WEDNESDAY, 16 MAY 2001 __

                PROCEEDINGS OF THE NATIONAL ASSEMBLY
                                ____

The House met at 15:02.

The Speaker took the Chair and requested members to observe a moment of silence for prayers or meditation.

ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS - see col 000.

               INTERNATIONAL CANDLELIGHT MEMORIAL DAY

                           (Announcement)

The SPEAKER: Order! Hon members will notice that, as we did last year, we have a candle in the Chamber to recognise International Aids Candlelight Memorial Day, which falls on Sunday, 20 May, when we honour the memory of those lost to Aids and show support for those living with HIV/Aids, to raise awareness of the disease and to mobilise communities in the fight against HIV/Aids.

Members will recall that last week the House held a special debate on the need to accord the fight against poverty and HIV/Aids urgent national priority. This year’s theme for the Candlelight Memorial - one voice many faces united for life - embraces the different facets of the pandemic. The candle burning in the House today serves to remind us all, as public representatives, of the need for the nation to join hands in the fight against HIV/Aids and the need for public representatives to be in the forefront of that fight.

QUESTIONS AND REPLIES - see that book.

                          NOTICES OF MOTION

Nkszn B P SONJICA: Mhlalingaphambili, ndiza kwenza isiphakamiso egameni le ANC:

Sokuba le Ndlu -

(1) iqwalasele inkcazo yoMphathiswa wezoLimo neMicimbi yeMihlaba emalunga nokunikezelwa komhlaba omninzi kaRhulumente kubalimi abasakhasayo;

(2) yamkele ukuba eli nyathelo libonisa ukuzimisela kukaRhulumente ekupheliseni ubuhlanga nocalu-calulo phakathi kwabanini-mhlaba kweli lizwe lookhokho bethu;

(3) ikhuthaze imidaka yeli lizwe ukuba iphakame izibandakanye kulimo oluphuhlileyo, yenze negalelo elibonakalayo kwimo yezoqoqosho yelizwe;

(4) ibulele kuMphathiswa nakuRhulumente we-ANC ngokuthabatha eli nyathelo lizalisekisa imibono kaMongameli uThabo Mbeki, yokuphelisa ubuhlwempu nendlala eMzantsi Afrika; nokuba

(5) yenze isimemelelo kubo bonke abantu abamnyama nabahlelelekileyo ukuba balamkele ngezandla zozibini eli thuba.

[Kwaqhwatywa.] (Translation of Xhosa notice of motion follows.) [Ms B P SONJICA: Mr Chairperson, I shall move on behalf of the ANC:

That the House -

(1) notes the explanation that the Minister for Agriculture and Land Affairs gave about redistributing Government land to emerging farmers;

(2) acknowledges that this step shows the Government’s commitment to ending racism and apartheid between land owners in this country of our forefathers;

(3) encourages the black people of our country to participate in development agriculture and make an appropriate contribution towards the economy of the country;

(4) appreciates the steps taken by the Minister and the ANC-led Government towards fulfilling the visions of the President, Mr Thabo Mbeki, of alleviating poverty and starvation in South Africa; and

(5) calls on all the black people and the poor to welcome this opportunity with both hands.

[Applause.]]

Mr R J HEINE: Chairperson, I hereby give notice that I shall move on behalf of the DP:

That the House notes -

(1) with alarm the spate of attacks and raids on businesses and foreign nationals in neighbouring Zimbabwe, in the light of the following:

   (a)  that businesses in Zimbabwe find it impossible to operate where
       there is no rule of law, and are therefore preparing to close
       their doors because of the latest violence and intimidation;


   (b)  that this has directly led to a drop in the business confidence
       index of the SA economy;


   (c)  that the EU are considering imposing sanctions against Zimbabwe;
       and
   (d)  that these events further lead to the relegation of Southern
       Africa as an investment destination and stand to derail the
       privatisation process in SA; and

(2) that the DP urges the SA Government to condemn these events in Zimbabwe in the strongest possible terms, as South Africa can ill afford to be pulled into an economic abyss along with Zimbabwe.

Mr H J BEKKER: Chairperson, I hereby give notice that on the next sitting day of the House I shall move on behalf of the IFP:

That the House -

(1) accepts with humility the accolades given by the IMF to South Africa’s approach in managing the economy which saw 3,1% growth in 2000, which was preceded by 1,9% growth in 1999;

(2) further notes that according to the IMF, South Africa’s policies on a competitive exchange rate, strengthened tax administration, spending controls and an anti-inflation monetary approach are financially sound;

(3) hopes that these achievements will not only help in raising South Africa’s profile abroad but will also assist in reducing the levels of unemployment facing the population; and

(4) also takes on board the cautionary comments of the IMF regarding the far-reaching economic consequences that the HIV/Aids pandemic may have, as well as their concern about low savings and that investment and growth would have to rise significantly to fight unemployment.

Mr J J KGARIMETSA: Chairperson, I shall move on behalf of the ANC:

That the House -

(1) notes that the national Government gazetted about R15 billion yesterday to be paid to 284 newly demarcated national authorities in the Medium-Term Expenditure Framework over the next three years; (2) recognises that the new formula will promote better planning and development strategies in line with the ANC Government’s commitment to urban renewal and the Integrated Rural Development Strategy; and

(3) commends the ANC Government for its progress in the introduction of sound financial practices and systems of accountability in all spheres of government, promoting more effective and productive use of taxpayers’ money.

[Applause.]

Mnr J J NIEMANN: Mnr die Voorsitter, ek gee kennis dat ek op die volgende sittingsdag van die Huis sal voorstel:

Dat die Huis -

(1) met verontwaardiging kennis neem van die ongedissiplineerde optrede van leerders van die Mogomotsi Hoërskool, Warrenton, wat onder meer gelei het tot die beskadiging van voertuie op die N12-hoofweg;

(2) van mening is dat dié soort ongedissiplineerde optrede wat onderrig by die skool sedert Maartmaand vanjaar ernstig ontwrig, nie langer geduld kan word nie en dat die belhamels summier geskors moet word; en

(3) glo dat dit by die leerders ingeskerp moet word dat persoonlike regte en vryhede nie mag inbreuk maak op die regte en vryhede van iemand anders nie. (Translation of Afrikaans notice of motion follows.)

[Mr J J NIEMANN: Mr Chairperson, I give notice that on the next sitting day of the House I shall move:

That the House -

(1) notes with indignation the undisciplined behaviour of learners of the Mogomotsi High School, Warrenton, which, inter alia, led to the damaging of vehicles on the N12 highway;

(2) is of the opinion that this kind of undisciplined behaviour, which has seriously disrupted tuition at the school since March of this year, can no longer be tolerated and that the ringleaders must be summarily suspended; and

(3) believes that it should be impressed upon the learners that personal rights and liberties may not violate the rights and liberties of others.]

Mr M N RAMODIKE: Chairperson, I give notice that at the next sitting of the House I will move on behalf of the UDM:

That the House -

(1) notes with shock and trepidation the bale-out package of R300 million granted by the central Government to the Mpumalanga provincial government;

(2) is concerned that the central Government’s continuous string of high profile bale-outs of the provincial governments indeed raises a red flag on what the Government portrays as the now stable landscape of provincial finances;

(3) is further concerned that financial mismanagement and corruption continue to flourish in Mpumalanga, and thus further acknowledges a remark by a magistrate of the Nelspruit court who referred to a deputy director-general of the Mpumalanga government, during a trial on financial mismanagement and fraud, as ``a blatant and pathetic liar’’, which is a direct indictment of the ANC provincial government’s ineptitude and a manifestation of incompetence; and

(4) calls on the Government to take over the administration of Mpumalanga with immediate effect instead of imposing a number of conditions for improvement at the taxpayers expense.

[Interjections.]

Mrs M A A NJOBE: Chairperson, I shall move on behalf of the ANC:

That the House -

(1) welcomes the private sector health summit that took place recently;

(2) notes the victory in court which makes drugs affordable and accessible;

(3) recognises that there is a softening of attitudes within the pharmaceutical industry;

(4) further recognises that the frontiers of access to health care must be extended; and

(5) calls upon the Conference of Family Practitioners to pledge to make health care accessible even in private practices in order to extend accessibility to all, including people living with HIV/Aids.

[Applause.]

Dr M S MOGOBA: Chairperson, I give notice that I shall move on behalf of the PAC:

That the House -

(1) notes that -

   (a)  the land on which the Bakopa had lived since the 17th century
       was forceably taken from them on 25 June 1962 because it was
       declared a white area, and the Bakopa left their land and many
       graves which are still visible today;


   (b)  this removal was painful, insensitive and, to this day, highly
       emotionally charged; and


   (c)  the Government kindly agreed that a veteran fighter for the
       return of their tribal land, Jan Letebele Matsepe, could be
       buried there on Sunday, 13 May 2001, according to his wishes,
       even though the application for the return of this land had not
       been completed; and

(2) calls for the speedy handling of this land claim, which will bring unity to the tribe, and joy and enormous goodwill to all.

