of 45 of the leading countries in the word.

Finally, on this point of so-called mismanagement, I quote from a recognized financial authority who has said the following. I am going to quote a few of the things he said before telling the House who said it. On 26 July 1979 he said this—

Hon. members will note the reference to the state of the world economy, which, of course, has markedly deteriorated in the last two years or so. In contrast, apart from a fleeting reference made by the hon. member for Yeoville, the highly relevant and significant implication for South Africa of this fact, of the state of the world economy, is completely lost on the two gentlemen I am now dealing with.

Mr. Speaker, may I just ask the hon. the Minister to give me the dates of those letters?

On 1 July, 1980 … [Interjections]. The hon. member must listen and not get confused. He has been confused the whole week. He must try to be clear now. The financial authority I am now talking about said the following on 1 July 1980—

This point, I might add, was completely lost upon the whole Opposition. In addition, this authority went on to say—

That was the March 1980 budget.

We are now in 1982.

On 30 June, 1981 the same authority said the following—

These are the very people who, we have been told in this debate by these two hon. gentlemen, have been mismanaging the economy.

Why do you raise taxes?

He goes on to say—

What more then is there to say, Mr. Speaker, on this point? Here we have the considered view of a recognized authority on finance.

Who is it?

However much I dare say we might differ on political matters—I am sure we do—let me say this is Mr. Harry Oppenheimer.

A well-known social democrat.

And he said it three years in succession; so it was not just a sort of fly-by-night. He differs on virtually every point of significance from the two hon. gentlemen opposite with whom I am now dealing.

1980!

I have just quoted what he said in June, 1981.

Where are we now?

June 1981 is a few months ago and the policies are just the same.

Interest rates were half what they are now.

Is it not Mr. Speaker, the difference between authority and knowledge and a willingness to be fair and objective on the one hand and what I can only call incompetence, a lack of knowledge and blind and petty prejudice on the other? And, I may add, an appreciation of sustained financial discipline and a complete inability to understand what financial discipline means. What the Opposition has completely failed to recognize, is that the South African economy is strong and prosperous and not, as the hon. member for Amanzimtoti said, suffering from a lack of adequate growth due to deficit financing. In this one short sentence the hon. member has been guilty of two fallacies. Firstly, there is not a lack of growth and, secondly, there is no such thing as deficit financing in South Africa. I shall come to that in a moment. There is, on the one hand, a strong economy and, on the other hand, the financial position, as a result of factors entirely beyond our control, is tight, as the rise in interest rates immediately indicates. The factors I am referring to are the fall in the gold price and the truly parlous state of the economies of our trading partners and of the so-called world economy in general. On this question of deficit financing, I want to say this. Deficit financing is when you bring in all you revenues—and the two great classical sources of revenue to the State are taxes and loans—and you then budget for a shortfall against expenditure. That is deficit financing. I have never engaged in that type of financing in any shape or form; in fact, in every budget we have shown a surplus. Therefore, there is no deficit financing. Loans are in fact as important a source of revenue to the State, and have been for hundreds of years, as are taxes. Indeed, it was not very long ago when we still used to distinguish between a Revenue Account and a Loan Account. It was only for the sake of convenience that we put them together a few years ago. Now we have to listen to this talk of deficit financing! [Interjections.]

In 1980 the gold price averaged 613 dollars per ounce. In 1981 the average price was 460 dollars per ounce. That fall of 153 dollars per ounce in the last year has cost South Africa in cash earned abroad something like R3 000 million in one year, and it has cost the Exchequer at least R1 600 million. So drastic a setback would have knocked the stuffing out of many a country today—and many countries that are bigger than South Africa—and yet, what is our position?

What was your estimate of the gold price?

Our economy is in excellent shape—there are record vehicle sales, there is a continuing investment boom and an excellent growth rate. We only have to look at the value of building plans passed throughout the economy. Our growth rate is still one of the best in the world at this moment and our finances, despite the strains imposed from abroad, are, under the Government’s direction, in very good hands. It is sheer nonsense to say that I have gambled on the gold price. Every informed source knows that I have been extremely conservative about the price of gold, and my budgets prove the point.

What price did you budget on?

And, Mr. Speaker, it is perfectly outrageous to say, as the hon. member for Amanzimtoti has said, that South Africa is facing bankruptcy.

Irresponsible, completely irresponsible!

The hon. member’s words were: “South Africa is in a classic spiral to bankruptcy”. I hope that hon. member is thoroughly ashamed of himself. [Interjections.] Apart from all our other assets and our incomparable mineral wealth, our gold reserves rose—they did not fall— from 9,67 million fine ounces as at 31 March 1978 to 12,36 million as at 30 September 1981, enabling us very comfortably to conclude favourable gold swaps abroad.

Then, Mr. Speaker, in stark contrast to the facts, I am accused by the Opposition spokesmen on finance of dissipating the gains we derived from the gold boom of 1980. That was a big point of theirs— another outstanding example of a hit-and-run ex cathedra statement without the slightest justification.

What are the facts? Some of the facts which the Opposition have conveniently chosen to suppress are the following: Firstly, we took advantage of the position to redeem the public debt on a vast scale. By the end of 1980—the year at issue—we had reduced our external long-term debt—our long-term debt, Sir—to R1 302 million from the figure of R2 296 million at which the figure stood at the end of 1977. Likewise, we paid off huge amounts of short-term public debt at the same time. In fact, we did this to the extent where certain leading banks abroad said to us: But you do not have to pay these amounts off at this rate. Why not roll them over and extend them? We shall be quite happy to lend this money to you for a longer period.

Secondly we placed the record amount of R1 240 million to reserve—to the Stabilization Account to finance strategic imports such as oil, armaments and so on. Was this amount of R1 240 million mentioned by any Opposition spokesman?

Thirdly we financed the building up of our security forces, equipping them effectively and at the same time helping substantially to finance the building up of a modern and effective armaments industry. I am talking now of what the Treasury has done, our “mismanaged” financial institution. In 1974-’75 the amount allocated to defence alone was about R650 million; today it is fast approaching R3 000 million. While this is happening, we do all these things to which I have drawn attention.

Fourthly we put aside record amounts for housing, education, social services, the development of the Black States and infrastructure generally.

Fifthly, while all this was being done, we contrived to make the biggest reductions by far in our history in taxation. When I took over as Minister of Finance at the beginning of 1975, the marginal rate of income tax, including the loan levy, which was a compulsory levy, was 72% at incomes above R28 000; today the marginal rate is 50% at incomes above R40 000.

I have thought it fit, simply because it is impossible to deal with all the matters raised in this debate, to issue a supplementary statement today containing certain facts on how significantly we have reformed and lightened the burden of taxation. One of those documents sets out in numbered form all the tax reforms and all the tax concessions and all the alleviation of the impact of tax we have made in the last few years. I believe it is an astonishing statement and I hope the hon. members of the Opposition will look at it. If I had the time, I would read it, but it is about three pages.

I have thought it fit also to tell the country in the form of a supplementary statement how we have by far-reaching practical measures lightened the burden of inflation. Why have the Opposition so signally failed to mention the latest improvement in the cost of living? I have here Die Burger of Tuesday morning. Die Burger of Tuesday morning says—

There were two days of debate after this had appeared, but there was no reference to this by any Opposition speaker, either on Tuesday or on Wednesday.

Every January inflation goes down.

This is what Die Burger says—

I would have thought, if we wanted to give a balanced view of the economy, however critical we wish to be, we might have felt it necessary to quote those latest facts on inflation.

In particular I should like to stress how we have helped the pensioners, the aged and those hundreds of thousands, if not millions, of people, mostly in the lower income groups, by subsidizing their bus and rail fares on a very substantial and increasing scale, just as we have subsidized and are subsidizing basic foodstuffs on what I can only call a very generous scale.

Why does the Opposition, if it has any regard for balance and fairness in criticism, not mention some of these things to the House and the public? I suggest the reason is that, ever since I have sat here, the Opposition has consistently exaggerated the impact of inflation. How can one carry on a debate on inflation without reference to all the countervailing and ameliorating measures which the Government applies each year and has indeed applied for a number of years? I have taken the liberty to list some of these in the supplementary statement which I referred to earlier.

Take for example the astonishing presentation on GST we have heard from the hon. member for Port Elizabeth Central and the hon. member for Cape Town Gardens. They tell us that the increase in the general sales tax is not in fact 1 cent in the rand but 40%. Of all the juggling with figures I have witnessed in this House, this must surely take pride of place.

You are the biggest juggler of them all.

The Opposition criticized us because they say we are financing the State by way of Reserve Bank credit. The hon. member for Amanzimtoti referred to it as “worthless paper money”. It might well be paper money but it is definitely not worthless. It is in fact full-bodied money. The Opposition suppress from the public that this is temporary bridging finance—I explained carefully in the statement I issued earlier on this matter—occasioned by the need to supplement the Treasury’s financing of strategic imports made by the State Procurement Fund and, very important, the record maize crop, where, in the latter case, the problem was compounded by the difficulty of exporting the usually large surplus because of the poor state of our trading partners abroad. It costs a great deal of money to store huge quantities of maize, and I think everybody knows that.

However, the remarkable thing about the maize issue is that the hon. member for Yeoville specifically asked me by way of a recent question on the Order Paper about the financing of the maize crop. I informed him that the total amount drawn from the Land Bank was no less than R1,8 billion. Surely, the hon. member can see what implications for financial policy such huge transactions must have. I suggest he should take that into account when he criticizes the Government. I say again that the credit drawn from the Reserve Bank under the current tight financial conditions—conditions forced on us from abroad—is temporary bridging finance and no part whatsoever of our budgetary philosophy. The inconsistencies of Opposition thinking on financial policy never cease to amaze me. They say they want to see inflation reduced, but we must not allow interest rates to rise. They say that even under very tight financial conditions Reserve Bank credit, even for short periods, must be eschewed, and yet, when I raised GST by 1% and imposed a temporary surcharge of 10% on imports precisely to place the Treasury beyond the need of such credit, they complained bitterly. And so it goes.

GST was not raised by 1%.

It was raised by 1 cent in the rand. Can the hon. member work that out?

Fortunately there have been many more constructive, objective and worthwhile speeches in this debate than those of the hon. member for Yeoville and the hon. member for Amanzimtoti. I wish I had the time to deal in detail with all the contributions that have been made by hon. members on this side of the House. I have taken the trouble to call for the Hansard records of every single speech made in this debate and I have spent hours studying them.

*I want to convey my very sincere congratulations to hon. members on this side of the House on the quality of the speeches they made in the debate. I wish I had the time to refer to every individual contribution to substantiate this statement of mine.

†On the Opposition side, I should particularly like to single out the speeches of the hon. member for Edenvale and the hon. member for Umbilo. Whether I, or anyone else on this side of the House, agree with all they said is beside the point. The point is that they can be commended—as I indeed do—for their calm, reasoned and well-informed speeches, and what I would call their sense of balance and fairness in debate. I do think the hon. member for Umbilo went a little astray when it came to deficit-financing, but I cannot blame him because he had had to listen to the hon. member for Amanzimtoti beforehand. His speech, however, was a calm, reasoned and constructive contribution. In all seriousness, for the sake of the standards and great traditions of this House, I want to propose to the hon. the Leader of the Opposition and the hon. member for Durban Point that the time has come for them seriously to consider replacing their present spokesmen on finance. [Interjections.] I knew that would cause some mirth, but I happen to be serious, because I am thinking of the standards of this House. I think the hon. member for Yeoville should be replaced by the hon. member for Edenvale, and the hon. member for Amanzimtoti by the hon. member for Umbilo.

They only get one out of ten.

This country and its parliamentary traditions are too great, and its economic and financial policies are too important, to entrust major financial debates to the present incumbents as spokesmen for their parties, the PFP and the NRP, when time and time again they have regarded cheap and petty politicking as more important than constructive debates on finance and the economy.

I have some more time available, and I shall therefore now try to deal with some arguments and proposals or suggestions that have been made. First of all I just briefly want to refer to the hon. member for Sea Point who talked mostly about housing, in fact low-cost housing for Blacks. I should like to assure him—and I think the figures bear this out completely—that the housing issue has been one of the major priorities of this Government, certainly since I have been Minister of Finance, and I know even earlier than that. That hon. member said that the joint committee rejected the subsidy proposals of the Viljoen Committee.

Joint statement.

Very well, but that is not correct. What happened was that the Government accepted all the recommendations in the Viljoen Committee report except paragraph 9, and that did not just deal with subsidies, but also with the whole question of the financing of Black housing. It was said that this was obviously an issue which, because of its importance, needed further very close study. As a result the Government immediately set up a committee under the chairmanship of the hon. the Deputy Minister of Finance, a representative committee to look closely at, and report on, the whole question of financing for Black housing. So that aspect was not rejected and is, in fact, being treated very seriously.

Can you report any progress?

I can say that the hon. the Deputy Minister and his committee are studying this aspect as a matter of urgency.

*The hon. member for East London North spoke about regional development and asked for a conference to be arranged as soon as possible after 1 April in East London, a conference at which small businessmen, doctors, attorneys and other professional people who have money to invest in the development of Ciskei and the Border can be involved. In this connection I just wish to mention that the proposed regional development Advisory Committee, the RDAC, can play an important part in this respect. There has been a need for the decentralization of regional economic development porgrammes. In this way, the local interest groups are given an opportunity to provide inputs in terms of which the Government’s regional economic development policy can be planned and formulated. In my opinion, the RDAC could consider arranging such a conference itself, if this is their view, in co-operation with the hon. the Prime Minister’s office—i.e. the Economic Planning Branch.

I also wish to refer to another matter that has been raised, by the hon. member for Albany, I think. I am referring to the question of the Land Bank, Government stock and its use as security and so forth. It actually concerns the question of the financing of land purchase.

†There was earlier this session a question on the Question Paper in the name of the hon. member for Mooi River. He asked me (Questions, col. 54)—

My reply was—

1. (a) R469 800, from applications to the amount of R605 000.
2. (b) Jointly against security of Government stock and farm property and in one case against security of Government stock only.

The point is that applications must of course be made for this type of financing. The Managing Director of the Land Bank in a letter to me at the beginning of February made it clear that virtually up to the end of January there were seven applications of which only one was rejected, and that the Land Bank went out of its way to give the maximum security it could on this State paper.