Mr P H K DITSHETELO: Chairperson, I shall move on behalf of the UCDP:

That the House - (1) notes -

   (a)  the allegations that sport in South Africa is engulfed in a
       cloud of controversy surrounding allegations of financial
       mismanagement and corruption; and


   (b)  as intimated in the media, that ASA management has failed to
       account for an estimated amount of R9 million donated to the
       sporting body;

(2) is of the opinion that, for the sake of sport, it would be advisable for the Minister to get to the bottom of these allegations as they are damaging the image of South Africa internationally; and

(3) urges the Minister of Sport and Recreation to institute a formal enquiry to establish the truth as far as the allegations are concerned.

Mr J P CRONIN: Chairperson, I shall move on behalf of the ANC:

That the House - (1) notes that the Banking Council has warned that banks may increase charges in response to new requirements by the Reserve Bank;

(2) believes that -

   (a)  banking charges are increasing rapidly while the level of
       service, particularly to low-income clients, is decreasing, and
       that high banking charges are a barrier to disadvantaged
       citizens and communities; and


   (b)  the new regulations are being used as an excuse for increasing
       charges still further at the expense of the most vulnerable; and

(3) calls on the Government, the banking industry, and civil society to tackle the issue of banking charges to ensure that the banking sector plays a productive role in the transformation of our economy and society.

[Applause.]

Mr N J CLELLAND: Chairperson, I shall move on behalf of the DP:

That the House -

(1) notes that -

   (a)  Director Henry Manzi, the newly appointed head of the Durban
       Metro Police, is alleged to have interfered with the
       administration of justice in order to release his own uncle;


   (b)  after receiving a phone call from his uncle - who had been
       arrested for a traffic violation and attempting to bribe a
       police officer - Director Manzi personally went to the Point
       Road police station and insisted that the junior officer under
       his command release and not charge his uncle; and


   (c)  Mr Manzi is an ANC political appointment and that the ANC went
       to extraordinary lengths to have Mr Manzi appointed as Director
       of the Durban Metro Police; and   (2) condemns this illegal, arrogant and despicable behaviour and calls on
   the ANC-led Durban Metro to discipline Mr Manzi.

Prince N E ZULU: Chairperson, I hereby give notice that on the next sitting day of the House I shall move on behalf of the IFP:

That the House -

(1) regrets the recent unbecoming event in which a Chatsworth man doused his house and his two children with petrol and held the children and his ex-wife hostage;

(2) applauds the police for having succeeded in pacifying the assailant; and

(3) hopes that conjugal harmony is restored in our communities to ensure a peaceful environment, especially for the sake of children.

Mrs M M MALUMISE: Chairperson, I shall move on behalf of the ANC: That the House -

(1) notes -

   (a)  resolutions of the internal Conference of Family Practitioners
       held in our country urging governments to take action against
       access to and availability of tobacco to children and adult
       smokers; and


   (b)  that the resolutions of this conference support and confirm our
       legislation to regulate access to tobacco; and

(2) supports the call by the conference for the introduction of even tougher measures to limit access to and availability of tobacco to all people.

Adv A H GAUM: Chairperson, I shall move:

That the House -

(1) notes -

   (a)  the ANC's decision not to call National Police Commissioner,
       Jackie Selebi, to explain to the Portfolio Committe on Safety
       and Security his extraordinary personal involvement in the
       investigation into the alleged plot to overthrow President Thabo
       Mbeki, and his recording of conversations between James Nkambule
       and alleged suspects;


   (b)  Minister Tshwete's sudden withdrawal from a debate of urgent
       national importance on his plot allegations;


   (c)  that this amounts to an undermining of Parliament's oversight
       role, the principles of openness and transparency and the
       public's right to know; and


   (d)  that Minister Tshwete is unable to come up with concrete
       evidence against the three persons he has implicated; and

(2) resolves that the ANC should stop its endeavours to kill this scandal with silence and to cover up a politically motivated police investigation and that Minister Tshwete should either deliver evidence or resign.

[Interjections.]

Mr M T GONIWE: Chairperson, on a point of order: The hon Gaum’s motion includes factually incorrect statements, where he claims that … [Interjections.] Shut up, man!

The CHAIRPERSON OF COMMITTEES: Continue, hon member.

Mr M T GONIWE: He claims that Minister Tshwete refused a debate. That is not factually true. Minister Tshwete was not available for that debate. It is factually incorrect.

The CHAIRPERSON OF COMMITTEES: That is not a point of order, but if any member doubts that a motion read in this House is correct, the Speaker can actually look into that motion and decide whether it is acceptable or not. We can therefore raise it in the appropriate structure.

APPEAL TO THE INTERNATIONAL COMMUNITY TO ASSIST IN THE RESOLUTION OF THE MIDDLE EAST CONFLICT (Draft Resolution)

The CHIEF WHIP OF THE MAJORITY PARTY: Chairperson, I move without notice:

That the House -

(1) notes with profound sadness and shock the ever escalating violence in the Middle East, resulting in a tragic loss of life and wanton destruction of property;

(2) believes that this deepening crisis poses a serious threat to world peace;

(3) deplores this continuing bloodletting;

(4) urges all role-players to come back to the negotiating table; and

(5) calls on the international community to provide the necessary support and assistance to bring about a lasting resolution to this conflict that has lasted for decades. Agreed to.

                    TAXATION LAWS AMENDMENT BILL

                       (First Reading debate)

Ms B A HOGAN: Mr Chairperson, our committee spent over 14 meetings deliberating on the capital gains tax. We heard many heated arguments for and against it. At the end of the day, we had to make a decision. I must say that, as chair of this committee, after hearing the arguments that were placed before us, I am absolutely clear in my mind that the introduction of a capital gains tax is absolutely justifiable in this country.

Yes, it is a new tax. Yes, it will bring administrative complexities. It will add to the burden on the SA Revenue Service and, to a certain extent, taxpayers. But there are very compelling reasons why we need a tax of this kind. I would ask those people who are opposing this tax to take time to go through those reasons and to think through those reasons very carefully, given that we are living in a society that is torn apart by income disparities and that we need to address the differences in income and way of life of our people, if we are going to meet our goals of true reconciliation.

Briefly, what is this tax about? This tax is very simple. If one owns a company, one earns - hopefully - profits on that company and pays taxes on those profits. There is no problem in that situation. If one, as an individual, owns a house and rents it out, one pays tax on the rental that one receives on that house. There is no problem in that situation. However, if one owns a company and sells it at a profit, one does not pay tax in the present dispensation. In the same light, if one owns a house and sells it at a great profit, one does not pay tax on that house.

Bearing in mind that the majority of our people do not even own a house or a company, the only income which they receive is a salary. They pay tax on that salary. If they are able to save - most of our poorer people, who are the majority of our population, save in saving accounts - they pay tax on the interest which they earn on those savings accounts. However, if one is a wealthy person and can buy shares, if one sells those shares one does not pay tax on the profit that one makes when one sells those shares. [Interjections.] There is a difference between trading and selling. I think that members should understand that.

There is an injustice that does cry out to be seen, heard and met. It is simply unfair to expect poorer people in our society to contribute to the payment of taxes while others who are more fortunate - that includes a lot of us here - have the ability to invest in investments on which they do not pay tax when they sell those investments. That is blatantly unfair. We need to address that issue urgently in our society. No matter what the complexities of the tax are, we cannot overlook the need for the equalisation of the way that we treat our tax.

This is not going to be a tax which simply knocks the ordinary person in the street. The tax has been very carefully crafted so that the ordinary person in the street is not badly affected. Firstly, no one will pay tax on their house that they own, if it is a primary residence. If what they gain when they sell that house is less than R1 million profit, they will not pay tax on the sale of that primary house.

Secondly, when life policies and endowment policies are paid out, they will not pay CGT. Thirdly, the tax that will be levied, if one does make a capital gain that has to be taxed, will only be at 25% on the capital gain that one makes. One is not being taxed on the full capital gain, one is only being taxed at 25%. Fourthly, the first R10 000 of any capital gain that one has to pay will be excluded from the amount that one has to calculate into taxation.

If one dies, one will pay capital gains tax, but the first R50 000 of what one has to pay on that capital gains tax will be excluded. Winnings from gambling, lotteries, etc are also excluded from capital gains tax, as is any disposal on one’s personal assets. If one sells any of one’s personal assets, that is a car, computer, jewellery or whatever, that is not subject to capital gains.

Capital gains tax, I repeat, is not going to affect the ordinary person in the street. Capital gains tax will affect, as it does in other parts of the world, the wealthy in our society. In fact, in the United States, for instance, the people at the top income level made 61,9% of all capital gains and contributed 62,4% of all tax on capital gains collected. We are talking about a wealthy stratum of people who are now going to be taxed.

It is not correct to believe, as has often been put across, that capital gains is a discredited tax in the world. In fact -and I will not go through the details - capital gains exists in most countries in the world. In the Americas - North and South America - there are only two countries that do not have capital gains tax. In Europe virtually every country has capital gains tax. I can go through the whole gamut of countries in the world, but capital gains tax prevails in a majority of countries in this world. It is not a punitive tax which is being imposed in this country because we have a wish to tax the wealthy sector, which, in quotes, is referred to as the ``wealthy whites’’.

Another reason we have to impose a capital gains tax and why we are persuaded that it is a justifiable tax is that, in the absence of capital gains tax, there is a tendency for people to convert their revenue into capital so they can avoid paying tax. We have a huge amount of tax evasion and a lot of the SA Revenue Service’s time is spent on trying to work out whether something is revenue or capital because we have this gap in our capital gains tax legislation.

This tax is therefore useful for purposes of increasing our ability to meet the problems of tax evasion, and we feel very strongly that capital gains tax is an important component in the whole array of taxes. It simply helps us to avoid tax evasion and avoidance. No doubt there are going to be tax administration complications. Ordinary taxpayers are going to have to fill in forms, and they are going to have to track through some of the assets which will be taxable. The SA Revenue Service is going to be faced with a rather stiff programme of implementing capital gains tax.

However, at our committee hearings we were given a very comprehensive report from the SA Revenue Service as to how they plan to implement this tax. It was a very credible presentation, and we have also just recently held our budget hearings on the SA Revenue Service and there is no doubt in anyone’s mind that the SA Revenue Service is leaping ahead in its ability to meet its obligations. We have seen that already in the extra money that they have been able to get for the state in revenue. Finally, I want to say thank you to four very special people, Franz Tomasek, Keith Engel, Martin Grote and, above all, Kosie Louw, revenue officials from both the SA Revenue Service and the Treasury. They played a remarkable role in hearing what everybody had to say; listening, giving considered responses, literally, to every issue raised by every person. They mediated and we asked them time and time again to meet with people. They met again, they met yet again, and they met yet again, with a number of constituencies.

They have performed a remarkable task in consultation. I must say that it is unique to many of our committee’s processes that officials are so responsive to the concerns of people who have come before our committee. I really would like to commend them on their approach. [Time expired.] [Applause.]

Mr K M ANDREW: Chairperson, I would like to associate myself with the hon Ms Hogan’s thanks to the officials who went out of their way to be of assistance to the committee. I also believe that the chairperson herself should be congratulated on spearheading an extremely thorough examination of the Bill by the portfolio committee. I regret to say that those are probably the last two things I would agree on with the hon Ms Hogan.

The main economic challenge facing South Africa is to achieve growth rates of 6% or more so that we can reduce unemployment and poverty on a sustainable basis. The key problems are a shortage of domestic and foreign fixed investment and low, jobless growth.

All our policies and programmes should be measured against their likely effects on economic growth, poverty eradication and job creation. Capital gains tax is no exception. We can debate the theoretical merits of a capital gains tax, but the key question is whether it is appropriate for South Africa at this time. The DA is convinced that it is not.

We should all know that South Africa desperately needs more savings and investment. We should also know, even communists like the hon Dr Davis, that if one wants less of something, one taxes it, which is part of Government’s rationale for high taxes on tobacco products. They want less of them, so they tax them more highly.

In its comments on this year’s Budget, Nedcor’s economists had this to say:

The introduction of capital gains tax remains a concern. It is difficult to imagine that the introduction of a tax on savings and investment will boost long-term growth prospects. The administrative burden it will place on the tax authorities, but more importantly on the private sector, certainly places a question mark on its usefulness. Alan Greenspan, the chairman of the US Federal Reserve, is on record for saying that the appropriate rate for such a tax is probably zero if tax revenue is the main consideration (suggesting that higher revenues from other taxes resulting from better growth would compensate for loss of CGT revenue). The only justifiable reason for CGT is the equity argument, and even here the impact that it will have is likely to be very negligible.

South Africa needs every competitive advantage that it can get to obtain foreign direct investment in competition with many other countries. We should be doing everything possible to retain and increase our competitive advantages. We suffer competitive disadvantages such as crime, labour market rigidity, Afro-pessimism, and so on. We should therefore be clinging to every competitive advantage we have, such as having no capital gains tax.

South Africa is also desperately short of skilled people and we need to use them all to maximum advantage. Capital gains tax is a very complex tax and will consume thousands of hours of highly skilled professionals’ time as they help their clients deal with another new and complicated tax - time which could, and should, be spent on other more productive activities.

One of the issues of concern is that Government has done no serious cost- benefit analysis of the impact of CGT on the private sector. Is it all worth it? International experience shows capital gains tax to be an inefficient and low-yielding tax. Government estimates that CGT will yield less than 1% of their revenues. The hon chairperson, Ms Hogan, said we are a society with large income disparities which have to be addressed, and she is quite right. But it was interesting that she said that we should have this tax no matter what the complexities. I say, if we want to reduce those income disparities, let us look at the most efficient way of doing it, and not simply say: This is the way - let us do it, come hell or high water.

Government argues that capital gains tax will reduce tax avoidance and so increase its yield on other taxes. This is unconvincing as it is based on the premise that taxpayers will involve themselves in schemes to save paying 42% in tax, but will not do so to save 31,5% in tax.

The Minister and other proponents attempt to discount the low revenue yield from capital gains tax by claiming that it will flush out a lot of other tax. This claim is never proved nor is it quantified. It is rather like politicians who claim to speak for the silent majority and who can be neither proved nor disproved.

It is, however, instructive to look at the experience of other countries. Five years after capital gains tax was introduced in the United Kingdom, and thousands of additional civil servants were employed, the expense of administering the tax was still greater than the income derived from it. In recent years the United Kingdom, like many other countries, has been relaxing its capital gains tax regime year after year. One needs to ask: Does the Bill only tax real capital gains? The answer is a resounding no. Government has said that only real capital gains should be subject to CGT, not illusory gains which merely reflect inflation. In the next breath, however, we are advised that and I quote, ``indexation is complex and administratively burdensome’’, so we will not be having it. Instead, we have reduced CGT inclusion rates which remain constant, irrespective of the period over which the capital gain is made and irrespective of the level of inflation. Surely this is untenable on any logical grounds.

The portfolio committee was told that it was only after careful consideration'' that the National Treasury, and I quote,reluctantly decided not to tax capital gains at ordinary rates despite the existence of strong arguments to the contrary’’. A senior official described this as an unhappy compromise and a ``first important step’’. We should not fool ourselves and we should not be surprised, therefore, if the inclusion rate increases before too long. We should not forget that the GST, general sales tax, started at 4%, and its successor, VAT, is now 14%.

Furthermore, we have a rather extraordinary situation in which Government will collect more CGT the worse it performs. Capital gains will be deemed to have arisen on investments made in foreign denominated currencies even if the only changes in value are as a result of the depreciation of the rand! And, of course, the higher the inflation rate, the more Government will collect in CGT from taxpayers.

Inflation could have a devastating effect on home owners if the R1 million exclusion on capital gains made on primary residences is not increased regularly. The portfolio committee was given a specific and unequivocal assurance that there would be a clear undertaking in the explanatory memorandum which would commit the National Treasury to increasing the R1 million exclusion on a regular basis to take into account inflationary effects.

I have not been able to find such an undertaking in the explanatory memorandum. I hope it is there, and I would like the Minister to indicate in his response where it is. If it is not there, all I can say is that the portfolio committee has been deliberately misled and lied to.

South Africa should be simplifying, not complicating, its tax system. We should be scrapping low-yielding taxes that devour scarce resources such as estate duty and donations tax. The SA Revenue Service should be concentrating on catching tax evaders, rooting out corruption and improving its efficiency. It should not be trying to deal with another complex new tax when many of its offices are still struggling to get to grips with the NITS system and residence-based taxation.

Savers should be encouraged by being given tax incentives so that they do not receive negative real returns on their interest income. We need rapid privatisation to bring in foreign capital and skills to increase our foreign reserves and to reduce debt-servicing costs.

These steps will help us get our priorities straight and give us the economic growth and jobs that will start reducing those income discrepancies. They would encourage savings and investment and lead to faster growth, job creation and poverty eradication. Capital gains tax will do the opposite. The DA will not be supporting this Bill. [Applause.]

Mr M M S LEKGORO: Chairperson, hon Minister and hon members, the imperative of providing basic public services and goods to the people poses major revenue challenges for modern governments. These challenges are complicated by the desire to strike a harmonious balance between the different basic principles of taxation. This complication is further aggravated by the desire to minimise, as much as we possibly can, what must be extracted from the taxpayers, but maximise the quality and quantity of the public goods and services. The Taxation Laws Amendment Bill now before the House is also caught up in this illogicality.

The South African tax system has serious weaknesses. It is extremely inequitable and has significant tax arbitrage opportunities. These tax avoidance opportunities further worsen the tax inequalities in the system, in that they are mainly exploited by the sophisticated and wealthier citizens who have money to pay tax consultants.