*The Government has the greatest sympathy for our farmers. I need not elaborate on that. However, it is virtually impossible for any Government to buy back such Government stock under any circumstances. Unfortunately it happens that when interest rates go up, the capital value of that stock diminishes. When interest rates go down, the opposite tendency prevails. However, we are doing everything in our power to approve, through the Land Bank, any application that is received, as I have indicated, to make it possible for that Government stock to be used as effective security so that the farmer may at least receive some cash on that basis.

†Just by way of comment I may say that it is interesting that shortly before the hon. member for Mooi River put this question to me my attention was drawn to The Natal Mercury which in a leading article had some very harsh things to say about my hon. colleague, the Minister of Co-operation and Development, and myself on this very issue. They had no facts. They did not approach us or the Land Bank. Yet they criticized us for not carrying out our announced policy on this very matter. I hope they will have the decency to check the facts. Perhaps they would then like to publish another leading article in a somewhat different vein. One gets a little tired of this one-sided prejudice appearing in this form.

You have got a persecution complex.

No, it is not a question of a persecution complex. It is a question of gross unfairness and gross inaccuracy. Our so-called free Press can do a little better than that. The hon. member had better read the leading article. Then he might tell me what he thinks of it in the light of these facts.

We agree that it is “so-called free”.

What are you implying by that?

I did not even hear it and I do not wish to hear it.

That was just the windmill talking.

Yes, he is an hon. member who tilts at windmills like Don Quixote, as we saw yesterday. He tilts at them on his famous steed.

I want to come to the allegation that an amount of R22 million has been lost in the form of GST. This was an allegation made in public. The hon. member Mr. Aronson was perfectly correct when he said that it was not lost but was recovered. I have not seen the newspapers put right the wrong impression they gave in reports, but we shall see. From recent Press reports and also from what a number of hon. members said during the debate, it is clear that my reply to a question asked by the hon. member for Yeoville has been completely misconstrued in certain circles.

The hon. member asked—

1. (a) How many cases of irregularities in respect of sales tax have been discovered since the inception of the tax, and
2. (b) what was the amount involved?

To this I replied—

1. (a) 34 969, and
2. (b) R22 406 673.

Surely, Sir, from this it should be quite clear—and I emphasize this point—that the amount quoted has not been lost, but that as a result of the discovery of the irregularities, the amount of R22,4 million which would otherwise have gone uncollected, was in fact recovered from the defaulters and paid into the Exchequer. So let us just have clarity on that simple fact.

There has of course been a great deal of publicity about this alleged GST swindle. Mr. Kit Katzin was in his element. There was sensation-mongering of the worst kind and all sorts of allegations, but there was nothing whatsoever he could prove. The Commissioner for Inland Revenue has already replied by way of a newspaper report, but he has given me a much more substantial reply. This proves that this department is in excellent hands, that its standards are high and that under very difficult circumstances it is doing everything in its power to maintain the utmost efficiency. The Commissioner for Inland Revenue says that he regrets that these seeds of suspicion have been sown because—

He goes on to say—

which he is doing at present. He says—

He then queries the amount, as I shall show, and he says that in any case the actual period was 45 months, in other words nearly four years. Then he says—

He goes on to say—

He gives this example—

The Commissioner says he is quite prepared to make his calculations available to the writer of the newspaper articles and to compare notes and give explanations as to why the national accounts figures should not be accepted at face value for such an exercise that he attempted to make. It is a great pity that he did not consult with the Commissioner before he wrote these huge headlines about “swindles”. His whole case, says the Commissioner, “built on incorrect facts and premises, has failed, and he has not in fact proven anything except that one should rather consult the true experts and not quislings hiding behind anonymity and claiming to be senior Government tax experts.” The Commissioner says he is more than willing to discuss the matter with the reporter and his collaborator and he guarantees that their anonymity will be respected, but he should like to point out to them the error of their ways. I think that is a very dignified comment, Mr. Speaker and I hope the reporter or the reporters concerned will take cognizance of it.

The hon. member for Port Elizabeth Central has on one or two occasions raised the question of fiscal drag. We have been looking at this, and I have here a table which has been prepared by the Commissioner for Inland Revenue. I shall make this table available to the hon. member for Port Elizabeth Central. In fact, I think I might even make it available more generally. On the basis of this table of tax the Commissioner says—

The inflation over those years is calculated at 40% per annum.

So, we have beaten that fiscal drag. I quote again—

*I think this is very interesting and also very important. Perhaps we should see these things in the right perspective.

Quite a number of other matters have been put to me. I want to thank the hon. member for Gezina, the hon. member for Malmesbury and other hon. members for their kind references to the department and what we are trying to do. Both the hon. member for Gezina and the hon. member for Malmesbury gave an excellent summary, I believe, of our policy, especially of the essence of our financial policy. I believe that these were very valuable and constructive contributions. As I said earlier, I really think that the same could be said about the contributions of all the other hon. members.

†I have already referred to the hon. member for Edenvale. There is a particular point in his speech to which I should like to return now. The hon. member proposed that insurance premiums paid by a taxpayer should be deductible from income in the same manner as contributions to pension and retirement annuity funds. I know the hon. member has made a close study of this matter, and I believe he put his case extremely well. So I should like to comment briefly on it, if I may, Mr. Speaker. In considering this proposal, I should like to point out that it must be borne in mind that contributions to a pension or retirement fund are aimed at the provision of a regular income for the taxpayer after his retirement and that such income is taxable in full in his hands.

Insurance premiums are intended to provide the taxpayer or his dependants with a capital sum which, in the vast majority of cases, is not taxable. Should the premiums paid in respect of insurance policies therefore be treated in the same way as contributions to the funds in question, it would be only logical to treat the proceeds of such policies in a like manner as pensions or annuities. The allowance or premiums as a deduction from income, instead of allowing the present rebate of 10% of such premiums, would also be of little or no benefit to taxpayers in the lower income categories, while affording substantial additional relief to taxpayers earning more than the marginal maximum of R40 000. At present a married taxpayer without children earning R6 000 per annum and his counterpart earning R45 000 both receive a reduction in tax amounting to R75 if they are entitled to the maximum rebate. In the case of the former this represents a reduction of 26,79% in his tax bill and for the latter, a reduction of 0,52%. Should they be allowed to deduct premiums amounting to R750 from income, the tax payable by the former would actually increase by 7,32% while the latter would receive the benefit of having his tax bill actually reduced by 2,10%. In fact only those taxpayers with an effective tax rate exceeding 10% would benefit from the concession. In the case of married taxpayers with no children this point is reached when the taxable income amounts to slightly more than R12 000. The present system therefore I think clearly provides a greater incentive for taxpayers in the lower income categories to take out insurance than under the system proposed by the hon. member. But, as I say, I am glad the hon. member raised this matter. It is a very important matter and one which we obviously will keep under close surveillance as we go along.

*I think I should perhaps conclude my reply at this stage. Once again I want to convey my very sincere thanks to hon. members who have participated in the debate. I want to assure those who went to a great deal of trouble, as everyone did, and whose contributions I could not discuss in detail, that I, the department and the various directorates under my control will thoroughly investigate every proposal and every argument that has been advanced, and that we shall contact them to follow up certain matters.

You promised me an answer with regard to constitutional developments.

I am glad the hon. member mentions that. I had actually meant to comment. Yesterday the hon. member for Durban North spoke about constitutional development and he referred to the Coloureds and to what had recently been said about the Coloureds. He expressed the hope that the Indians would not be ignored. I should like to give the hon. member the assurance …

No, not ignored, but treated differently.

Let us say discriminated or differentiated against.

That is correct.

I should like to give the hon. member the assurance that it is no part of the Government’s intention or policy to do that. We are well aware that both the Indian community and the Coloured community are important in this country. They have an important part to play and both of them will, I believe and the Government believes, receive a very fair deal. I hope that puts the hon. member’s anxiety at rest.

Question put: That all the words after “That” stand part of the Question,

Mr. Speaker, I move—

This measure gives effect to the taxation proposal laid on the Table by the hon. the Minister of Finance during the Second Reading of the Part Appropriation Bill on 11 February 1982, in terms of which it is proposed to increase the rate of sales tax from 4% to 5% with effect from 1 March 1982. Although in essence this seems quite a simple matter, it must be borne in mind that commerce and industry will have to prepare for the change and make various alterations and adjustments in accounting procedures to ensure that the correct amounts of tax are collected and paid over. There are certain technical matters which will require some attention and a full explanatory memorandum has been prepared for the information of hon. members. From a practical point of view it will be appreciated that traders who have adopted the add-in basis, will have to adjust their prices and, of course, the Commissioner for Inland Revenue will prescribe appropriate rounding-off tables as provided in section 10(9) of the Act. Hon. members will appreciate the necessity of these preparations being made before 1 March 1982.

*Although sales tax is a transaction tax, in the case of vendors it is paid to the Treasury on a periodic basis. A vendor who pays monthly, must furnish a return of transactions during each month to the Receiver of Revenue and pay the tax on those transactions.

The tax is not only levied on cash sales and where credit is given, a reserve is allowed equal to 50% of the amounts due to the entrepreneur in respect of taxable transactions at the end of the tax period. This reserve is carried over to the next tax period and added to the vendor’s taxable values for that period. The effect of these particular provisions of the Act is that half of the tax is distributed over the credit period.

It is not the intention that the higher rate of 5% be applicable in respect of amounts that become taxable prior to 1 March 1982, and a formula is proposed in clause 2(c) of the Bill in terms of which a once only payment will be made to compensate the vendor for the fact that the 5% rate of tax will be applicable in respect of all tax periods ending on or after 1 March 1982.

Briefly, what this amounts to is that a reduction of tax is granted for the first tax period ending on or after 1 March 1982, but that this reduction will be recovered in subsequent tax periods due to the application of the 5% rate. This method of settlement was chosen to simplify the administration of the tax by vendors as far as possible, and I trust that it will be welcomed by dealers and others. The alternative would have been to call for separate returns for the 4% tax. After careful consideration the conclusion was arrived at that the bookkeeping involved would be considerable—and this was to be avoided.

Hon. members will note that a payment is not proposed in respect of irrecoverable debts written off after 1 March 1982 or recoveries of irrecoverable debts taking place after that date. It is realized that the amount in tax collected in respect of the transactions in question will not be quite correct. In general, vendors will be in pocket to a small extent in cases where debts including a 4% tax are written off after 28 February 1982. It is felt that the collection procedure must be as simple as possible and bookkeeping kept to a minimum. Vendors are responsible for collecting tax for the Receiver of Revenue, and it is felt that the small concessions are justified on the grounds of efficiency.

Mr. Speaker, it will come as no surprise that we on this side of the House will oppose this measure. I want to say at the outset that I am somewhat amazed that the hon. the Minister of Finance has seen fit to walk out during the course of the introductory speech by the hon. the Deputy Minister of Finance on a sales tax matter shortly after he, the Minister had made rather vituperative attacks in the House, and knew that is was going to be debated. The hon. the Minister, however, walked out in the midst of the debate in order not to be present when this was discussed. I think that that was not called for, to say the very least, to come in here and get rid of a lot of irresponsible statements and then walk out. No, that is not the way to behave.

Mr. Speaker, …

What is the hon. member’s problem?

Order! It is not for the hon. member to inquire what the hon. member’s problem is.

The hon. member did not rise on a point of order.

Mr. Speaker, is it proper for the hon. member to address you with his hands in his pockets?

The hon. member for Yeoville may proceed.

The very first thing that needs to be said in this case is that the political responsibility for increasing general sales tax lies upon the hon. the Minister of Finance, and upon the Government. It is not going to help anybody to seek to shelter behind officials, as has been done in an exhibition that is unequalled this afternoon. That is what the truth is. It appears that when an hon. member of the House has not got a constituency, he does not know what political responsibility is. When one stands up in the House and deals with matters of this sort then one accounts for it and does not seek to shelter behind officials. When there are these kinds of tax increases and there are Government maladministration and mismanagement it is a political responsibility. I think it is a cowardly thing to seek then to shelter behind officials. I think that needs to be said. I think it is important that it be said, because some people should know that there is such a thing as a political responsibility.

Mr. Speaker, on a point of order: Is the hon. member allowed to say that the hon. the Minister of Finance is cowardly and shelters behind officials?

Did the hon. member for Yeoville actually say that?

Mr. Speaker, I said the hon. the Minister of Finance acted cowardly because one cannot shelter behind another person. If that is not cowardly, I do not know what is.

The hon. member must withdraw that.

I withdraw the word “cowardly”, Sir. However, every self-respecting person will disapprove of sheltering behind another man when one has political responsibility. That is the reality of this situation.

Let me now deal with the hon. the Minister and this Bill he has introduced. Firstly, let me say that we oppose this Sales Tax Amendment Bill, and we do so for a whole variety of reasons, all of which I believe to be valid and which I should like to specify. Firstly, an increase in the sales tax has an effect on the living costs of ordinary South Africans at a time when they are already hard hit by inflation, and I shall enlarge on that in a moment and deal specifically with the excuse about inflation we have just had to listen to. Secondly, sales tax is imposed on the essentials of life, particularly foodstuffs, and we have repeatedly said that if sales tax must be imposed, these essentials should be excluded. Thirdly, there is no indication of the extent to which food subsidies will be increased in order to alleviate the burden. We have had no details about that at all. Fourthly, let me say that the nature of the tax is such that in a society in which there are great disparities in income it is undesirable, because it is not a fair tax. The lower the income, the greater the proportion of that income that is spent on items on which sales tax is payable. The workers in the lower income groups, and the pensioners in particular, pay sales tax on virtually all the money they have available to them because they have to spend virtually all their money. Fifthly, the hon. the Minister has given no indication of what the whole tax package will be this year, and until one knows what the budget as a whole is going to be, it is wrong selectively to choose items of this nature for additional taxation. Sixthly, sales tax increases with inflation, because when prices go up more sales tax is collected and the actual amount of the sales tax in regard to a particular item—e.g. food—in absolute monetary terms increases as the price of the item goes up. It is a point that the hon. member for Port Elizabeth Central also made, but which the hon. the Minister of Finance is incapable of appreciation or unwilling to appreciate.

Let us just look at the scenario of the taxation picture. It appears on analysis that despite a drop in the gold price, and despite the recession in the countries that are our major trading partners, revenue for the forthcoming year, in total terms, even without this taxation, is unlikely to decrease, as the anticipated decrease in earnings from gold-mining, for example, must be balanced against anticipated increases in company tax and personal income tax. The real question is: By how much is Government spending going to go up? That is the real issue. One is perhaps not being wildly extravagant in anticipating that this Government is likely to increase expenditure by something like 15%. If that takes place, it is estimated that the deficit before borrowing—and as far as I am concerned that is the deficit we are talking about—will be something in the region of R5 000 million. If that amount were to be equated with the gross domestic savings in South Africa, for example, it would probably be found to be just less than a quarter of that. The question is therefore: How much is going to be borrowed, how much is going to be drawn from the Stabilization Fund and how much is going to be raised by additional taxation? That is, of course, on the assumption that there will be a 15% increase in Government expenditure, which is what one could guess that the Government is likely to do. Whether one approves of it, of course, is quite another matter. So if one raises, for example, an amount of R1 500 million by way of extra taxation, it means that the consumer is directly going to pay for the bulk of this taxation, because if one takes the general sales tax and the import levy, one finds them jointly accounting for R1 150 million of the R1 500 million, which is the revenue it is desired to raise. What is therefore happening in this budget, at the present stage, is that the consumer is being hit hardest, and if there are going to be further excise duties announced and imposed on 24 March, the situation is going to get even worse. So the reality is that the consumer is being made to pay the bulk of the additional taxation which the Government now intends to raise.

I want to turn to the question of inflation. The hon. the Minister of Finance, in trying to talk away inflation, said that January was a lovely month, but anybody who looks at the statistics for January of every year for the last few years, finds that, apart from January being a lovely month in the Cape, it is also a specifically lovely month for inflation. The hon. the Minister of Industries, Commerce and Tourism knows that because he has the statistics. Every January there is a seasonal downturn in the inflation rate, because it is a month in which there are not particular increases imposed. The hon. the Minister of Finance takes that month in order to demonstrate that, in fact, there has been an improvement in the inflation rate. I wish it were true. We are going to have to look at the figures for the months that lie ahead to see whether in fact there is an improvement in the inflation rate.

Whether the hon. the Minister of Finance tries to talk it away or not, the reality is that inflation has been and remains a major problem in South Africa. If one wants to make a real comparison, let us compare the position at the end of 1981 with the position at the end of 1980. That is a fair comparison. I am sure that the hon. the Minister of Industries, Commerce and Tourism will find, if he looks at his statistics, that the increase over that period was in fact just over 15%. That is the real test, and not the figure for an isolated month in that particular context as the hon. the Minister of Finance contends.

It is juggling with figures.

Even though there can be a temporary slowdown in the rate of inflation, I want to ask—and I want an hon. member on the Government side to get up and deal with it—whether in reality a number of blows have not already fallen on the consumer which will show up in the indexes shortly and whether there are not also a number of blows that are still likely to fall on the consumer.

For example?

There is GST itself. There is the import levy, which increases prices. Mortgage rates and finance charges have gone up and they are going to have an impact on the index. The rand has depreciated substantially and we all know that that means that imported products bought by the consumer will go up in price. Those are realities. Then there is the question of petrol. For some time now there has been speculation about when the petrol price is going to go up, even though world prices are going down. As a result of what has happened to the rand, it is generally anticipated that there is likely to be an increase in fuel prices. Is that not going to affect inflation, not only directly but also in many indirect ways?

Let us look at food prices. Food prices show no tendency to be slowing down to any extent. On the contrary, we now read and hear that the forthcoming maize crop is anticipated to be a poor crop. What is then the first thing we hear? Last year when there was a big surplus of maize the price went up and this year, while in fact the crop is likely to be substantially less, the first thing one hears is that there is going to have to be a substantial increase in the price of maize. So the laws of supply and demand in this so-called free enterprise society of the Government do not work at all. When learning elementary economics, one is told that, when there is a surplus, prices are supposed to go down and that, when there is a shortage, prices go up. However, in the new kind of free enterprise society of the Government it does not matter whether there is a shortage or a surplus, because prices only go in one direction and that is up. That is the reality.

As far as we are concerned, GST is utterly unacceptable in the circumstances, and the increase is utterly unacceptable. However, before we leave this subject, I want to come back to the issue of GST irregularities. As far as the public are concerned, not only do they not like paying sales tax, but when they do pay it, they expect the money they pay to go into the coffers of the Exchequer. That is what they expect, because that is what the money is intended for. That is also the job of the Government. It is the Government’s political responsibility. The hon. the Minister of Finance has tried to turn this into an argument as if there was something wrong with the department of the Commissioner for Inland Revenue. He went out of his way to say that the department is in excellent hands and that its standards are high. I agree with him wholeheartedly that the standards of this department are high and that, in fact, it is in excellent hands, but do you know what is wrong, Sir? Those people are overworked and underpaid and the department is understaffed. The officials are trying to do an excellent job, albeit an unpopular and therefore a more difficult job, but by the Government not putting those things right, they have to contend with an even more difficult job. It is a political responsibility of this Government to put matters right in this department, and no-one can put the blame on those officials, because statistics prove that the irregularities are the result of the limited staff that is available. The question to which no answer has been given is whether there would not be a completely different picture if this department had a full complement of staff and if the officials were paid in a manner which would attract staff so that they could be in a better position to control that situation. That is no reflection on the officials of the department, Sir, as the hon. the Minister tried to suggest. On the contrary, it is a commendation to them that they in very difficult circumstances are trying to do a very difficult job of work.

Let us deal with the so-called irregularities. In everything that the hon. the Minister has said today there were a couple of things that were noticeable by their omission. Firstly, we asked for a thorough inquiry in regard to this matter, but nowhere has he indicated that such an inquiry is being conducted. That is what we have demanded and that is what we are entitled to get, because when allegations of such a serious nature are made then it is the duty of the Government to have them thoroughly investigated. So on that point we have had no answer.

Secondly, when the hon. the Minister dealt with some of the comparisons of the national accounts, he said that one could not actually rely on the national accounts, that these accounts were not accurate. With great respect, Sir, I should imagine that one should be entitled to rely on the national accounts as published being accurate to a reasonable degree and being a reasonable method of testing a situation. Now, however, we find a new challenge being made. In order to escape from one dilemma, another dilemma is being created, and that in respect of the accuracy of the national accounts. And this is not an attack that we have made. It comes out of the mouth of the hon. the Minister himself. Instead of the hon. the Minister getting up and saying that these allegations have been made, that he has had them investigated, that the investigation is not complete and that he is awaiting the report, or that he has had these allegations investigated and that they were found to be of no substance, or that he has had them investigated and that the things that were wrong are being put right, instead of this we get this most remarkable performance from a Minister. One finds very great difficulty in appreciating why the whole of the country is wrong and only this hon. Minister is right. He is the only fountain of knowledge that there is, the only one who is right and who in fact is able to express an opinion. Instead of dealing with the realities and the merits of the matter, and the problems arising from it, we get this rather escapist approach on the part of the hon. the Minister.

I say again that in so far as this GST allegation is concerned, the allegation that there are irregularities, what we on this side of the House want to achieve is not that people should be allowed to escape responsibility, but that the Commissioner’s office is put in a position where it has sufficient staff, and where the staff are properly paid in order to enable them to do their job.

In so far as the provisions of the Bill are concerned, which are designed to deal with this change-over period, the only comment one can make on it is that where there is some financial benefit to the dealers, there is no financial benefit to the consumer. In fact, the consumer is going to pay the full rate after 1 March, and if one looks at these calculations, one finds that there is a financial benefit that comes to the dealer. I would have preferred the benefit to have been given to the consumer in that the sales tax, if it had to be increased at all, would only have been increased from the beginning of the new fiscal year. That would have been more attractive, both from our point of view and from the consumer’s point of view, even though we oppose the increase altogether. In so far as the provisions of the Bill are concerned, however, they are in themselves practical, and therefore we will not oppose them. We cannot, however, vote for the Second Reading of this Bill because we oppose not only the increase in general sales tax at this stage because it shows a disregard for the needs of ordinary South Africans at a very difficult time, but also because the principle of a general sales tax at this time and in this form of community is not acceptable to us at all.

Mr. Speaker, we are not at all surprised that the hon. member for Yeoville is opposing this Bill on behalf of the official Opposition. The PFP has always opposed legislation of this nature despite the fact that it is in the interest of the fiscus.

In the main, the hon. member for Yeoville tried to anticipate the main budget. His entire speech was evidence of that. I do not intend elaborating on this. I prefer to wait until the main budget comes up for discussion. Furthermore the hon. member really spoke a lot of nonsense here, just as in the previous debate, when he also referred to the general sales tax.

Mr. Speaker, it is in fact very interesting to reread the Second Reading debate on the Sales Tax Amendment Bill that took place in this House in 1978. One suddenly encounters extremely strange, even laughable statements that the hon. members of the Opposition made in their speeches at the time. I should like to refer to a few of them. On Wednesday, 14 June 1978, the hon. member for Hillbrow, for instance, made the following ridiculous statement with regard to general sales tax. I quote what he said (Hansard, 1978, col. 9470)—

Imagine that, Mr. Speaker. However, the hon. member went on to say (col. 9471)—

The hon. member for Hillbrow is present in the House now. Is he perhaps aware of a single honest person who has done such a ridiculous thing over the past four years? I doubt it. [Interjections.] The following statement by the hon. member for Hillbrow, however, takes the cake. I quote once again (col. 9471)—

How ridiculous can one make oneself by saying such ridiculous things and then to crown it all, to have them recorded in Hansard too! [Interjections.]

Even the hon. member for Port Elizabeth Central—at the time, of course, he was still the NRP’s member for East London North— labelled the above speech by the hon. member for Hillbrow as an inflammatory one. He also said that it would only be the hon. member for Hillbrow who would walk in and out of a shop in order to save one cent in sales tax. [Interjections.] In that same debate the hon. member for Hillbrow was described by the then hon. member for Mooi River as a “cicada”. [Interjections.]

It would be interesting to hear whether the hon. member for Port Elizabeth Central and the hon. member for Hillbrow have found one another in the interim, particularly now that the hon. member for Hillbrow is the hon. member for Port Elizabeth Central’s Whip.

Charlie, have you found one another yet? [Interjections.]

While I am busy with the hon. member for Port Elizabeth Central, I just want to refer to what he had to say yesterday with regard to general sales tax. Mr. Speaker, as you know, one can of course juggle a great deal with percentages. Yesterday the hon. member for Port Elizabeth Central made the allegation that the increase in general sales tax amounted to 40% if one took the rate of inflation over the past year into account. Mr. Speaker, surely you as a farmer know that a farmer can easily push up the lamb or calf percentage by as much as 100% when one compares it to the percentage of the previous year. If one has one extra lamb or one extra calf in the first year and two lambs or two calves in the second year, one has pushed it up by 100% forthwith. Therefore, percentages can be ridiculous when they are used as arguments.

Let me now be more serious. As early as in the Part Appropriation debate the official Opposition objected to the increase of 1c in general sales tax. At the same time they asked for food products to be exempted from the tax and for food subsidies to be increased. The hon. member for Yeoville did so again this afternoon. But at the time the question had already been put as to where the additional income for the Exchequer should be found; they were asked to give an alternative. That debate lasted for three days without our receiving a reply and we have not received any reply to it in today’s debate either. That is why I want to repeat the question: Where must this extra income be found?

At the time, when general sales tax was introduced, the official Opposition asked for certain exemptions. The exemption of food has already been ridden to death. The Association Chambers of Commerce made serious representations that no exemptions should be made, specifically no exemption on basic foodstuffs, since according to them it would create a precedent that would frustrate the effectiveness of this tax entirely. Indeed, a section of the telex that they sent to members at the time during the course of the debate, read as follows—

What applied to this matter at the time, is still applicable today.

Furthermore, it was argued here that the increase of 1c would be inflationary and that it would be a heavy burden on the lower income groups, particularly our pensioners. To a lesser extent this is true. No one can deny it. However, the 1c increase should be non-inflationary to a large extent. I shall explain why. Firstly, the tax is levied at the point of sale and therefore should not push up the replacement costs of products. Secondly, it will not have any important influence or effect on the consumer’s index either. We know that the consumers’ index is the most important indicator of the rate of inflation. The increase of 1c can lead only to people spending somewhat less on luxury articles and this will put a stop to spending too much money on too few articles. What is important, is that this measure is one of those by means of which the economy can be given more balance. That is why I am pleased to support it.

Mr. Speaker, 1 believe the hon. member for Smithfield has taken a certain degree of pleasure this afternoon in pointing out what he regards as contradictions which certain members of the official Opposition had committed from time to time. He quoted from Hansard in this regard. While he was doing so I noticed that quite a number of his colleagues had a real good laugh about this. But might I just suggest to hon. members on that side of the House that they should not laugh too hard, because in the light of recent developments I am quite sure that this hon. House is going to hear many debates where references will be made to various members, both present and former members of the NP, and to what they said at particular times in their political careers. I see the hon. member for Smithfield agrees with me. He is smiling. I think he has taken the point.

No, I am laughing at you.

I await with great interest to hear what is going to be said in future debates.

The principle of sales tax is, as my party has stated in the past, a form of taxation which we can accept because it does very effectively spread taxation over the purchasers throughout our society.

Therefore it brings into the tax net many spenders who otherwise for a great variety of reasons manage to avoid paying tax. For this reason it is a very sensible form of taxation. However, Sir, I am afraid that we in these benches of the NRP, like the hon. member for Yeoville, the spokesman on finance of the official Opposition, are not going to support the provisions contained in this Bill.

We are not going to support this Bill for two main reasons. Firstly, an increase of 25% in GST is going to have quite a considerable effect on living costs. When coupled with an inflation rate which is still running at 14% per annum and which is possibly likely to increase in the near future, we believe that this is going to place an added burden on people. That is the first reason why we are not going to support this Bill.

The second reason is that we have had absolutely no indication, as was also said by the hon. member for Yeoville, of the total tax package and neither have we had any indication of the expenditure proposals of the Government. We have heard nothing as to whether there is going to be a cut in Government expenditure and this is the second reason why we are not going to support this legislation.