Taxes on income and profits account for 60% of total revenue, of which 41% is taxation from individuals. This shows the extent to which our tax system is dependent on individual taxes. This is an unacceptable state of affairs, and it needs to be corrected. The tax burden must be spread to all different categories of taxpayers.

The tax reform programme of Government must respond to some of these weaknesses to protect the morality and ensure the equity of the tax system. The introduction of capital gains tax is an effort in this direction.

It also needs to be clarified that capital gains is not a tax on wealth, but on income derived from the sale of one’s assets. The capital gain or loss is triggered by the disposal of an asset. It is taxation on income and functions on the same principles as any tax on income. Accordingly, the debate on capital gains is not whether capital should be taxed, but whether income derived from the sale of assets should be included as taxable income.

This is the issue at the core of the debate on CGT, and it is actually a very unnecessary debate. If there is nothing wrong in taxing income derived from salaries, wages and profits, then what is the discussion all about? The bottom line is that income should be taxed. How that income is generated is actually irrelevant. If a sum of R3 000 per month earned by an employee is taxable, it makes sense that any sum of R3 000 earned through any other method should also be taxed.

If this basic common sense does not apply, then what we are left with is a preferential treatment of income. This kind of preferential treatment of income will mostly benefit the wealthier, in that they are the only group of people that own assets over and above the houses they live in, the cars they use as their daily transport and other personal use assets.

This situation is uncalled for, because the South African tax system is already skewed to the disadvantage of the ordinary working people whose income is solely derived from wages and salaries. The preferential treatment of income that predominantly accrues to the economically well- heeled stands against the equity principle of a good tax system. In one of the submissions received from the representatives of the workers, it is argued that it is unjustified and prejudicial to workers, that a rand of income earned through capital should be taxed any less than a rand earned through human labour, because any rand earned confers the same economic power.

I could not agree more. The wisdom of this is on the surface; one does not need to dig any deeper. The most important principle of social justice is equity, that people in equal circumstances should be treated the same. This same principle applies in taxation. Individuals in the same economic situation should pay similar taxes and taxpayers with a greater ability to pay should pay more and share the greater burden of taxation.

The absence of capital gains tax in our tax system is inequitable and cannot be defended by any intelligible taxation principle. Government has undertaken to carry out the most extensive tax reform process. Some of the key issues that need to be addressed in this regard are bringing about equity in the South African tax system and broadening the base so that we can reduce tax rates.

The introduction of capital gains tax is a move in the right direction. There is sufficient evidence to demonstrate that capital gains tax has the potential to address some of our tax objectives simultaneously, albeit to different degrees. The fact that capital gains accrues disproportionately to higher-income individuals is enough to show its ability to contribute effectively to a reduction in the regressive nature of the South African tax system.

This is particularly important for a country like ours where income gaps are very great. Capital gains tax is not a revenue-raising tax as such. The revenue it will yield is not significant, but it is also not the type of revenue one would rather do without. It is estimated that it will raise something in the region of R1 billion to R2 billion. In fact, to look at the benefits of capital gains tax from a bare revenue point of view would be to miss the point. It has been said over and over again that capital gains tax will give rise to many tax benefits such as preventing tax avoidance schemes and reducing rates.

The National Treasury has decided to impose CGT at the lower rate. This has been done despite the fact that such a move is going to undermine the progress of our tax system. The low rates at which CGT is being introduced are not satisfactory, but are better compared to a situation in which there is no CGT at all. The introduction of CGT will go a long way towards bringing about equity in our tax system.

It should also be noted that lower rates are an international practice and for South Africa to remain competitive it has to follow that international trend. The ANC supports the Bill. [Applause.]

Mr H J BEKKER: Mr Chairperson, the IFP in general supports the Taxation Laws Amendment Bill. The majority of these amendments have a bearing on the Budget which the IFP endorsed and, therefore, despite some reservations, we will vote for the legislation. The Bill contains many clauses or amendments and, understandably, it will not be possible to be in agreement with each of these amendments. But in assessing the legislation as a whole, the weighting is positive.

In balancing the Budget, the Minister has gone a long way towards maximising income or revenue, particularly with more effective control by Sars and the plugging of some loopholes. The latest software monitoring system by Sars that can identify suspect companies and, at a later stage, also individuals, is welcome. Tax evasion by culprits causes an additional burden on those honest taxpayers that are paying more than they would have been required to had the tax dodgers paid their dues. The IFP would, however, like to caution that one can get to a situation of overtaxation, particularly by introducing new forms of taxation without compensating by lowering existing taxation. The commitment of the Minister of Finance in demonstrating a tendency to lower company tax and tax on individuals is therefore welcome. This has clearly been demonstrated and a positive effect could be seen on production and investment. We know that the Minister has given the undertaking that this will continue in future.

Australia, at the time of the Sydney Olympics, introduced general sales tax, which is a hybrid of our value-added tax. Despite the assurances of their authorities that company taxes and personal taxes would eventually be lower, the Australian economy has nose-dived, and the building industry in particular went into a recession.

The Australian authorities now admit that the introduction of GST, to a great extent, caused the negative sentiments. So bad is the situation that first-time home owners, in addition to the existing subsidy of almost R30 000 which they receive, will now receive an additional R30 000 subsidy on newly constructed homes. The official Australian figures for these are, of course, Aus$7 000 and Aus$7 000 respectively.

Resulting from the introduction of GST in Australia, we will probably see the defeat of the Australian government and their replacement by the present opposition. These can be the ultimate repercussions of only introducing without compensating. I reflect on this merely to caution Government about the saturation levels of taxation and the repercussions of the so-called ``gatvol’’ factor that may arise.

Capital gains tax, if not set off by other forms of tax relief, could be one of these dangerous factors in South Africa. The IFP therefore welcomes the more lenient approach which later appeared in the allowing, as a transitional arrangement, of the submission of a sworn valuation of the property until 30 September 2001. This valuation can now be done by a registered appraiser or an estate agent.

I would like to thank the hon the Minister for committing South Africa to the gradual reduction of personal taxation and company tax. Individual taxation, and particularly personal tax on the higher income brackets, is extremely high and relief is urgently required.

Could the hon the Minister consider the following and add the cumulative effects of taxation? We have personal tax with marginal rates of more than 40% and even 42%; VAT of 14% on most consumables and capital goods; indirect taxation on various items; rates and taxes on properties in local authority areas; and now capital gains tax. Should one die, estate duty will take care of the rest. We also have levies and charges to institutions which, we all know, are simply being passed on to consumers. The question is whether, at the end, this is not also a form of taxation on the consumer.

Then there is tax on petrol, tollgates and a myriad of other forms of duties, levies, customs and excise. Have we ever done an exercise to determine what South Africans are paying for security and safety to insurance companies by way of excessive premiums? Similarly, think of the high cost of security barriers and alarm systems, as well as payments to private security companies. These are enormous amounts being forked out by the embattled taxpayer. Only when we have determined the real take-home pay left after all these costs have been calculated, will we be able to understand the plight of the embattled citizens.

In South Africa we must identify the true enemies of the state. Those, to my mind, are the top tax-dodgers and evaders, including those who can afford to pay tax, but pretend to be ignorant or plead poverty. Crime, particularly violent crime, is the greatest deterrent to investment in South Africa, as are sabotage and vandalism of all forms of property, corruption in the state and in the private sector, poverty, disease, high interest rates, inflation and the devaluation of the rand. Therefore we are grateful that inflation is being controlled and that the control systems in place are subject to inflation targeting.

On average and on balance, the IFP will still vote for the legislation, but our cautionary remarks should be considered.

Mr M S BOOI: Chairperson, Minister and hon members at large, I just want to start by thanking the Minister for the way he has approached the capital administered and for the role he is playing in Government at this particular moment.

Specifically, I would like to quote from the speech made by the Minister on 23 February 2000, when he told this House (Hansard 2000, col 923):

Our history implores us to use our freedoms to light the path to a more humane, more caring society. It demands that we lift our sights far into the horizon, that we use our voices to proclaim our freedoms. Our history teaches us courage and resilience, that we embrace the challenges, that we be strong, that we be confident, that we be humble, and that we be patient. It demands that we overcome fear and embrace the power of transformation, that we grasp the complexity of each other and the world we live in, that we see beyond the illusions and the truths we often create for ourselves. If we see only the beauty of the yellow and gold fish and the fierce jaws of the shark, we will not believe that they swim in the same waters, but they can and they do and they thrive. We need to accept that reality to understand why.

It is in that context that I am going to approach capital gains tax, because, as members have already said, it is not easy, it is quite complex. As we have said, it is not here in the manner in which it was done during December last year, when it was presented as a tax to hit at the white community or the wealthier people. It is not presented with that type of approach, but we are more informed about what is happening exactly.