The hon. the Deputy Minister is asking for the rate of the GST to be increased. We say it is to be increased by 25%—from 4% to 5%. This is a 25% increase in the rate of this taxation. As the hon. the Minister of Finance said last week, this is going to extract—we believe very painfully—about R600 million from the pockets of the consumers in South Africa during the coming year. I wonder whether the hon. the Deputy Minister realizes that this amounts to R50 million per month? It is also the equivalent of R1 640 000 per day. This is a considerable amount of money and therefore there is no doubt that this added burden is going to have a considerable effect on the real purchasing power of the entire South African public as far as their pay packets are concerned. It is going to have an even greater effect on the lower income groups especially those who, because of the smallness of their income, generally make very small purchases. I believe that these people are going to find this additional rate of taxation a tremendous burden upon them. The effect on these people is going to be far greater than upon those earning much higher incomes. Pensioners particularly are going to feel this increase and, as I have said, when it is coupled with the rate of inflation as well as the high rates of interest which people are having to pay today on mortgage bonds and in respect of borrowed money, I believe that our people are going to be squeezed as they have never been squeezed before.

There is another reason why we oppose this legislation at this stage. We know from past experience that whenever a new form of taxation is introduced there is always the unscrupulous businessman who will take advantage of that increase in tax to put up his prices. Then, when one questions him, he says: Don’t you know that there has been an increase in sales tax? There are businessmen who do exploit consumers in this regard. We on these benches accept the fact that taxes have to be raised to meet Government expenditure. During my Second Reading speech on the Part Appropriation Bill I believe I made my party’s point of view perfectly clear when I said that we were totally opposed to the present level of Government spending in South Africa which we believed to be excessive when it is considered in relation to our country’s present GDP and especially—I repeat especially—when it is related to the need in South Africa today for real growth in our economy, growth in the job-creating and wealth-producing private sectors. I do feel that we shall have an opportunity next week during the Third Reading of the Part Appropriation Bill to discuss this matter further with the hon. the Minister. This I intend doing.

We concede that all Governments must tax their citizens in order to pay for the administration of the State and also, as I have said earlier this week, for the development and the operation of an adequate infrastructure. Taxes should pay for Government expenditure. In fact, I believe that the people of a nation should know and feel the real effect of the taxt bite, because they should know what they are paying for. While it is all very well for hon. members on the Government benches to say that Governments also finance their expenditure through borrowing—I said on Monday that I concede this as a point to them—we on these benches believe that the degree of borrowing should be limited.

The one thing that bothers us is the growing national debt. This is one thing that I should like to put to the hon. the Minister next week. I hope he will give us some answers and reassurances. Only this morning a person appeared on “Radio Today” and talked about the national debt of the great United States. Their national debt has now reached a sum in excess of $1 trillion. This person, who, I believe, is an adviser to the Reagan Government, said that the problem of financing that debt today is that for some of the loans which they have recently negotiated, they are paying up to 14% and therefore the servicing of these loans and the financing of them is now placing a considerable burden on the State. It is the sort of thing which causes us, who sit in these benches, a certain degree of concern.

We believe, however, that it is the Government’s policy which places an excessive financial burden on the wealth and job creating sectors of economy, and therefore we see no way at all as to how we can support the Bill at the present time in so far as it raises the rate of GST. We shall therefore oppose the measure.

The hon. the Deputy Minister made a remark in the course of his Second Reading speech about the change-over period. I am pleased to hear that there is an explanatory memorandum which is going to be distributed amongst commerce and industry, but I believe that this measure is to be implemented as from the first of next month which, since today is the 25th, will be in three days’ time. All I can say is that I sincerely hope that all the rounding-off tables are in the hands of the businesses concerned. In fact, I brought back from Natal this week a rounding-off table which has been printed by a large group and which I find to be incorrect. I therefore have great concern about this because it appears that there has been a certain degree of misunderstanding amongst the public. I have mentioned this to one of the senior officials of the department, and perhaps I should give them this rounding-off table which I have. It certainly is an indication to me that there is in the minds of many businesses uncertainty or an incorrect understanding of what has been proposed. I do believe the department must do everything within its power to ensure that such misunderstanding should cease to exist so that the public will not, as I have said, be ripped off by some unscrupulous people.

As I have also indicated, we shall oppose the Bill.

Mr. Speaker, every time I listen to the Opposition, and especially when they talk about economic aspects, I am surprised, for every time they show signs of a one-sided approach. On the one hand, no tax may be increased, but the next minute they are insisting that there should be free education, that housing should be further financed, that the transport subsidy should be increased and that there should be increased food subsidies. Where must the money come from?

Their argument consistently boils down to the redistribution of income: We must take from the rich and give to the poor. The poor must not contribute anything either. We cannot see sales tax in isolation from our other taxes. Very well, I admit that sales tax, seen in isolation, possibly has a horizontal and vertical fairness aspect which is weaker than other taxes. However, we must compare it with other taxes. I agree that with sales tax, one cannot always take the problems of the consumer into consideration. One must assess sales tax over the period of the economically active life of a person, for at a specific juncture general sales tax, seen in isolation, is a large proportion of one’s expenditure on consumer goods. However, as one’s total income increases, it decreases as a percentage of it.

I think that the Opposition must agree that in recent times the income of the Blacks in South Africa has grown tremendously. One must distinguish between what one pays in income tax and what one pays in sales tax. Personal income tax may even be as high as 50%, while sales tax will now be only 5%. A person who now spends R100 a month, will in future only have to pay R1 more in sales tax. It is not the case that our highly skilled people must pay R50 of that R100. One must maintain an equilibrium. Nor can one consider the consumer side only, it has to be judged assessed in conjunction with savings. Sales tax is levied on consumption. How could one levy taxes on income which would be detrimental to savings in a country such as South Africa, where savings are very important? All studies indicate that sales tax does not have a demotivating effect on the worker. However, if income tax rises too high, it definitely has a demotivating effect.

Six per cent of South African taxpayers, a very small percentage, pay 80% of all income tax. This means that one cannot omit the bulk of the economically active population from our tax structure. Because of the fact that a small percentage is making the largest contribution, it is, as a result, very difficult to tax the lower-and middle-income groups in the form of income tax. One is therefore in a kind of vacuum as far as the lower-and middle-income groups are concerned. Our country cannot afford to have a large percentage of the economically active population that does not pay tax.

There is also another aspect which is often forgotten. We do not have a homogeneous economy such as the countries of Western Europe for example. We have a dualistic structure. Two-thirds of the population are part of the Third World. Let us consider the situation in countries which find themselves in a position similar to ours. In Kenya, sales tax as a percentage of the State income, is 21%; in Ghana, 22%; in Egypt, 43% and in India, 35%. In South Africa it is 12%. The situation in India is especially interesting. Their personal income tax is 3,3% and company tax, 12%. Sales tax is therefore one of the principal methods of obtaining income in these developing countries.

This brings me to the question of inflation. It is so easily said that sales tax causes inflation. However, if money is not available, and credit is not available either, sales tax could not be the cause of inflation. In this country, we have recently experienced a period of overspending by consumers. Is this then not a good measure to cut down on that consumer spending—which is, to a large extent, based on credit? Previous speakers also mentioned the evasion of this tax. I am pleased that the hon. the Minister of Finance pointed out that the figure for the sources from which revenue can be collected in South Africa stands at 90%. I should like to refer to an interesting study which was done by McLive of the Brooklands Institute in the U.S.A. In the U.S.A. sales tax is not imposed on all products. For them an effective figure is 75% of the total sources.

I should like to support this increase of 1%, seen in the light of our total tax structure and in the light of the principle that South Africa’s economic population as a whole must contribute to its own development, as well as in the light of the fact that this tax also contributes to promoting savings in South Africa.

Mr. Speaker, with great respect to the hon. member Dr. Marais, I cannot really see what the thrust of his argument is and I certainly cannot agree with what he said about supporting the extra taxation of 1c. In his review of the general spread of taxation, there is one thing the hon. member has not taken into account. Bearing in mind the present state of the economy, and the distribution of income throughout the population, I think the hon. the Minister would agree that there is a section of the population that is doing well. Their pockets are still flush and for them there is no shortage of money. In that regard they consequently do not have any particular problems.

Fat cats!

Then there is a gap which separates them from a very large section of the population on fixed salaries. These are the people who do not have much hope of getting much more money and therefore having more buoyant incomes. They are stuck on fixed incomes and are struggling to meet the ever higher cost of living. All these increases make things more and more difficult for them. Bearing in mind that large gap, I cannot see this as being a fair form of taxation. It is true that we have had GST for a number of years now, and we really cannot now argue the principle underlying GST. At the time, however, we certainly did voice our objections to it. We can, however, argue about the increase, which we say is a bad thing. That hon. member referred to two-thirds of our population belonging to the Third World. If the benefits of those two-thirds were equal to those of the other one-third, however, things would be different, yet they have to pay the added tax without getting a fair share of the cake in this country.

Their real incomes are rising faster than those of the others.

But they were so low to begin with that percentages are really meaningless. We are therefore left with two main objections to the Sales Tax Amendment Bill before us. The first is to the actual increase of 1c in the rand by means of which the hon. the Minister wants to get a further R600 million. I shall come to that in a moment. The second objection relates to clause 3 which provides that this will come into operation on 1 March 1982, which is next week. In the hon. the Deputy Minister’s introductory speech, he had the following to say—

He referred to the appropriate rounding-off tables mentioned in section 10(9) and to giving people who operate on an add-in basis time to make adjustments. That is all very well, but in the first instance he has not provided very much time between now and 1 March —it is only a few days—for them to make very substantial changes. As regards the tables, I take it that the department has been warned a long time ago.

What neither the hon. the Minister of Finance nor the hon. the Deputy Minister told us is why this is being introduced on 1 March, why there is this urgency. What crisis does the hon. the Minister face in financing the governing of this country that he has to impose a surcharge of 10% with effect from midnight on the day he introduced the Part Appropriation and, in addition to that, this sales tax from 1 March while the main budget will be introduced on 24 March? On that there has been absolute silence. No one has explained to us why this is so urgent. In August last year the hon. the Minister spoke of how buoyant the economy was, so that between then and now a crisis situation appears to have developed in that we now have to impose without notice an increase of 10% and with very short notice and undue haste, if I may use such nice phraseology, or indecent haste, this increase in sales tax.

He is frightened of the IMF.

Did you see the statement I issued on that point, or do you not read such things?

I read the hon. the Minister’s statement, but I was not impressed with it. It does not explain this.

Let us say that you do not understand it.

We object to the increase of 1% not only on behalf of the masses who have to meet this increase, but also with regard to local authorities. Only a few days ago I made a speech in the House on the implication of the extra 1% in GST for the local authorities. I said that Johannesburg paid R4 million last year alone and will now have to pay an extra R1 million and I pointed out that, while with one hand he gave R2,9 million for extra assessment rates, he is taking it away again with the other hand. He is taking away another R900 000 by way of the 10% surcharge and, if they have to buy a large piece of machinery like a transformer, the entire extra amount given will have been taken away.

I told the hon. the Minister of Finance that the objection to the GST was based on the struggle local authorities have to balance their budgets. Over the years they sent deputation after deputation to the hon. the Minister of Finance seeking financial relief. There was the Borckenhagen Committee which sat from 1959 to 1976. There was such dissatisfaction with that that the Browne Committee was appointed. Its recommendations were so unsympathetic to the local authorities that a deputation of the UME came to see the present hon. Deputy Minister of Finance. He then had the Croeser Working Committee appointed which has been working together with the UME, local authorities, the Institute of Municipal Treasurers, etc. Of the 133 recommendations made in the report, I think 102 have already been discussed.

They have been discussed completely.

But what has happened to those recommendations? Sir, in his reply to the Second Reading debate of the Part Appropriation Bill today, the hon. the Minister of Finance said not one word about the plight of local authorities, not one word about the Croeser Committee, not one word about the Browne Committee, not one word about the Driessen Committee.

You do not read what we say. There are plenty of statements.

Did the hon. the Minister deal with it in his reply to the debate?

Hon. members have made some excellent statements. [Interjections.]

The hon. the Minister did not deal with it. That shows the contempt with which this matter is being regarded. Local authorities made the following submission to the Browne Commission—

This all shows the contempt and lack of appreciation on the part of the hon. the Minister towards all matters affecting local authorities. Particularly today this was evidenced by the manner in which the hon. the Minister of Finance replied or failed to reply to the Part Appropriation debate. [Interjections.] Local authorities have a case as far as the extra 1% GST is concerned, and that is why we on these benches are opposing the Second Reading. We cannot oppose the 4% GST because it is already there, but we can oppose the extra 1% and we oppose it vigorously. My role in this Opposition is to oppose this extra tax in respect of local authorities who are struggling to make ends meet.

I want to refer the hon. the Deputy Minister to an article in the South African Treasurer of January 1981 Vol. 54, No. 3, of which the heading is “1982—Whither Local Authority Finances?” I want to bring several points to the hon. the Deputy Minister’s notice and the first one is the high interest rates. It is estimated that local authorities will be borrowing something like R253,3 million in the 1982 fiscal year. Only ½% extra interest on their loans means an extra R1,267 million that they will have to pay. One of the most important recommendations discussed by the Browne Commission and the UME was the financing of local authorities. Has the time not come for a municipal bank to be established so that local authorities can be properly financed at the lowest possible rate of interest to fit in with the economy and the development of the country which is so important for commerce and industry? Why do we not have any reply to that sort of recommendation?

There has also been a tremendous cut in housing funds to local authorities.

Mr. Speaker, on a point of order: The hon. member is speaking about housing funds, but what relevance has this matter to the Bill now before the House?

Order! Will the hon. member for Hillbrow please elaborate on that?

Yes, Sir. I am trying to point out how important the additional 1% GST is. For example, we are taking away R1 million from a city like Johannesburg, and other local authorities will, because of the additional 1% GST, have to pay out extra as well. In the meantime there is a crisis in housing, and local authorities will be seriously affected if they have to cut capital contributions because they have contracts on hand which they cannot cancel. They have to proceed with those contracts and have had to borrow bridging finance to complete them. Now they will have to pay out additional sums of money and so will not have the revenue with which to repay those loans. In addition to that they are not able to obtain extra money to continue with their housing projects which are so vital to this country.

And Dawie could not care.

With regard to transportation, various recommendations have been made by the Driessen Commission. Here I want to ask the hon. the Deputy Minister whether, in order to meet the increase in sales tax, the recommendation to pay local authorities 25% of the cost of capital equipment and 30% of the cost of land construction will be accepted. Can the hon. the Deputy Minister tell us whether the grant of 30% for construction and expropriation in respect of expressways will be paid?

I want to ask the hon. the Deputy Minister, where he is now going to impose a levy of an extra R1 million, why, when the Driessen Commission originally recommend that the Government set aside R92 million to assist local authorities and in its White Paper the Government only accepted the sum of R52 million and ultimately paid only R20 million of the amount of R52 million, the Government then let local authorities down and is now going to burden them still further by levying additional general sales tax on them? How does the hon. the Deputy Minister expect local authorities to cope? Are they just poor relations? Surely, they constitute a basic infrastructure as the third tier of government which is such an essential component of the total South African economy. General sales tax was one of the many aspects which was discussed with the Browne Committee and which is now being discussed by the Croeser Committee. One of the committee’s decisions was, and I quote—

I should like to hear from the hon. the Deputy Minister whether he intends replacing any other of the 11 suggestions made to the Browne Committee relating to different rates of income and different types of tariffs applicable to local authorities, all of which were rejected. I want the hon. the Deputy Minister to tell the House whether any of these recommendations are going to be considered with a view to giving local authorities the sort of relief which they so urgently need.

There is also another problem which I want to put to the hon. the Deputy Minister. I want to know whether he has now reached an impasse as a result of his having to wait for recommendations from the President’s Council before any decision can be taken in respect of Black, Coloured and Asian local authorities. If, as is anticipated, the President’s Council recommends the establishment of Coloured and Asian local authorities—and, of course, if the Government approves of such local authorities being established which is more likely now perhaps in view of recent events—I should like to know whether the hon. the Deputy Minister is of the opinion that such Black, Coloured or Asian local authorities will have the viability to pay this general sales tax of 5% that will be imposed on them. I want to put it to the hon. the Deputy Minister that, if those local authorities are going to have to pay this increased general sales tax of 5%, they are going to experience extreme difficulties in surviving as viable local authorities. Therefore, we are not only imposing this increased general sales tax of 5% on existing local authorities but by means of the blanket provisions of this Bill we are also going to impose it on every type of local authority established or to be established in South Africa.

In view of the fact that 102 recommendations out of 133 have been finalized, I should like the hon. the Deputy Minister to tell us whether he is going to accept that the Government pay full rates in the future subject to a 10% subsidy for the Post Office and the S.A. Transport Services and a 20% subsidy for the other departments of State. Secondly, is he going to approve the 80% subsidy on ambulance services and the 40% subsidy on fire services? If the hon. the Deputy Minister can tell us that, to offset the extra R1 million and the extra general sales tax that local authorities will have to pay, he will be able to grant them some sort of relief, then perhaps he may be able to justify the imposition of increased general sales tax. Leaving local authorities in exactly the same financial dilemma, however, in which they have been for so many years, leaving them with the same lack of financial resources, and then imposing this additional burden on them, is, I believe, cutting off one’s nose to spite one’s face.

For the reasons I have just mentioned, we will strongly oppose the Bill now before the House.

Mr. Speaker, the hon. member for Hillbrow and other hon. members of the Opposition have raised very few arguments of any real substance in this debate. They are kicking up a fuss here this afternoon. All they are in fact doing, is repeating ad nauseam all their old arguments, which they have already used in the debate on the Part Appropriation.

The hon. member for Hillbrow objects to the fact that the increase in general sales tax takes effect on 1 March this year. However, it is always inconvenient for the hon. members of the Opposition. No time will ever be convenient for them. Do the hon. members of the Opposition not know that due to poorer economic conditions the hon. the Minister has been compelled to obtain increased revenue for the Treasury? This has been necessitated by a drop in the gold price and the weakening of economic conditions worldwide, which have had an unfavourable effect on our exports and balance of payments. Let us just consider what the drop in the price of gold has entailed. The gold price dropped from an average of $613 an ounce in 1980 to $460 an ounce in 1981. Today the price in New York is $365 an ounce. This means a considerable loss of revenue for the Treasury. And that revenue must be found. Where is it to come from?

Economic circumstances in South Africa have undoubtedly been very detrimentally affected recently by factors over which the Government has no control and which we cannot expect to improve soon. Necessary services must continue, however, and the State must have the money to fulfil its obligations. Because GST is so low, it is clear that this source will be utilized in order to obtain the necessary funds. The increase in GST from 4% to 5%, is well-considered and justified.

In the light of the heavy demands being made on State funds, the increase of 1c is a relatively small sacrifice on the part of the public. To pay only R1 on a purchase of goods worth R100, is really asking very little. It is therefore difficult to understand why the Opposition is making such a fuss.

In Great Britain, tax levied on more or less the same basis as our GST runs at between 12% and 15%. In the various States of the USA a tax of 4% to 12% is levied, a tax comparable to our GST. I concede that it is not altogether the same as our GST, but it is still comparable. As hon. members will understand, this is considerably higher than the 5% towards which we are now moving. They go as high as 15%. The Opposition carry on and on with their arguments. Again this afternoon the hon. member for Yeoville complained here that GST on food prices should be abolished. I want to say here and now that this side of the House is not indifferent to the needs and problems of our lower-paid and needy people. The Government is doing everything in its power to keep food prices as low as possible. R250 million in subsidies has been voted over the past year in order to keep food prices low. The accusation that the Government is indifferent to the needs of people in the lower income group, is unjustified. All the facts contradict such an accusation. Furthermore, the Government is at present investigating whether it cannot extend a helping hand, by means of increased subsidies, to those suffering hardship. The Government extends an open hand to these people. Right from the outset the idea has been that GST should be a broadly-based tax. The more broadly-based, the lower the tax will remain, and the more narrowly-based, the higher it will become. If food is excluded, GST will have to be much higher than 5%. If food is exempted from GST the State will lose an estimated R700 million a year in tax. Can we afford this at this stage? Surely they know we cannot afford it. This money will therefore have to be obtained from other sources.

What are those other sources? One of those sources could be direct taxation. We all know that before GST was introduced, the burden of direct, taxation rested so heavily on a small portion of the tax-payers, on the productive sector of the economy, that it dampened initiative. Before the introduction of GST, a mere 25% of the tax-payers had to provide 75% of the income from taxation. That was an unhealthy state of affairs. The Franzsen Commission, too, found that it was an unhealthy state of affairs.

It was therefore necessary to resort to a tax such as GST. The introduction of GST broadened the base of the tax burden. Greater emphasis was placed on a tax on consumption; i.e. consumption instead of income.

I want to return to the question of food. As we all know, administratively it is very difficult to exclude food from GST. It creates problems with separate bookkeeping and auditing. When one excludes food, one has a problem determining what basic foodstuffs comprises. One must ask whether drink is included; surely everything which passes through the mouth is food. Must drink also be excluded? [Interjections.] We know that there are certain hon. members of the Opposition who consume liquor as food. [Interjections.] What about all kinds of exotic foods? What about luxury foodstuffs? Must this all be excluded? Where does one draw the line, and how does one draw it? How can it be administered? The Opposition cannot tell us how it must be done. It is easy to say that food must be excluded, but the hon. members over there do not suggest how it is to be done. Let us take the case of maize and maize products. Should one only exempt flour from GST, flour which is the staple diet of many people in South Africa? Or should one also exclude the many exotic dishes which are made from maize and maize products?

Samp?

Where does one draw the line? The hon. members of the Opposition are not being realistic when they make these requests. They do not do any calculations and they speak of things that they know nothing about, because they have not made a study of them. We can tell them that the people who deal with these matters, the Commissioner of Inland Revenue and others, have carried out an in-depth, world-wide study. They are aware of all the implications which could result from this.

I contend that the hon. the Minister has no choice but to increase GST. Since our GST is still among the lowest in the world, 5% as against 15% in a country such as England, it was obvious that this source would be used to obtain more money for the State. Therefore I should like to support the Bill.

Mr. Speaker, the hon. member for Bloemfontein North who has just sat down tried to compare our general sales tax which is going to be 5% with the value-added tax in Britain which is, as he rightly says, currently running at 15%. The hon. the Minister of Finance talked about juggling with figures, but I think the hon. member was doing precisely the same thing, because he tried to give the House the impression that the value-added tax in Great Britain was much the same as general sales tax in South Africa, but he omitted to say that in Britain there is no value-added tax on food. [Interjections.]

That in fact makes an enormous difference because the gravamen of our argument on this side has been the actual position in regard to those people who have to spend an enormous sum of money, an enormous percentage of their income, on the basics of life.

I should like also to reply to one or two points that have been raised not only during the course of this debate but during the course of the previous debate as well.

May I ask the hon. member a question?

Certainly.

Mr. Speaker, the hon. member has said that in Great Britain there is no value added tax on food. Will the hon. member tell us what a loaf of bread costs in Great Britain as opposed to what it costs here in South Africa?

Mr. Speaker, I have no idea what a loaf of bread costs in Britain.

Three times as much.

Mr. Speaker, may I ask the hon. member for Maitland in turn whether the Government in Britain discriminates on the ground of race in terms of the wages it pays? It does not.

That is not the policy of this Government either.

Of course it is. [Interjections.]

Of course it is. Let us look at the nursing profession and let us look at the Police. The hon. the Minister who is shortly to become the Minister of Law and Order pays different salaries to members of the Police Force based on the colour of their skins.

Order! The hon. member must return to the Bill.

Yes, Sir. Actually, this is a very interesting debate and one of the most interesting things about it is that the members of the NP who have participated in it seems to have disappeared out of this House rather quickly. The hon. member for Smithfield spoke and he is not here. The hon. member Dr. Marais also spoke and he has also disappeared. In fact, he disappeared after the hon. member for Hillbrow had been speaking for only a few minutes. However, I want to say again that we are seeing in this measure in front of us the vote now and pay later syndrome. I want to point out to the House that GST was originally introduced in 1978 and this was done shortly after we had had a general election in 1977. Now we find ourselves in the early days of 1982. In 1981 we had a general election and, once again, we find that additional sales tax is being imposed upon the South African taxpayer. If this is not an indication of vote now and pay later then I do not know what is. It is almost like having a new economic law, namely that GST increases directly after but never shortly before a general election. I think that after the next general election—which may now be rather sooner than we otherwise may have thought—we may find GST being increased once again.

During the previous debate, the hon. the Minister of Finance referred to the fact that I had been tilting at windmills. Unfortunately, he is not in the House at the moment but I do want to say that I would never do such an irresponsible thing as to tilt at windmills. In fact, I am very fond of windmills. My family is so attached to windmills that we have even had our name on them over many, many years. I believe that a windmill is a most extraordinarily useful thing. Unlike the hon. the Minister, who takes tax from the people, a windmill uses what is purely natural energy to draw water from the ground to sustain people. Therefore, Sir, I have no desire whatsoever to be some sort of a modern day Don Quixote.

The fourth point that I want to make in regard to what transpired earlier is in regard to the fact that the hon. the Minister spoke about collecting GST. He read out a letter that he had received and suggested that if one collected 80%, I think it was, of the tax that one should collect then one was doing fairly well. I think that the point that we must make in regard to GST is that in the first place the shopkeeper collects it. It is not in the first place collected by the Government. It is paid by the public and I am quite convinced that commerce in this country makes certain that it does collect sales tax on those items on which sales tax is payable.

Then, having collected from the public— the public has already paid—if the Government is unable, whether it be due to shortage of staff or for whatever reason, to collect the sales tax that has already been paid by the taxpayer, I believe it is a very serious breakdown. Four percent might not seem very much to hon. members on that side of the House, who have of course been called “fat cats” on many occasions, but in the retail motor trade for instance it is significant. If one makes 4% net on total turnover before tax, one is doing very well. If one is able to collect that 4% in tax and not pay it over to the correct authorities, one is in effect doubling the profit of one’s organization. This therefore becomes a very material matter indeed.

We are well aware that there is a law called Engel’s Law. Engel’s Law basically states—the hon. member for Yeoville has also referred to it—that the poorer people are, the greater proportion of their income is spent on food and basic essentials. I think this must be remembered very clearly by the House. Let’s face it, the man who earns very little and who lives on or below the breadline—regrettably there are far too many of these people in the country—has to spend 100% of his income on basic essentials. Whether these basic essentials are shelter, food or clothing, 100% of his income is spent on these things and he has nothing left for anything other than basic essentials. However, if one goes to the other end of the scale the situation is quite different. Let us for example take the position of the hon. the Prime Minister or one of his Cabinet Ministers. I would think that they would not spend more than perhaps 5% of their income on basic essentials. This is a most important difference. To them the increase in sales tax is not important, it means a very small proportion of their income. If one adds 1% to 5% of their salaries, the resulting proportion that they are paying out of their income, is very small. However, if 100% of your income is already being spent on basic essentials and that is increased by 1% it means that you or/and your family will actually physically have to go without some of those basic essentials.

From 1978 onwards, on many occasions in the House, I have pointed to the plight of the people of Mdantsane outside East London. I have drawn the attention of the Government on many occasions to the unemployment that exists there and the consequent deprivation. We are aware of the incidence of diseases that hit children such as marasmus and kwashiorkor in these areas. Hopefully the plans of the Government are going to rectify that situation some time in the future. However, in the meantime, these people who are still in the same position in which they were in in 1978 are now being faced with an additional tax which is going to be imposed on them by the Government. To me the most important factor in sales tax is not the imposition of the tax as such, but that it is imposed on basic foodstuffs. I do not believe that there can be any excuse for this in the South African society. Our society, let’s face it, is a very different sort of society to the average Western European or American society. The hon. member for Bloemfontein North compared us with civilized societies in highly developed industrial countries such as Britain and North America. We must, however, not forget, as the Government is fond of telling us, that we are part of Africa. We therefore do have some 70% of our population who do not have the same opportunities, have not had the same basic education and can therefore not earn the same basic amounts of money.