I will pull out quite a number of examples to show that what Ken Andrew has missed here is to listen properly to some of the submissions that have been presented to us as the portfolio committee. Sars has promised us and has provided us with quite a lot of information to show that they are quite prepared for the acceptance of capital gains tax.

In simple terms, capital gains tax aims to collect more tax from those who can afford to pay, and also to improve our collection of tax, to do so in more efficient and effective ways. It is a very progressive tax. It will reduce opportunities for those who are wealthier to run away from paying taxes, and tax avoidance.

I want to demonstrate the few areas and the few loopholes that exist in our tax structure at this particular moment that the wealthy people are able to exploit: the tax status of uncertainty, trader versus dealer or investor, in respect of numerous transactions; share dealings; sales of businesses by traders; the confusion and uncertainty around source as the basis of taxation; the true tax status of one profit-making organisation that often has a sizeable property and financial investment; South Africa as a tax haven for nonresidents; capital expenditure; writes-off against revenue, eg farmers and game farmers; and the capitalisation of interest in the sale of businesses. These are some of the issues I wanted to highlight.

But what is more disturbing, and what Ken Andrew has not been able to come to terms with, is that while he is crying for job creation and employment, the question he has not been able to answer is what one does when somebody comes to South Africa as a nonresident, buys property and stays in South Africa without creating employment. Does one have to allow that person to continue staying on that property, enjoying the sunshine of the Western Cape and South Africa without paying tax? Those are the questions that I think Mr Ken Andrew has not been able to deal with or find answers to.

Let me deal with a few questions. One of the things that Ken Andrew knows, and that has been presented to the committee by the capital gains tax people, concerns the individual farmer and the executive. After staying on that farm, and then selling it, the money that the farmer is able to make, which has not been received by South Africans, is more than R5 million. With the recouping by the CGT itself, we think that out of the R8 million that he has been able to make, we would be able to recoup R5 million!

What does a nonresident, who owns a farm in private capacity, which he also uses as a residence when he is in South Africa, do? The farm, on 1 April, would have cost R10 million. When he disposes of the farm itself, its value, in two years’ time, would create about R15 million! And the farm is far larger than two hectares. What would be taxable? South Africa does not receive anything in tax. Now, what capital profit does he make? He makes R5 million.

When we introduce the CGT, that will level the playing field so that South Africa does not just remain a tax haven for those nonresidents. With that R15 million the original cost that is being argued about today would take about R10 million. If there have been improvements, we will not do anything. What we will be able to get out of it is that R5 million, which we are not able to talk about.

We are saying, as the ANC, that the capital gains tax is going to be able to make a contribution towards helping our own people, because it is going to help us to improve matters and find all those who are avoiding paying tax, and making them pay. It is not good for them to keep running away. If they keep visiting South Africa and yet do not pay tax, it will cost us quite a lot. They put demands on us to fight crime and to improve the particular localities where they have put up their houses.

What we are saying, as the ANC, is that it is not so that, as they are saying, there will be excessive administrative costs and that it will hit the white people more. It does not only hit the wealthier people, but the wealthier people are making it impossible for us to gain something from them. We say that they must take that responsibility, as South Africans, because it is their responsibility also to assist those who are poor. Without assisting the poor, they would definitely be turning against democracy.

It is not in our interests to be seen to be lambasting only the wealthy, but the wealthy people have a role to play. Out of all the wealth they have made over all these years, let them make it possible for all to gain something out of it. Following Mr Trevor Manuel’s words, the only way we can be confident and able to build patience is when we make sure that we do find the balance between the taxpayers. That is what we are looking for. [Applause.]

Dr P J RABIE: Mr Chairman, hon Minister and hon members, this Bill introduces capital gains tax, from 1 October 2001. This is a very lengthy and very intricate Bill, and it is extremely controversial, especially for a developing country such as South Africa.

The proponents of this Bill furnish a number of theoretical reasons why this Bill should be implemented. It is my view that this piece of legislation is too expensive to administer, and would discourage foreign and domestic direct investments, a prerequisite for future economic growth, and the reduction of our currently untenably high rate of unemployment.

South Africa is part and parcel of a global economic order. We have to compete in all trade spheres. The significance of an investor-friendly tax system cannot be negated. The South African economy, at present, is experiencing an acute skills shortage, our economic growth is still less than 3% of the GDP and our official unemployment figure has reached the alarming rate of 31,7%. The unemployment figure, however, is unfortunately considerably higher in some of our rural areas.

A number of drastic changes were recently implemented in the South African tax system. A fundamental change was that a residence-based norm of tax was imposed, replacing the former source-based system. Another fundamental change is the new capital gains tax that is to be implemented on 1 October. With the introduction of the capital gains tax, our economy is losing one of our competitive advantages which must be seen within the present unacceptable degree of violence, crime and Afropessimism within business and investor circles.

Capital gains tax is based on a very complex and inefficient revenue collection mechanism. Simplicity is an important criterion for an equitable tax system. The majority of taxpayers, not a handful of tax professionals, should readily understand and be able to apply this particular tax. I agree with the chairperson, Ms Hogan, that capital gains tax is a worldwide practice. However, it must be stated that the current trend is to reassess capital gains tax because of the effect it has on savings and foreign investments.

The question that Government should ask themselves is whether the wellbeing of the underlying economy is more important than the short-term benefits of generating more revenue. In simple terms, the more tax the taxpayer pays, the less he can invest to pay tax on again.

To administer this tax will create another bureaucracy. I asked the hon the Minister a question in February 2001. The following written reply was received, and I quote:

The cost of developing CGT infrastructure in the financial year ending 31 March is estimated to be R16 million. Additional funds have been transferred to Sars to cover this expenditure. A similar amount will be expended in the financial year ending 31 March 2002 and operational costs to administer CGT are estimated at R100 million per annum.

This is a substantial amount of money. South Africa is experiencing a shortage of capital, a vital ingredient for future economic development. Our present domestic savings rate, which is in the vicinity of 15%, is a matter of serious concern. I am of the opinion that our low savings rate will be further aggravated by the implementation of capital gains tax.

A responsible fiscal approach is to lower Government expenditure and taxes in real terms and leave more resources in the hands of the private sector. Capital gains tax and the taxation relating to pension funds have a close bearing on each other. Allow me to mention that the present tax rate on pension funds is 25%. Sars will collect an additional R500 million in the present tax year from pension funds, from R5,8 billion to R6,3 billion. It is generally accepted that since the inception of taxes relating to pension funds in 1996, the lower income categories of taxpayers have been adversely affected because their potential assets have been eroded by taxes.

Capital gains tax will be imposed after a moratorium of three years on pension funds. The result of taxes and pension funds creates a reluctance to invest in institutions that provide for retirement. The end result of this perception is that a greater monetary responsibility is placed upon the Government to provide for lower categories of taxpayers - for that matter, for all taxpayers.

We are aware that the sources of revenue of Government must be managed in a responsible manner. One sector of the economy should not be favoured at the expense of another category. It is also accepted that the high-income categories of taxpayers pay proportionally more than the lower-income categories. This is a universal phenomenon.

The Receiver of Revenue has made commendable progress regarding tax evasion, but I must mention that the tax rate of pension funds has increased from 17% in 1997 to 25%. It is calculated that this may decrease the yield of pension funds at the date of retirement by 1 to 1,4 percentage points. The proposed implementation of capital gains tax may further diminish the yield by a further 0,4 to 0,5 percentage points.

The UK, once the most strike-crippled, overtaxed, overregulated economy in Europe, has become one of Europe’s most sought-after financial destinations. The reasons why foreign investors choose the UK are low taxation, flexible labour markets and high productivity. The UK has capital gains tax, but whether to retain or to abolish it completely is being discussed.

Dit is duidelik dat die kool die sous nie werd is nie met hierdie vorm van belasting. Die hoë administratiewe koste met die instelling van ‘n nuwe vorm van belasting, die bykomende las op belastingbetalers, die sielkundige weerstand teen bykomende vorme van belasting, die prysgee van ‘n mededingende voordeel van ‘n land sonder kapitaalwinsbelasting en die moontlike uitwerking daarvan op pensioenfondse, is skadelik vir hierdie land se ekonomie. Die DA gaan nie hierdie wetsontwerp steun nie. (Translation of Afrikaans paragraph follows.)

[It is quite clear that this new form of taxation is not worth the effort. The high administrative costs in respect of the implementation of this new form of taxation, the added burden on taxpayers, the psychological resistance to additional forms of taxation, the sacrifice of a competitive advantage of a country without capital gains tax and the possible effect of this on pension funds, are detrimental to this country’s economy. The DA will not support this Bill.]

Mrs R R JOEMAT: Chairperson, hon members, the fruits of liberty cannot be sweet for everybody. There is a verse in the Bible that says: ``Give to Caesar what belongs to Caesar.’’ Who is our Caesar today? None other than the commissioner of Sars, Mr Pravin Gordhan. Give unto the Receiver of Revenue what belongs to the Receiver of Revenue.

In his Budget Speech the Minister already announced that the capital gains tax would be introduced. Since then public submissions were received and intensive discussion was held with various institutions and individuals at the hearings. The outcome of these discussions varied, some being dissatisfied, while others understood and supported the implementation of capital gains tax. This process was successful and consideration was given to these submissions. Adjustments were made to the original Bill.

The aim of the introduction of capital gains tax is to broaden the tax base and bring equity and efficiency to our tax structure. Capital gains are merely earnings in a different form. People with different forms of earnings should be taxed equally. A rand earned through the sale of capital assets holds the same value or economic power as a rand gained through employment and should therefore be taxed equally. The absence of CGT skews the burden of taxation onto salary income individuals.

The proposed legislation will move towards a more equitable tax structure. However, since only a portion of the capital gains are subject to tax, those fortunate enough to enjoy capital gains continue to benefit from preferential tax treatment. Upholding the equity principle, the Income Tax Act is based on a tax system that progresses according to earnings: That is, taxpayers with greater earnings should be subjected to a progressively higher tax. In simple terms it just means: The more you earn, the more tax you pay. Failure to tax capital gains undermines the morale of the salaried workers.

Let us look at where the income source is for the majority of the people of our country. Previous research suggests that poor South African households obtain 40% of their income from wages and a further 5% from self- employment. Nonpoor households, on the other hand, obtain 72% of their income from wages and 6% from self-employment. Personal tax constitutes 40% of the total revenue of our country. Therefore it is fair to say that if there are other sources of income, then they must be subject to tax as well. The majority of people will not be affected by this tax.

With effect from 1 October 2001 it is proposed that residents will be subject to CGT on gains realised on the disposal of their worldwide assets of whatever nature. Nonresidents will be taxed only on gains realised on the disposal of certain assets in South Africa, an example of which is immovable property. Death or emigration will also be events which trigger CGT. Donation of assets will also be a CGT event. For this reason there will be a simultaneous reduction in the rates of estate duty and donations tax. There will be certain exemptions, for example, the first R1 million of a gain realised on the sale of a primary residence. The majority of people do not own a house that holds a value of R1 million. The majority of people do not own their own homes and certain of them are still homeless. When a person retires from his or her small business, as defined in the Bill, the first R0,5 million of the gain made on the sale of the business will not be subject to CGT. The majority of people do not have investments overseas that generate an income for them. Therefore the majority of people in our country will not be affected by CGT. The majority of people do not sell their personal assets and enjoy gains of R10 000 per year.

We, the ANC, support this Bill because it means more revenue to improve the lives of many, which is the vision spelt out by our President in his state- of-the-nation address in February this year, and I quote:

The objectives we seek to achieve are moving the economy onto a higher- growth path, increasing its competitiveness and efficiency, raising employment levels and reducing poverty and persistent inequalities.

It is estimated that the revenue yield will be approximately R1 billion to R2 billion once the system is fully phased in.

During the local elections the DA displayed posters on which was written ``We stand for all the people.’’ But when they vote in this House, they only vote for the interests of some of the people.

Dit noem ek tweestertjakkalse. [Gelag.] [That is what I call being two- faced. [Laughter.]]

The Bill forms part of the ANC’s commitment to the principle of equity, and supports our goal of a better life for all. The ANC supports this Bill. [Applause.]

Dr G W KOORNHOF: Mr Chairperson and hon members, Sir Winston Churchill once said that the only two certainties in life are death and taxes. It is a pity that they do not happen in that order. There is, however, another certainty, and that is that South Africa will get another tax on 1 October 2001.

The Portfolio Committee on Finance received numerous written submissions on the Bill and also conducted extensive public hearings. Seldom has this committee heard so many concerns raised about a Bill, ranging from outright rejection to substantial reservation, to identifying administrative deficiencies contained in the Bill. I want to congratulate the officials and consultants from the national Treasury and Sars -they are all in the House - on their time-consuming efforts to address issues raised by stakeholders. It was, however, clear from the start that the introduction of capital gains tax in South Africa was politically driven, and that no submission or argument would prevent the Government from introducing and implementing this political tax.

Allow me briefly to highlight what are, in our view, the three major deficiencies of this Bill. Firstly, CGT is a very complicated tax, and a difficult tax to administrate. This is due to its volatile base. Not only will the beneficiaries of capital gains vary from year to year, but also the capital gains amounts will vary. Sars will experience an increased difficulty in policing this tax, which will result in massive policing costs for them. There will, furthermore, be additional compliance costs to taxpayers, in particular for less sophisticated taxpayers, who will now have to utilise the professional advice of tax advisers, all at additional cost to taxpayers.

Secondly, to introduce a capital gains tax in its current form, and at this point in time in South Africa, amounts to unfairness. A leading economist in South Africa, Mr Nick Barnardt, stated more than a year ago, when the intention to introduce a capital gains tax was announced in Budget 2000- 2001, that it amounted to whites having been allowed to accumulate big untaxed capital gains over the last century, but blacks being taxed as they accumulate theirs over the next century.

A fairer tax would have been a low-rate net wealth tax of a quarter percent or a half percent per year. The benefits of such a tax include the following: Firstly, it is easier to administer; secondly, it has a much more stable base from year to year; thirdly, it is less discouraging of new wealth creation and creates less of a disillusionment for taxpayers; and fourthly, it treats newly and previously accumulated wealth relatively equitably.

Thirdly, there is uncertainty about what effect this tax will have on the land tenure system, including tribal land and trust land. To my knowledge, no consultation has taken place with, for example, traditional leaders, about the possible effect of this CGT on them and their land disposals. It would be grossly unfair to impose a tax on persons who do not have security of tenure. A possibility would have been to exclude tribal land disposals from this tax net, as is the case with retirement benefits. There is just too much uncertainty about this aspect in the current Bill. As a country, we first need to introduce a system that secures private property ownership, especially for people in the extralegal sector, before we introduce a complicated First-World tax system.

In conclusion, for these reasons, the UDM will not support the Taxation Laws Amendment Bill, and calls on the Minister of Finance and the Government to reconsider the implementation of this Bill and replace it with a low-rate net wealth tax. [Time expired.]

Mr L M GREEN: Chairperson, hon Minister and members, the Taxation Laws Amendment Bill imposes a comprehensive burden on certain individuals, and especially on small business entrepreneurs. The disincentive created by this Bill is that small businesses may be discouraged from expanding too much. The exemption of CGT up to the first R500 000 for a small business is not enough. Small business needs the scope, capacity and incentive from Government to assist it to grow. This will not be achieved by a CGT exemption up to R500 000, as the cost of running a small business is sometimes much higher than actual returns on investment.

The ACDP is pleased that the lump sum benefits from retirement funds are not to be included within the CGT system. The Minister has mentioned that this is not total exclusion, but further consideration is planned once the tax system on retirement funds is finalised.

The average taxpayer pays a lot of direct and indirect taxes into Government coffers during his or her working years. It is the desire of these people to ultimately retire with the knowledge that they have generally paid their dues to society. Retirement must therefore be a time to look forward to, allowing one to enjoy the fruits of one’s labour in the final years of one’s life. The ACDP suggests that benefits from the retirement funds should not to be considered for inclusion in the CGT system in the future.

Government seems to put its faith in the overall benefit of capital gains tax. The country needs investment-boosting incentives, and we do not know conclusively how foreign investors may eventually respond to the CGT system. The possible downside of the CGT system for South Africa, at this stage of its development, is that potential new investors will take a wait- and-see attitude on how the CGT system may impact on existing foreign investors. The ACDP therefore cannot support this Bill.

Mr T R MOFOKENG: Mr Chairperson, hon Ministers, hon members, the Minister of Finance is present in this House today to present us with the Taxation Laws Amendment Bill in order to accommodate capital gains tax, which is long overdue. We appreciate the goodwill of the hon the Minister. We hope the CGT that he has brought to us is going to bring us goodwill.

Bringing capital gains tax into income tax will rectify a deep weakness of the South African tax system. It will reduce the opportunities for avoiding tax, which are considerable at present, by converting certain forms of income to capital gains, and it will bring greater fairness to society.

Since 1994, the South African authorities have successfully addressed a number of microeconomic imbalances, achieving significant reductions in inflation and in the fiscal deficit. Accompanying microeconomic stability, rates of growth in GDP and investment have improved in the last six years. Real GDP growth averaged 2,3% per year from 1995 to 1999, compared to 0,2% from 1990 to 1994.

For the future, the fundamental policy challenge remains that of raising growth potential even higher in order to achieve substantive progress in reducing unemployment and poverty. This will require further increases in investment and savings rates, and the continued implementation of key structural reforms.

Budgetary restraint is evidenced by a reduction in the national Government fiscal deficit from the equivalent of 5% of GDP in 1994-95 to 2% in 1999- 2000, well under the original budget target of 2,8% of GDP. This performance is due, in part, to impressive tax collection efforts, underpinned by significant improvements in tax policies and the good administration of Sars.