When sales tax was originally introduced the hon. the Minister of Finance suggested that if one were to exempt certain basic foodstuffs from this taxation, this would be the thin end of the wedge, so to speak, but he also said that it would make things far too complicated—especially when it came to working it all out—not only for the department itself, but also for the retailer or wholesaler. In the past week we have had a lot of comment on taxation on basic foodstuffs, and I believe that this House should take note of the fact that Mr. Raymond Ackerman of Pick ’n Pay has said that it would be no problem for his organization to systematize the non-collection of taxation on basic foodstuffs. He said that virtually within 24 hours they could so organize things, with their modern electronic tills and methods of operation, that they could handle customers, charge them tax on everything other than the basic foodstuffs and not charge them tax on the basic foodstuffs themselves. So it is a very real possibility. It is certainly not impossible to do so. I therefore believe that we really have to give serious consideration to this matter.

I am not suggesting that this is a political issue. I believe it is far too important to try to make a political football out of it, because the deprivation of a certain portion of our society is such that if we could improve their lot by taking away the 4% from their current expenditure, it would make a most enormous difference to their lives.

The hon. the Minister referred to something I said during the Second Reading debate about what the actual sales tax increase is. The hon. member for Cape Town Gardens also mentioned it. I totally fail to understand what the hon. the Minister of Finance is trying to get at when he suggests that the figures I have given are incorrect. There can be no doubt about the fact that if one increases one’s sales tax from R4 in every R100 to R5 in every R100 one is increasing one’s collected revenue by 25%. So as soon as there is an increase in the sales tax, as is being done in this Bill—something we strongly object to—there is an increase in revenue from that source by a figure of 25%.

Let us now also consider the further point, which is inflation. The hon. the Minister and the hon. the Deputy Minister know that I have spoken about “bracket-creep”, as the Americans call it, in the context of inflation. I have constantly referred to this in the House. Without having to lift a finger, the hon. the Minister can increase; and does increase, his sales tax by the inflation rate on an annual basis, and to all intents and purposes in the past year our inflation rate increases has been 15%. So if one takes into consideration that one is going to get a 15% increase in the sales tax, plus the 25% in additional revenue to be received from the increase in the GST—one finds that whereas the tax collected on R100 last year was R4, for the purchase of the equivalent articles this year, after the increase, the sales tax would be R5,75—the overall increase is therefore 43,75%. I was therefore being conservative in saying that the figure was only 40%. It is, in effect, a 43,75% increase in sales tax which the hon. the Deputy Minister is trying to impose on the nation.

There is also a last factor that has to be taken into consideration and that is that on a number of articles an additional duty of 10% is being imposed. There is a frightening list of these articles, but let us just look at a few of them. The list includes live animals, meat, dairy produce, products of animal origin, edible vegetables, edible fruit and nuts, coffee and tea, cereals, products of the milling industry and oilseeds. So it goes on. It also includes prepared foodstuffs and beverages. All those I have mentioned are foodstuffs. What is now going to happen? In addition to the 15% inflation, there is now going to be a 10% increase which might put the total price up by perhaps 5%. Therefore, on those particular items we are going to go from R100 probably to approximately R120. To that one must still add sales tax. One then finds that, instead of collecting R4, the State will be collecting R6 which represents an increase of 50%.

I have tried to make my main point in this debate foodstuffs and the effect of the imposition of GST on foodstuffs. I think I would go so far as to say that I personally would be prepared even to see sales tax increased to a higher rate than is going to be applied if the hon. the Deputy Minister and the Cabinet would agree to remove sales tax on basic foodstuffs.

Hear, hear!

One can hear “hear, hears” on this side of the House. I plead with that side of the House once again please to give serious consideration to removing GST on basic foodstuffs. We oppose this measure.

Mr. Speaker, the hon. member for Port Elizabeth Central has rehashed most of the arguments that were raised in the Second Reading debate of the Part Appropriation Bill. I shall reply in passing to some of the remarks he made, but I feel I must draw his attention to the fact that the hon. member for Bloemfontein North specifically said that in Britain the tax is 12% to 15% because there is no tax on food. He specifically said that, but now the hon. member for Port Elizabeth Central attacks the hon. member for Bloemfontein North because he says the hon. member for Bloemfontein North did not mention the fact that the tax was so high because food was excluded. I suggest that the hon. member for Port Elizabeth Central read the Hansard of the hon. member for Bloemfontein North.

I shall do that.

The hon. member for Port Elizabeth Central also said in effect that the public pays the tax and then the Government does not collect the money. This is a direct reflection on the department and its officials and I think it is an absolutely scandalous statement.

Here we have another member without a constituency hiding behind the Public Service.

I want to ask the hon. member whether he has seen the certificate traders have to fill in.

Yes.

Has he read the certificate?

Yes.

Does he then agree with me that the onus is wholly and solely on the traders to complete the certificate properly, reflecting their turnover and giving all the required information, and to send in the certificate once a month together with GST?

That is right.

In other words, if the trader fails to send it in, he is the one who is committing the criminal offence, he is the offender.

That is correct.

Why is the hon. member then passing the buck to the department and the hon. the Minister?

They have to see that it is collected. They have to police the matter.

The hon. member for Port Elizabeth Central speaks about various things which are essential in this country but then he forgets that one needs an enormous revenue to finance them. There are very large and important items like ensuring that South Africa is a self-defending country. We need enormous amounts of money for the defence budget, for Armscor and for the Sasols and the Koebergs. Those things are all forgotten. The revenue must come from somewhere, but the hon. member for Port Elizabeth Central, like other hon. members, made no constructive suggestion as to where the funds should come from.

The hon. member for Yeoville—I am pleased to see that he is here—complained that the hon. the Minister of Finance who spoke in the previous debate was not here after the hon. the Deputy Minister introduced this Bill. In other words, the hon. member for Yeoville was complaining that the hon. the Minister of Finance was not here whilst he himself was speaking. I want to tell the hon. member for Yeoville in all fairness that the hon. the Minister of Finance has a Deputy Minister to assist him with the workload and that that hon. Deputy Minister has no problem whatsoever in dealing with—he is in fact more than capable to of doing so—any arguments the hon. member for Yeoville can produce.

If you do not know parliamentary practice, you do not—

I should like to teach the hon. member for Yeoville something about parliamentary practice. He complains about the hon. the Minister of Finance, but while the hon. member for Smithfield was busy replying to the hon. member for Yeoville, the hon. member for Yeoville walked out and did not listen to the reply. What sort of parliamentary courtesy is that?

You do not have to teach me courtesy.

That is not parliamentary courtesy.

I am going to walk out right now.

The last time the hon. member walked out he was expelled from the UP. That was in 1976. I hope the hon. Leader of the Opposition will not be compelled to … [Interjections.]

The hon. the Minister is advised by a team of experts, and amongst these are the Department of Finance, the Treasury, Inland Revenue and the Reserve Bank.

Does he always take their advice?

The hon. the Minister does not take his decisions in isolation; he is part of a team. He is the leader of the team and, obviously, he listens to the advice of the team, but the final decision must be his. He must, however, be guided by experts who daily deal with these matters. That is why for example the hon. the Minister quoted directly from what the Commissioner of Inland Revenue had to say in regard to a particular matter.

I should like to mention the fact—the hon. member for Bloemfontein North also mentioned it—that this year the average gold price has been $413 an ounce, which means a loss of R4 200 million to the whole economy, and to the Exchequer a loss of R 200 million, that is if the price of $413 an ounce could be maintained, which is doubtful. A loss of R4 200 million means that there must be an enourmous cut-back by both public and private sectors. It means that there are essential programmes for which money will not now be available.

What about the public sector? Are they cutting back?

The hon. the Minister has told the hon. member for Amanzimtoti exactly what cut-backs the Government has effected, and he will get further details of cut-backs next month when the budget is introduced.

The hon. member for Yeoville said that the Government was making it very difficult for officials of the Department of Inland Revenue to do their work. That is absolute nonsense, Sir. The hon. the Minister, on behalf of the Commissioner of Inland Revenue, issued an invitation to the newspaper reporters who made allegations about losses in regard to the GST. He is prepared to give them proper information so that they can correct their statements, and publish more in-depth articles after listening to the Commissioner of Inland Revenue, who is an expert on the subject. That offer was made by the hon. the Minister of Finance.

The hon. member for Yeoville called for an inquiry in regard to the loss on GST, and this again is a direct reflection on the Department of Inland Revenue. The hon. member attacked the hon. the Minister of Finance, but in doing this he cannot assume that he did not cast a direct reflection on the Department of Inland Revenue.

Hon. members of the Opposition have come with no constructive proposals as to how the extra income should be obtained. As the time for this debate is running out, I should like to give the hon. the Minister an opportunity to reply to hon. members of the Opposition and also to Government members. All I therefore still want to say is that I support the measure before the House.

Mr. speaker, in reply to what the hon. member Mr. Aronson has said, I must say that I think the hon. member for Yeoville made it very clear at the start of this debate that he was not attacking the Department of Inland Revenue. In fact, he said that the political responsibility was that of the hon. the Minister, and that was what he was attacking. Just as the hon. the Minister of Finance has deemed it necessary to get some assistance by having a Deputy Minister, by the same token the hon. member for Yeoville suggested that the Department of Inland Revenue should be given additional staff because it is known that there is a shortage of staff in that department.

During the course of this debate two things have often been mentioned. The one is percentages and the other the question of gold. I find the question of percentages particularly interesting. The Minister has said that the increase in the cost of goods because of increasing GST would be 1%. If one looks at it logically, however, the cost of goods is 100% plus 4% GST. This GST is now being increased by 1%, therefore the increase is in fact slightly less than 1%. The point I want to make, however, is that when we talk of percentages it is going to be very interesting when we come to things such as the closing of the wage gap, the closing of the discrepancy in pensions, etc., where the Government tends to use percentages in order to prove that the gap is closing faster, while in real terms—in money terms—the gap is actually widening.

During the debate various comments have been made on the effect that the decline in the price of gold has had on South Africa. It is interesting to ask what South Africa had done before it had a rising gold price. If one looks at the book The South African Economy by Jill Nattrass, it is interesting to note that during the decade ending in 1970 we actually grew, in real terms, at 5,8% with a constant gold price. During the decade ending in 1960, we grew at 4,3%.

What about the oil price during that period?

Yes, the oil price did not increase either. The point I want to make, however, is that during the decade ending in 1980, when we were in a very unique position vis-a-vis the oil price—because we did have an increase in our major export commodities—we actually grew, by 3,1% in real terms. The point is that before the tremendous increase in the price of gold the South African economy was able to grow faster than it has grown so far in this decade.

If we come back now to the increase in general sales tax, I think it is an unfortunate move. I think it is going to have an unfortunate psychological effect. I drew money from the bank today. Of course, in South Africa one has to go to the bank fairly frequently these days … [Interjections.]

You are very fortunate in that you still have money to draw from the bank.

Yes, I know. I am one of the fat cats. [Interjections.] It was interesting because there was quite a queue in the bank. Obviously, other people also have to go to the bank fairly often. I had the interesting experience of being able to listen to two people talking. One of them was a lady. She said to the gentleman behind her in the queue: “You know, I had such a shock when I received my tax assessment from the Receiver of Revenue”. Now, when one is a married woman, this hits one fairly hard. Then the gentleman behind her said: “Yes, I first had to cut out smoking, then drinking and the next think I shall have to cut out will be eating”.

And what is left then? [Interjections.]

Mr. Speaker, the point I want to make is that psychologically this is the attitude which we find amongst the general public. I think one can look at it from two points of view. The first point of view is that of combating inflation. People are going to see prices go up. Inflation is something that tends to feed upon itself. When prices go up people continue to anticipate that prices will go up even further. It is no good arguing that there is a subsidy on certain commodities because when a housewife buys her bread at the supermarket she does not think of the increase in general sales tax and counterbalance that against the 3 cent subsidy on brown bread. All she sees is the price has gone up.

Then there is a second thing that concerns me. That there is a tendency which we saw in the 1970s—in about 1973 and 1974—when the economy began to slow down. That was the move to overkill. With business optimism, when one moves into a downward phase of the business cycle, I think one has to be very careful that one does not kill consumer confidence. I think without any shadow of a doubt that the increase in GST is going to affect this.

I should like now to raise two points of a more technical nature.

The first is a point that one of my colleagues from Natal has asked me to raise and, of course, one may ask hon. members opposite whether an hon. member for Natal would ask one of the hon. members from the Transvaal to raise an issue on his behalf. [Interjections.] The point I want to raise is in connection with the GST on prepackaged materials. I wish to refer to bottles. Somebody has written to one of my colleagues in connection with this particular point. When GST was first introduced in 1978 bottlers thought when they bought the bottles from the manufacturers they did not have to pay GST because the GST would in fact be paid by the end user, viz. the consumer. I understand from this letter that they have now been told that not only must they pay GST, but they will also have to pay back-GST on these bottles. This is interesting because if that is in fact the case, then the person who is doing the bottling is going to be paying 5% in GST and the end user will also be paying 5% in GST. Therefore there will be a 10% GST because it is going to be paid by both the manufacturer and the end user. Is that not correct?

5% on 5% cannot be 10%.

5% plus 5% is 10%.

5% plus 5% is 10%. [Interjections.] Moreover, if the bottles are being returned, each time the end user will be paying an additional 5% and there is a sort of cascading GST. I would appreciate it if the hon. the Deputy Minister could get the department to look into this particular complaint.

There is a last matter I should like to raise. I know that it has been argued that GST should be applied totally and to this extent it is actually a regressive tax if one compares it with the sales duty that we had impared between 1969 and 1978 that was not general but was imposed on particular items. However, I think there are some items in respect of which it is very hard to justify the composition of GST and one of these, in particular, is medicine. I raise this matter because particularly in the case of people who are in the pensioner category, expenditure on medicines is a very high expenditure indeed. It irritates them that they have to pay GST on those medicines.

Mr. Speaker, we have practically reached the end of this Second Reading debate. Before I react to the hon. members who have spoken, I shall first make a few general statements and with these statements I hope to reply to most of the problems that were raised in connection with the GST by the hon. members of the Opposition. I think one of the basic principles that we must accept, is that the State has an exceptionally extensive programme of expenditure. The hon. member for Amanzimtoti did in fact say that due to the fact that he was not aware of what the 1982 programme of expenditure would be, he had a problem in accepting the increase in GST. I shall come back to this aspect in a moment. In order to provide for this programme of expenditure, the State must levy income taxes.

There is a basic principle involved in the levying of this income tax that we can deal with by saying that the narrower the field of income tax, the higher the level of income tax must be; in other words, the principle that the hon. the Minister of Finance has accepted with regard to income tax, is that we want to extend the spectrum of income tax as far as possible. This is particularly true in the case of South Africa’s special circumstances where the burden of personal income tax, which provides the largest contribution towards our revenue, is being relieved by distributing this indirect taxation as widely as possible. The argument has repeatedly been raised on this side of the House that GST is in fact one of the taxes that broadens the tax structure as far as possible. I think the important principle involved here, is that the broader the base of income tax, the lower the level of income tax can be. If we do not want to call GST income tax, then we say the broader the base, the lower the base of taxation can be.

When we look at GST as such, then we say that the broader this base, the lower we can keep the level of GST for the longest possible term. I think we must accept this as a basic principle—that we would like to make this base as broad as possible and that we would like to keep this level of income tax as low as possible.

Hon. members of the Opposition have repeatedly argued that we should exempt foodstuffs from GST. There was also the argument that medicines should be exempted as well. General sales tax has another inherent characteristic as well, and the principle involved there is that we must keep the administrative costs as low as possible for the bodies or persons in question, the private sector, the trade that is primarily responsible—this was pointed out very clearly here by the hon. member Mr. Aronson—for the gathering of this tax, the administrative costs and the administrative burden, with regard to the collection procedure for GST. That is why we say that if we were now to apply GST selectively, it would increase the administrative burden on the trader. The hon. member for Port Elizabeth Central alleged that this was not true. In a moment I shall quote something to him to prove that there are bodies and persons who allege that this is exactly what is going to happen if we start applying selective GST to commodities instead of applying it to the total turnover. I should like to quote what was said by Mr. Sid Matthews, one of the directors of Spar, in this regard. He said the following—

What this gentleman is telling us, is that if we were to begin applying GST selectively, we would either have to increase the taxation on the balance of commodities or obtain that taxation from other sources.

What is the date of that statement?

It is an extract from the Rand Daily Mail of 16 February 1982.

*Mr. Matthews went on to say—

This is the argument that we on this side of the House have repeatedly used. We have pointed out that this is one of the basic reasons why we do not want to make GST a commodity tax but a turnover tax. I do want to point out that it has already been said— and a great fuss has been made about it— that the motion cannot be supported because it is being announced separate from the main taxation budget of the Republic and must therefore be viewed in isolation. I declare straightforwardly that the out of season announcement of this taxation—I think the hon. member for Hillbrow made a great fuss about it—was not made in isolation. This tax increase that has been announced in advance, has been processed in the total budget programme for next year and viewed in this light. The only difference is that it was announced in advance instead of waiting until the main budget was introduced before announcing it.

The hon. member for Hillbrow asked why we have done this. I do not want to go into it, but to ask the hon. member to reread the hon. the Minister’s speech in which he made this announcement, because in his speech the hon. the Minister said why we were doing this in advance, with reference to a financial analysis of the circumstances under which it was taking place. The hon. the Minister indicated what the considerations were, and I do not want to repeat them, because my time is running out.

Before I come to the hon. members for Yeoville and Amanzimtoti, I just want to say the following: I believe that in the course of my general remarks I have dealt with the speech by the hon. member for Port Elizabeth Central, and the hon. member Mr. Aronson replied very effectively to the hon. member’s accusation. I am now referring to the accusation by the hon. member for Port Elizabeth Central that the State, the Department of Inland Revenue in particular, should be accused of not collecting the required sales tax.

The hon. member for Edenvale spoke about the levy of sales tax on bottles. I undertake to look at this matter, because I feel there is something wrong there; that is if the hon. member’s information is correct. The whole idea of sales tax is that the tax should be levied at the point of sale so that there will be no repeat or escalation in the sales or manufacturing programme. The department will definitely look at this matter.

The hon. member for Yeoville as well as a few other hon. members referred in particular to the question of inflation, with reference to sales tax. The hon. member for Amanzimtoti is not here at the moment, but I am not angry with him because he is not here. [Interjections.] No, he is here after all. I apologize to the hon. member. He is hiding behind some of his colleagues, but I am still not angry with him. The hon. member said one important thing and I think we should take note of it. He said that sales tax would increase the general price level of commodities. This is an absolutely correct statement. It is not going to increase inflation; it is going to increase the general price level. We can talk for a long time about the question of damping of demand through taxation structures, and we can make a case for or against it being a cause of inflation. We could also talk for a long time about the question of cost push inflation. The fact remains that sales tax, since it is an indirect tax, has a damping effect on demand as well as increasing the price index. In itself it is therefore not inflationary. I think that I must in fact make this statement.

I come back to the hon. member for Yeoville. I listened to him with a great deal of amazement this afternoon, particularly to the tirade at the beginning of his speech. He did two things in his speech. He replied to the hon. the Minister of Finance’s Second Reading reply and did an amazing thing by saying that he held it against the hon. the Minister of Finance because he was not in the House and I was dealing with the legislation. It is not necessary for the hon. the Minister of Finance to be in the House when I am dealing with the legislation. It is not necessary at all.

The hon. member for Yeoville used this debate, that dealt with sales tax, to react to the reply of the hon. the Minister of Finance. He attacked the hon. the Minister of Finance in his absence about things that he had supposedly said. We on this side of the House think that this was not the mark of a colleague, it was unasked for and showed poor taste. Indeed, it was not a reply to the Second Reading debate of the Part Appropriation that was at issue here, but a Bill on sales tax that I as Deputy Minister of Finance introduced to the House. It had nothing to do with the presence of the hon. the Minister of Finance in the House. I think it was really in poor taste for the hon. member to accuse the hon. the Minister of Finance of not being in the House and to link this to legislation that I introduced in the House. The hon. member did not really say anything about this legislation to which I can react.

The hon. member did two things. In the first place he replied to the speech of the hon. the Minister of Finance and in the second place he gave a preview of how the budget should look at the end of next month. I cannot comment on that. I am not in a position to react to his previews this afternoon, because then I would be anticipating the budget. I think it is unfair of the hon. member to present such a preview at this stage and then to expect me to react to it without anticipating the budget.

I should like to come back to the hon. member for Hillbrow. The hon. member linked the Croeser report—that actually has nothing to do with this legislation—to the legislation by saying that sales tax would increase the financial burden on the local authorities considerably. He put a few questions to me, and I want to reply to them briefly. The Croeser group on local authorities has practically completed their task. They made a few recommendations that should provide relief for the financial problems of local authorities. The hon. member for Hillbrow alleges that their financial problems will be aggravated due to sales tax and that we have no understanding whatsoever of the financial problems of local authorities. I want to reject that statement with the greatest of contempt. The Croeser Committee is in fact struggling with the financial problems and the recommendations of the Browne Committee with regard to additional financial resources. We are in the process of obtaining acceptable additional sources for local authorities and having them approved by the Cabinet.

The hon. member referred specifically to the fire brigade and ambulance services. If the hon. member were to look at a statement that was made in the House last year, he would see that the Government has already accepted the subsidy with regard to the administration costs of the fire brigade services. As far as ambulance services are concerned, it has been in operation since 1 September 1981. As far as fire brigade services are concerned, it comes into operation on 1 April 1982. This has already been accepted in principle. The Croeser Workgroup has already accepted that Government properties falling within the jurisdiction of local authorities, will be taxed according to a specific formula, which amounts to it being approximately 80% of the valuation of the Government property. I think the hon. member should take a look at our statements. Then he will see exactly what we have accepted, what is already in operation and which aspects—we have even spelled them out in detail—of the Browne Report on financial matters are being investigated at the moment. I want to assure the hon. member for Hillbrow that the investigations into the various sources of revenue have practically been completed and we then hope to submit those principles to the Cabinet for their consideration and approval within a short while. We also hope to table a full report shortly of all the recommendations of an administrative nature that we have already accepted and put into effect.

I also want to refer to speakers on our side of the House, particularly the hon. member Mr. Aronson, the hon. member Dr. Marais, the hon. member for Smithfield and the hon. member for Bloemfontein North. I want to say thank you very much to them. I listened very carefully to each speech by hon. members on this side of the House, and I want to refer with a great deal of appreciation to what they have said, particularly in regard to the principle of and increase in GST. What they had to say, was of a high quality, and I noted with a great deal of appreciation the considerable trouble that they took to go into the question of general sales tax so thoroughly. I think that in most cases they also reacted very effectively to some of the accusations and statements made by hon. members of the Opposition.

I think I have already replied to all the points that were raised by hon. members. No, I think there was still the hon. member for Amanzimtoti’s question about the tables. He asked whether the tables in connection with the new GST would reach the dealers in time. I just want to assure him that the dealers will receive the tables in very good time.

I also recall that other hon. members declared that we have no sympathy with the lower income groups. I just want to quote two aspects that will show, despite the fact that GST is now being increased, that some relief is also being provided to the lower income groups. Firstly, with this new taxation structure there will be new deduction tables for taxpayers with a taxable income of less than R7 000 per annum. In some of those income groups these tables will provide for a considerable percentage decrease, and this will do a great deal towards relieving the position of those people.

Mention was also made of the fact that we are taxing foodstuffs unnecessarily. However, there will be no increase in the case of brown bread as a result of the new GST. The price of brown bread will remain exactly as it was when GST was 4%. As a result of the rounding-off tables the price of white bread will remain the same too. Therefore, the price of white bread will not be increased either. If we look at the price of a litre of milk, we see that it is not affected at all by this new taxation structure. I could continue to point out other commodities with regard to which the increase will be minimal.

With a view to the time I want to conclude now. I want to extend my hearty thanks to hon. members on this side of the House for their support.

Mr. Speaker, I move, subject to Standing Order No. 56—

Mr. Speaker, the Second Reading debate on this Bill took up some time. The hon. the Deputy Minister sought to reply to the issues that had been raised but a number of things remain completely unanswered. The first is that the hardship that arises from the imposition of sales tax on food remains. It is quite pointless to talk about items that are in a category where there is no increase and ignore all the other multitude of items where, in fact, there is an increase. That argument remains completely unanswered.

There is a second point that remains unanswered. It is all very well to say this is part of a package when, in fact, this package is not disclosed to the House. The whole argument was that it is utterly wrong to present taxation piecemeal. The budget should be presented as a whole. Then one can decide whether it is necessary to raise this tax or whether there are not alternative sources of revenue. One cannot judge whether this is the correct tax or not unless one sees the whole package. The hon. the Deputy Minister did not reply to that point either.

The third point is in regard to the fact that he maintains that I indicated what the budget was going to be. What I said was that this was possibly a scenario on the part of the NP, and if that is in fact the scenario—of which there is proof at the moment—then there is no doubt that the taxation burden in respect of new taxation for the forthcoming financial year is being placed full-square upon the shoulders of the consumer. The hon. the Deputy Minister did not reply to that point either. In these major respects the case which the Opposition has made is completely unanswered.

Then we come back to this old argument of when an increase in costs is inflationary or not. Every increase in costs is, in fact, an increase in the index and an additional burden on the consumer. There is no doubt about it; that is a reality. Whether increases in costs, because they stifle demand, may in the long term have an anti-inflationary effect, is another story.

Nobody has demonstrated, however, that the increase in general sales tax have not in the long term had a completely inflationary effect. They have not stifled demand in that respect. On the contrary, if one looks at the whole pattern of consumption and of retail sales, it is clear that these have gone up. They have not gone down. They have not stifled demand.

One of the other factors the hon. the Deputy Minister fails to accept is that, in an inflationary age, income from sales tax goes up all the time because for the same unit one is paying a higher price and therefore one has a larger income from general sales tax. That is irrefutable. It is a fact. It cannot be denied.

In this Third Reading stage, where we have to deal with this legislation as it stands, all that we can say is that no case has been made out for any increase in general sales tax. On the contrary, the case for decreasing the burden on the consumer has not been answered and remains irrefutable.

Mr. Speaker, I just want to react briefly to what the hon. member for Yeoville had to say. I believe the reason we cannot separate the general sales tax on food from general sales tax on other commodities has really been debated ad nauseam in this House. This afternoon we discussed it yet again. I hope I made it clear enough this afternoon that we want to keep the general sales tax on the widest possible basis in order to keep it as low as possible. I believe that this is the basic principle, which in any case is also the reply to the question of the hon. member for Yeoville.

The next reply we furnished, which was very thoroughly corroborated by the hon. member for Bloemfontein North, was that if we were to exempt certain commodities from general sales tax, this could start a vicious circle. Where would it all end? Initially it was only requested that food be exempted from general sales tax. Today we were told that medicine should also be exempted. Tomorrow or the next day it will be something else again. Where will it end? The next thing we will hear that Coca-Cola goes with bread, which of course, will mean that we will have to exempt Coca-Cola from general sales tax as well. [Interjections.]

Yes, and wine goes with fish. [Interjections.]

I tried to make quite clear exactly what the philosophy underlying the entire system of sales tax is. The idea is that it must be applied on the widest possible basis and its administration must be made as easy as possible for the vendor in order to save him administrative expenses. In this regard I have also quoted what experts, such as the director of Spar—a very large organization—has to say, namely that those administrative costs would eventually have to be borne by the consumer.

Implicit in our approach to the levying of the general sales tax—and of course, to the way it is collected—is the eventual protection of the consumer, so that he is not burdened by an ever-increasing sales tax structure.

I think we on this side of the House have thrashed out this matter fully. Hon. members of the NP have expounded the entire matter in detail. I think that we have discussed this entire matter ad nauseam. If the hon. member for Yeoville and the hon. member for Hillbrow do not want to understand, I cannot help them any further. Perhaps they cannot understand, in which case I am still less able to help them.

Of course the hon. member for Yeoville also mentioned another aspect relating to inflation. Hon. members on the Government side also referred to this. I believe that the hon. member for Amanzimtoti understands that problem. It is the problem surrounding the cost implications of general sales tax. I have the impression that the hon. member for Amanzimtoti understands this. However, I suspect that the hon. member for Yeoville does not begin to understand it. Now he makes the astounding statement that it has by no means been proved that the long-term effect of general sales tax, as a demand-damping tax is not inflationary. However, the contrary has not been proved either. The fact remains that a tax that damps demand, must in fact be anti-inflationary in the long term. It is as simple as that. As the hon. member for Amanzimtoti clearly put it, the price structure of a commodity is higher because the tax exists. I therefore believe that we have now dealt with this aspect, too, very thoroughly.