Reform has involved, for instance, reductions in the standard company tax rate from 40% to 30%, and to 15% for small business. For personal tax, the number of tax brackets has been reduced and rates lowered.

National Government revenue totalled R204 billion in 1999-2000, just under 25% of GDP. Taxes on income and profit continued to be about 60% of the total, with the individual income tax of R117 billion constituting the major component, equivalent to 42% of the total revenue. Indirect taxes made up 38% of the total revenue dominated by value- added tax and excise. A number of taxes on property, including taxes on gifts, estates, real estate and marketable securities transactions, make up R3,1 billion, which is a modest but important part of revenue.

In the classic Haig-Simons approach to taxation, the ideal tax base is comprehensive income, usually the sum, over the tax period, of increases in purchasing power from all sources. Those sources include capital gains that arise in the period, which should therefore be taxed in the same way as all other forms of income.

The argument has been raised in the South African context, however, that capital gains tax is unsuitable for developing countries and, moreover, that it is vanishing in developed countries. Neither is true. Capital gains tax is enforced in a range of countries, not only in the Organisation of Economic Co-operation and Development (OECD) countries, but also in some middle-income countries. More fundamentally, the force of the equity, anti- avoidance and efficiency cases for taxing capital gains depends not on the average level of real income, but on the degree of inequality that the tax system seeks to address, and the sophistication of the financial markets that the rich and well-advised can use to avoid taxation. Both considerations point to the potential importance of taxing capital gains. In South Africa, inequality remains high by international standards and financial markets are well developed. The Johannesburg Stock Exchange is on average the 18th largest in the world.

In conclusion, I have full confidence in the SA Revenue Service’s ability to manage to administer CGT very well. In the past financial year, the SA Revenue Service surpassed its revised collection target of R215,5 billion by R4,1 billion. For four successive years, the SA Revenue Service has exceeded the progressively high targets set by the national Treasury. Yet its administration costs amounted to less than 1% of total revenue collected, which is very low by international standards.

Without any fear of contradiction from any party in this House, the ANC supports the Taxation Laws Amendment Bill with acclamation. [Applause.]

Miss S RAJBALLY: Chairperson and Ministers, the MF welcomes the Taxation Laws Amendment Bill as it makes provision for the amendment of various tax- related Acts. It also intends to give effect to the proposals relating to the introduction of capital gains tax.

The MF is in agreement with the annual exclusion from capital gains tax of the amount of R10 000 for natural persons, as this is aimed at keeping small gains out of the CGT system. However, this does not take into account the criteria which determine a primary residence for people in polygamous marriages, which is a problem more prevalent among the people in KwaZulu- Natal.

One of the challenges facing South Africa is to seek ways to correct excessive inequalities in the distribution of income and wealth. Supporters of capital gains tax argue that such a tax would assist in that regard. The MF agrees with the Minister of Finance’s justification that the proposed introduction of capital gains tax in South Africa will bring the country more into line with the taxation practices of other countries.

However, South Africa is akin to the developing countries of the world and copying the specific taxes levied by the industrialised countries is not necessarily to be recommended. It is therefore hoped that the introduction of CGT in South Africa will bring the country’s tax dispensation in line with the system of South Africa’s trading partners.

The MF believes there is still a need to introduce provisions that will prevent the tendency to inflate the basic cost of assets during the period from the announcement of the introduction of CGT to the valuation date. It is therefore recommended that education in this type of new system be introduced. The MF supports the Taxation Laws Amendment Bill. [Time expired.] [Applause.]

Mr C AUCAMP: Chairperson, the hon Joemat started her speech with a Bible text. I want to do the same today, but I want to put that text in a little frame and I will give it to the Minister so that he can hang it behind his desk, so that he can read it when he comes into his office.

Daardie teksvers is Jesaja 1 vers 5, waar daar staan: Waar wil julle nog geslaan word?''[Tussenwerpsels.] Ons het 'n paar probleme met hierdie belasting. [That Bible text is Isaiah 1 verse 5, which says:Why should you be stricken again?’’ [Interjections.] We have a number of problems with this tax.]

In the first instance, we think it is investor-unfriendly. For stable economic growth to occur, people must be encouraged to invest in assets with a growth potential.

Hierdie belasting sal lei tot onverantwoordelike rentmeesterskap en die versoeking sal wees dat mens eerder jou geld opgebruik: Laat ons eet en drink en vrolik wees, want môre kom Jan Taks. Dit gaan ook negatief inwerk op sekere sektore, veral die eiendomsmark. Mense gaan nou hulle besparing konsentreer op nie-belasbare bates.

Daar word beweer dat hierdie belasting nie die armes sal raak nie. Ons glo dit gaan inflasie opstoot, dat kapitaal om bestaande besighede te koop, hoër gaan word. Dit gaan oorgedra word op die verbruiker en ons is terug by die wet van Transvaal. Daar is ook reeds hier verwys na die administratiewe uitvoerbaarheid van die wet. (Translation of Afrikaans paragraphs follows.)

[This taxation will lead to irresponsible stewardship and one will be tempted rather to spend one’s money: Let us eat and drink and be merry, because tomorrow the tax man will come. This will also has a negative impact on certain sectors, especially the property market. People will now concentrate their savings on non-taxable assets.

It is being alleged that this taxation will not affect the poor. We believe that this will raise inflation, and that capital to buy existing businesses will be higher. This will be transferred to the consumer and we will be back to the law of the Transvaal. Reference has already been made to the administrative feasibility of this legislation.]

Because of administrative problems, other countries have introduced what they - call ``capital gains withholding tax”, that is 10% of the selling price at every transfer of property is held back and then the calculations are made. Can the Minister give us the assurance that this will not happen here?

Wat boedels betref … [As far as deceased estates are concerned …]

… Ms Hogan said, and I quote: ``If a person dies, he must pay tax.’’ She will first have to consult the Pope to find out to which address the assessment must be sent. [Laughter.]

Daar sal oneindige kontantvloeiprobleme wees met boedels, boedelbelasting en nog hierdie belasting ook, wat boedels in die gedrang kan bring. Plaashuise is nog nie uitgesonder nie. [Tussenwerpsels.] [Tyd verstreke.] (Translation of Afrikaans paragraph follows.)

[There will be endless cash-flow problems with deceased estates, estate duty and this tax on top of it all, that could jeopardise deceased estates. Farmhouses have not yet been exempted. [Interjections.] [Time expired.]

Ms R TALJAARD: Chairperson, hon Minister and hon members, when debating the introduction of capital gains tax, the key question before us must surely be that of desirability and equally that of the need for legal certainty. The South African economy stands before the ongoing challenge of attracting foreign direct investment and ensuring that a substantial turnaround is effected in the abysmal level of fixed capital formation in the economy. On both these counts, capital gains tax will add to the problems and not to the process of seeking the missing ingredient that could catapult the economy onto a higher growth path.

Our country does have social needs that could require infinite Government resources. However, we have a collective pool of finite resources and our country requires creative incentives that will attract foreign direct investment, not measures which would make us a less attractive destination, which is exactly what capital gains tax will do. We therefore need a healthy balance between measures that will maximise revenue gains for Government and measures that will further the needs of a vibrant growing economy that attracts investors. This will always be a very complex balance to strike. Unfortunately, the clear undesirability of capital gains tax tilts this balance in the wrong direction.

There is a key adage that applies to our discussions around capital gains tax today. Legal uncertainties are always bad for business, and it is in this respect that the Taxation Laws Amendment Bill is still riddled with many problems and key issues are left for regulations to be issued or for a broader legislative review. The most fundamental of these is that not enough has been said about the possible negative impact that capital gains tax will have on corporate restructuring.

Corporate restructuring, mergers and acquisitions and reorganisations are frequently key arenas that attract foreign direct investment. Indeed, as Price Waterhouse Coopers and the Banking Council have pointed out in their submissions, many multinationals grow businesses through strategic mergers and acquisitions. Such transactions, were they to be brought within the tax net, would represent a significant drain on a company’s ability to grow.

These activities are fundamental to any vibrant economy, and to encourage efficiency in the corporate sector most jurisdictions provide an exemption from capital transfer taxes for these activities. The proposed Bill provides no relief. We propose a general exemption from capital gains tax for these activities, according to the Banking Council.

Thus we have to entertain the question whether the introduction of capital gains tax will have a negative impact on what ought to be a vibrant area of economic activity as our economy becomes ever more integrated in the globalised economy - mergers and acquisitions and corporate restructuring. These matters affect our parastatals as much as they affect the restructuring that is taking place in the private sector as our previously inward-looking economy becomes more outward-looking and competitive.

Ironically, some of the first possible key test cases of capital gains tax and the difficulties and legal uncertainties around corporate restructuring will include a parastatal, Eskom. If the Taxation Laws Amendment Bill is passed in this Assembly, Eskom will lose its tax exemption status. The Eskom Conversion Bill that is currently before Parliament will corporatise Eskom and pave the way for it to be split into different business units - generation, transmission and distribution.