The last aspect I want to refer to—and with which I shall conclude—is that the hon. member cannot under any circumstances expect me to announce at this stage the entire budgeting pattern in terms of which the GST increase was worked out. Surely it is ridiculous to expect me to announce it at this stage. However, this decision was taken within the context of a budgeting pattern, and not in isolation. The reason for its announcement and introduction being advanced was clearly explained in the hon. the Minister’s speech. I really cannot say any more than this at this stage, however much I may want to.

Question put,

Mr. Speaker, I move—

The Bill contains amendments to section 26 of the Public Accountants and Auditors Act, 1951. This section regulates the powers and duties of auditors.

The functions that are vested in the auditor of a company by the Companies Act, are not aimed at protecting the interests of shareholders and creditors of the company only, but also at protecting members of the public who want to do business with the company or its shareholders, or who want to become shareholders in the company.

In view of the duties vested in the auditor by the Companies Act, and the requirements that are laid down in the Public Accountants and Auditors Act for the execution of the duties of the auditor, it is obvious that members of the public who envisage transactions with the company or its members, will depend on opinions expressed by the auditor, explanations or certificates issued by him and statements, accounts and other documents certified by him.

When these people suffer losses as a result of such confidence, under certain circumstances they can recover these losses from the auditor if he has acted in a malicious or negligent manner. Therefore, not only is the auditor responsible for losses suffered by his client as a result of the negligent execution of his duties, but he also runs the risk of being sued for damages by some third parties for losses suffered due to their confidence in incorrect impressions that were negligently created by the auditor.

In the nature of his function an auditor is therefore to an unusual degree subject to actions for damages on the basis of wrong impressions that were created by his action or negligence. However, there is a great deal of uncertainty with regard to the extent of the exposure of an auditor, since the few verdicts in our administration of justice in this regard have not yet pointed out a clear position. This uncertainty is a source of great concern for the profession and at the same time not in the best interest of parties who have suffered damages, since they do not know whether a suit against an auditor will succeed or not.

†It is understandable that the prevailing legal uncertainty in this field is a matter of great concern to the profession. Consequently the Public Accountants’ and Auditors’ Board requested that the provisions of the Public Accountants’ and Auditors’ Act be improved by providing in section 26 as fully and as clearly as possible the circumstances in which an auditor will be liable to his client and to third parties for financial losses sustained as a result of their relying on his negligent misstatements. The amendments set forth in the Bill will bring clarity to certain crucial aspects of an auditor’s liability, and the greater legal certainty will not only benefit members of the profession but also third parties.

The proposed amendments were submitted for comment to various interested organizations, inter alia the Afrikaanse Handelsinstituut, Assocom, the South African Federated Chamber of Industries, the Association of Law Societies of the Republic of South Africa, the associations of the various kinds of financial institutions and the Registrar of Companies. No objections were raised against the proposed amendments.

I now request the support of the House for the Bill.

Mr. Speaker, I wish to indicate at the outset that in opposing the Second Reading of the Bill, I do not wish to go into the merits of the definition of the liability of auditors as a result of their misrepresentations. That is a matter which can be debated, but our opposition is not based on that aspect. It is based on perhaps a more clinical and legalistic argument which nevertheless, I submit, is very significant and ought to be taken into account, and that is the question of codifying private law. That is what is happening here.

Our legal system is one in which private law has until now by and large remained untouched as far as codification is concerned. If one looks at the background to this particular amendment, then one finds that in 1979 the Appellate Division in Bloemfontein for the first time found that a negligent misrepresentation which causes mere financial loss is a valid cause of action. This finding sent a wave of panic through the accountants’ profession and also through other professions because until then the law had had not been clarified on this particular aspect. No doubt this is why they approached the hon. the Minister, the hon. the Deputy Minister or the department for some protection because they feared that they might be exposed to claims by third parties in almost unlimited amounts.

This is the reason why the protection is being sought, but it is misplaced in the sense that in that very same judgment by the Appellate Division the judges clearly stated that they were now breaking ground in our common law. It is an area which requires nursing—I think that is how they put it.

It is an area in which each case will have to be treated on its merits. One cannot set out clear and final guidelines at this stage. That is the background to the worries that do exist among auditors and accountants.

In the light of that background the question arises whether one should codify our laws or whether it should be left to the courts to deal with the problem. Our whole legal history is in favour of letting the courts decide on aspects of our private law. I am not referring to technical, criminal offences. These can obviously be defined in great detail. I am referring to the common law. This is an aspect which touches on our private law, our common law, which is now being codified. Although there is a difference between the professions of the accountants and auditors and those of other professions, such as architects, lawyers and engineers, there will be an inevitable demand and request by other professional bodies, or any other body, for protection by statute of liability. One will then be touching on many other aspects of our private law and will be codifying it. Many writers have debated the question whether or not one ought to codify our common law. The writers in favour of it—the same argument was used by the hon. the Deputy Minister today—state that by codifying the law it becomes simpler. It becomes simpler for third parties and it becomes easy also for the court to understand and apply it. On the face of it, that sounds like a good argument. However, practice throughout our legal system has proved the contrary. Once you codify private law, the problems really start, because every second word has to be interpreted and every second case which is brought to court has different circumstances, and somehow it has to fit into this defined provision in the Act. Once aspects of private law are codified you really start creating problems as far as the courts are concerned while you do not really provide certainty as far as the third party is concerned.

I want to appeal to the hon. the Deputy Minister to consider whether one should not again look at the Bill to establish whether this codification fits into our legal system. If the accountants insist on codification, and if this Bill is passed, it will not have the desired effect in the end. It will be easier to get the desired effect if one lets our courts lay down closer guidelines than those which exist now. It is true, as stated by the hon. the Deputy Minister, that there are at the moment no clear guidelines in our law. However, this is so because the concept of liability on the part of accountants for negligent misrepresentation causing more financial loss, has only recently become clearer. That is why our law on this aspect is still very new. I want to appeal to the hon. the Deputy Minister to reconsider the question as to whether or not one should not let the courts—because in every single case they can adapt and take circumstances into account—decide the question of liability.

Other countries have codified their private law. France, the Netherlands and Germany have codified and defined their civil law in statutes, but not for the prime purpose of making it clearer and easier to understand, as many people may think.

In those countries, for example in Germany, or Switzerland, the prime motivation behind codification was a different one. It was more of a political one, the object being to unify a legal system, because before codification different provinces, States and even cities had their own legal systems and precedents, and the only way to unify a legal system under those circumstances was through codification. This type of reasoning and motivation also existed in other countries where codes do exist. Our system, which is derived from the Roman-Dutch system and the English system, and also influenced by other systems, has not had its private law undergo codification, and I fear that what we are doing now is opening the door for other parties to push for codification, which is contrary to our tradition. For that reason I therefore ask the hon. the Deputy Minister to reconsider this Bill. That is the only basis upon which we on this side of the House oppose it. We do not believe that codification is in the interests of third parties who may wish to institute claims, and neither do we believe it to be in the interests of the accountants because they would not, in fact, be any better off. There would be more court cases about interpretation than about the merits of the individual cases themselves.

For that reason we cannot go along with the Second Reading of the Bill.

Mr. speaker, the argument of the hon. member for Durban Central is very interesting, particularly the fact that he contrasts codification with our concept of the Roman-Dutch common law, stare decisis, in terms of which we act. It is also interesting that he only dealt with codification and in fact completely neglected to voice an opinion on the onus of proof which is being transferred in this respect. I should have expected that in his discussion of codification, which indeed comprised the entire theme of his speech, he would have felt obliged to ask the hon. the Deputy Minister, in the first place, not to give priority to codification, but in fact to consider abandoning the idea of transferring the onus of proof from the auditor to the third party. If that had been his argument, it would have been more in keeping with the principles of our common law. However, he totally disregarded that here, and although in general I should never even consider transferring the onus of proof to the third party instead of the primary party, under these circumstances I can understand and accept the necessity for this.

I now want to concentrate on the legislation itself. It is interesting to compare the auditing profession with that of attorneys and other professional people. The hon. member for Durban Central referred to a 1979 Appeal Court decision, but let us take a further look at the Supreme Court decision last year involving one of our major banks. The question before the court was the handling of a will. If the hon. member studies that case, he will note that negligence and deliberate, malicious conduct are never exempted for any profession, and in this legislation they are not exempted either. The basic why I differ with the hon. member for Durban Central is his failure to understand the underlying necessity for this legislation, and I say this with all due respect. This is not legislation to protect the auditing profession. In fact, the aim is to protect the third party and the public, particularly as regards the amendment of the existing section 26 by the addition of paragraph (aA) after paragraph (a) of subsection (3A). The provision is aimed at protecting the public, because the legislation under discussion will make it easy for the auditor, in the first place, freely to submit a certificate and report, and in that way will protect the public when the auditor is at all of the opinion that irregularities have occurred. In the proposed new section 26 (5) he is in fact asked to express an opinion or give a certificate, and here, too, he is exempted, not to indemnify himself, however, but to indemnify the third party. In the proposed subparagraphs (aa) and (bb) of subsection (5) we see again that he is not exempted from negligence and malicious conduct towards third parties. Where there is the slightest possibility that he could have acted maliciously or that he ought to have realized that he could have given third parties the wrong impression or could have motivated them to act in consequence of his opinion or certificate, he cannot claim the immunity afforded by this legislation. If, therefore, one analyses the essence of this legislation physically, one sees that the question of codification is not all that is involved, but that it in fact links up with our Roman-Dutch common law. Because I differ with the hon. member in that regard I cannot support him, but this side of the House and I support the hon. the Minister.

Mr. Speaker, the provisions contained in this Bill are of a technical nature and concern the accountants’ and auditors’ professions. As the hon. the Deputy Minister said, these amendments have been requested by the Public Accountants’ and Auditors’ Board in order to protect, as the hon. member for Vasco also said, the public and in particular the creditors and shareholders involved. For this reason we in these benches, having looked at the Bill, decided to support it.

The hon. member for Durban Central has raised some very legalistic problems he has, but in supporting the Bill we were interested to note that the hon. the Deputy Minister said that these proposed amendments were submitted to the Afrikaanse Handelsinstituut, Assocom, the S.A. Federated Chamber of Industries and also the Association of Law Societies of S.A. I would assume that they have gone into the Bill in great depth and, seeing that they have seen fit to accept and support the provisions, I just want to tell the hon. the Deputy Minister that we shall be doing likewise. We will be very interested, however, to hear the hon. the Deputy Minister’s reply to the hon. member for Durban Central.

Mr. Speaker, I am very glad to follow the hon. member for Amanzimtoti in supporting this Bill. I am very glad that this party is keen to join us in this. We can be very brief as far as this legislation is concerned. I think it deserves support because it does not really change anything and only creates order and gives greater clarity on points which were not clear.

The hon. member for Vasco said that the professional people are actually being protected to a lesser extent, whereas the public and third parties in particular are being protected by this legislation. In this connection one must specifically bear in mind that the third parties involved were not in all cases able to choose the professional people concerned. For this reason it is fair that they should enjoy protection in terms of this legislation. It therefore gives me pleasure to support the Bill.

Mr. Speaker, I wish to thank the hon. member for Amanzimtoti for supporting this Bill. I may disappoint him by not replying to the hon. member for Durban Central the way he probably thinks I should reply, but I shall do my best. Like him, I am an engineer and not a legal man. As far as the hon. member for Durban Central is concerned, he has raised certain legal matters and legal aspects and I am definitely not in a position to enter into a legal debate with him. I shall however make some comments on the points he has raised.

*I also want to extend my sincere thanks to the hon. member for Vasco and the hon. member for Caledon for their support. If I recall what the law advisers told us about the objection—which did not come from the official organizations that I mentioned here— with regard to the aspect of common law, the arguments that the hon. member for Vasco raised here, are entirely in line with this. We referred this legislation to a large variety of official organizations, including the Law Society. I should just like to quote briefly what this organization’s commentary was on the proposed legislation. The secretary of the society reports—

As far as I am concerned this is the sphere of the judicature. However, I want to tell the hon. member for Durban Central that this was the green light for us as a department and for the Registrar of Financial Institutions. This is the protective clause that we want to introduce for the third party without having any effect whatsoever on the onus of proof or the common law aspect by means of which these people can still prove negligence in court.

The hon. member for Durban Central referred to other professions that may also call for the codification of their professions now. However, I think there is a basic difference between the auditor’s profession and the medical profession, for instance. I shall try to elucidate this difference briefly. With regard to the medical profession there is a direct, intimate relationship between the patient and the medical practitioner. The patient chooses his doctor or medical consultant. He has a personal choice and it is a personal relationship that arises between patient and doctor. If there is negligence, the patient is protected under common law and can make a case against his doctor. In other words, it is a dual relationship. Let us now look at the auditor’s profession. In the first instance, the auditor is controlled by the Companies Act. I think there is a series of sections—I think they are sections 269 to 283—of the Companies Act that place certain obligations on the auditor. The legislation that is before the House today, lays down the requirements according to which those obligations must be complied with.

However, there is also another basic difference, and this is that the third party that must be protected in this legislation, has no say over the auditor whose advice he must accept to take legal action or not. In other words, it is not a personal, intimate relationship between the two parties. I therefore think it is important that the scope within which protection exists for the third party against the auditors, should be spelled out to a certain extent, and this is all that we are doing in this legislation.

I want to conclude by saying that we also received a request from the Bar Council. We received this request only a day or two ago. In it the Bar Council also expressed its support for this legislation, with one proviso only. They ask that we should make an amendment to the Bill because in our protective legislation we are simply making provision for the fact that should the third party institute legal proceedings on the strength of the information provided by an auditor, and then suffer losses due to negligence, he could have the right of recovery through the normal legal channels. The Bar Council has proposed that we should word the amendment in such a way that should the third party refuse to institute legal proceedings, he should still enjoy protection. Therefore, the protection should exist not only if the third party were to proceed to institute legal proceedings on the strength of his information, but also if he should refuse to do so.

Mr. Speaker, I hereby wish to thank hon. members very much once again for their participation in the debate.

Question agreed to (Official Opposition dissenting).

Bill read a Second Time.

Mr. Speaker, I move—

Agreed to.