As a taxable entity, Eskom’s new business units could be liable for CGT in the legal uncertainties that still dominate in this arena. While the Treasury is promising a comprehensive review of all related legislation, this legal uncertainty must simply be remedied immediately to ensure that we do not create unintended consequences in the realm of corporate restructuring as our economy moves forward.

The same legal uncertainty applies in the realm of valuations in which the legal uncertainty will wreak havoc. While there is a degree of clarity as to what assets will fall into the new CGT net, there is very little certainty on the modalities of valuations. All these uncertainties need clear-cut solutions and clear-cut legal certainty in the interests of business. [Interjections.] [Time expired.]

Mnu N M NENE: Sihlalo, bengithi ngizokhuluma ngesiZulu ngase ngedlula kumfo kaKotwal ngithi ngifuna ukuzwa ukuthi kuthiwa yini i-capital gains tax ngesiZulu, wathi akazi. Ngibe sengibona ukuthi kuzoba nzima-ke ukukhuluma ngento engingayazi kahle. (Translation of Zulu paragraph follows.)

[Mr N M NENE: Chairperson, I was planning to present my speech in Zulu, but when I asked Mr Kotwal what capital gains tax is called in Zulu, he said he did not know. I then realised that it would be difficult for me to talk about something that I did not understand.]

As has already been stated, this Bill is an attempt to address the distortions that have actually overstayed their welcome on the Statute Book of this country. The absence of capital gains tax fitted perfectly in the apartheid system, which, by its nature, was unfair in that it protected the interests of the rich minority at the expense of the poor majority.

An HON MEMBER: You represent the rich majority.

Mr N M NENE: That is not true.

The only opposition we hear to this Bill comes from those who have always opposed the strides we have made towards the realisation of a better life for all and those who have benefited from the inequitable distribution of wealth in the past. [Interjections.] It just goes to show that it is very difficult for them to accept the fact that they benefited from this in the past. One can hear it by the way the hon Leon responds. [Interjections.]

Having listened to all the arguments for and against capital gains tax, both in this House and in the committee, I am left with only one conclusion, namely that this is not an additional tax but an adjustment that allows every taxpayer the opportunity to contribute what he or she can afford to pay. [Interjections.]

Arguments against capital gains tax include the fact that the SA Revenue Service is not ready to implement this tax. The SA Revenue Service has presented a comprehensive implementation programme to the committee, as all the members have stated here. We are convinced that this institution will rise to the occasion, as it has done before with regard to all other taxes which had to be implemented.

Income tax returns have already been changed to make provision for capital gains tax. The systems have been appraised, changes have been made to the existing functionality, and functional specifications have been drawn up.

The training of personnel and the restructuring of the entire institution is already at an advanced stage. Most of the inclusion rates and the exclusions have been touched on, so I will not waste the time of the House on them. But it appears that the only reason the hon Ken Andrew and the DP are opposed to this is that it is not high enough to be able to curb …

Mr M J ELLIS: You did not understand one word that was spoken.

Mr N M NENE: Therefore, in order for him to endorse the Bill, we would have to increase the inclusion rate. [Interjections.] The hon Hennie Bekker spoke about taxing without compensation. We just want to remind him about the lowering of donation tax, estate duty and the recent tax cuts in excess of R8 billion that were given to the poor.

We also heard about the SMMEs. The hon Green talked about small businesses. I do not know whether we understand small business in the same way. When he talks about small business, he is referring to a business that generates more than R500 000.

The argument that capital gains tax will adversely affect small businesses is just not true. The truth is that small businesses have not benefited from the absence of CGT. How, then, do people explain that the introduction of this tax will affect them if they have never benefited from it before? Their businesses only consist of their own labour and skills and those of their few employees.

The other argument is that capital gains tax will discourage entrepreneurship and risk-taking. It is ironic that those who are opposed to CGT concede that tax policy considerations alone would suggest that capital gains should not be given preferential tax treatment, but then go on to argue that such a tax preference is necessary in order to deliberately channel savings into risky investments that yield capital gains. They argue that the economy will not have the optimal number of smaller, riskier businesses or start-ups and high-technology businesses if capital gains are taxed.

Risk-taking is one of the traditional justification, for the existence of capital. Why then should investors risking their financial capital be subsidised and not the wage earners who risk their human capital? Taxes are not a major determinant of foreign direct investment. Even if they were, the tax on capital would be the wrong tax to be reduced in order to attract foreign direct investment. Nonresidents almost never pay their host countries for capital gains, except, in our case, on fixed property, as has already been explained.

We hear about the nondesirability of this kind of taxation. Then the question remains: When is it going to be desirable, because they say it is not desirable at the moment? When will it ever be desirable? When will transformation ever be desirable to the people who benefited under the apartheid regime? They talk about indexation, but they concede that this would complicate the administration of CGT and would not be in line with the general practice in all the other countries.

In supporting this Bill, I wish to take this opportunity to commend the national Treasury, the Ministry of Finance and the SA Revenue Service for the transparent and accommodative spirit in which this Bill has been crafted. The ANC supports the Bill. [Applause.]

The MINISTER OF FINANCE: Chairperson and hon members, often people say they are taxed to death. This Bill, I think, has been talked to death. As the chairperson, Barbara Hogan, advised, there were 14 meetings of the committee on this Bill, and we have already spent 100 minutes this afternoon on the Bill!

Let us deal with some of the contradictions that have arisen. The hon Ken Andrew presented a very balanced picture here this afternoon. He was equally disingenuous and pathetic. The problem that he has stems from the pettiness and silliness of his leader. [Laughter.] He cannot understand that if one wants world-class business, one must have world-class tax systems.

What we have seen and what he must admit to is that in the United Kingdom the cost of raising capital gains tax in the year ending March 2000 was 1,49 pence per pound collected, as against 1,23 pence per pound of income tax collected. To suggest that they are scaling it down because of this is to be as disingenuous as I said he was. To suggest that we have not done the cost-benefit analysis is plain dishonest. We said that capital gains tax would cost about R100 million and would bring in between R1 billion and R2 billion.

The cost-benefit analysis has been done. We know what it will cost us. We are not fools, and because we are not fools, we have demonstrated year after year that we know what is going on in the SA Revenue Service and we will continue to improve in spite of what they say. [Applause.] [Interjections.]

I also want to say that at no point was a commitment made to include increases in the value of property sold in the memorandum, and so to ask that it be included today is to ask us to style our tax policy in a very different way. We have mentioned, and we will commit ourselves to, periodic reviews to ensure that that element of it will keep pace with inflation. But we made no commitment and therefore there is nothing included in the memorandum on the Bill. In respect … Mr K M ANDREW: You are reneging on a promise.

The MINISTER: I have never reneged on a promise on tax policy. Ken Andrew must take that back.

Mr K M ANDREW: I will not take it back. [Interjections.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Order!

The MINISTER: In respect of what the hon Bekker said, this Government is hardly likely to fall on the introduction of capital gains tax.

An HON MEMBER: It may fall on something else.

The MINISTER: Well, that is always possible, but not on the introduction of capital gains tax.

Let us turn to the hon Dr Rabie. [Interjections.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Order!

The MINISTER: There are contradictions in what he was saying. Firstly, he said that one sector of taxpayers should not be favoured and then proceeded to argue that one sector of taxpayers should be favoured and that sector should be the very rich. I just want to correct something that he said, and that was that there would be capital gains tax on pension funds. We want to confirm here this afternoon that pension funds will be spared capital gains tax.

In respect of what the hon Dr Koornhof raised in arguing against the Bill, it is important to ask: Who raised the questions against the introduction of capital gains tax? Nick Barnardt is perfectly correct: The wealthy, the privileged, those who benefited over the years obviously are opposed to it. [Applause.] If one wants equity, one has to take the decisions. [Applause.] If one wants an omelette, one sometimes has to break an egg; one just has no choice about that. [Interjections.]

In respect of the issue of tribal land, which the hon Dr Koornhof raised as well, we are in constant contact with the Minister for Agriculture and Land Affairs, who has the responsibility for this administrative task, and we will monitor the situation and report to Parliament on an annual basis. The hon Ms Taljaard is also very confused. Mergers and acquisitions are not growth. They are an element of growth, but they are not growth and so she should not equate them with growth, because then she will be making a very, very big mistake. She will fail to understand what the stimuli for growth are.

In conclusion, I would like to thank the parties that support this Bill. A lot of work has gone into it, as we have demonstrated in the course of this. We announced the intention in February last year. We tabled the Bill in December last year. It has been discussed quite extensively by the committee. A number of views have been heard. We have taken account of them, and amended the provisions as far as possible, but on the principle of an equitable tax system, the ANC will never surrender. [Interjections.] For that reason, we are introducing capital gains tax. I thank this House for its support. [Applause.]

Debate concluded.

Question put: That the Bill be read a first time. Division demanded. The House divided:

AYES - 219: Ainslie, A R; Arendse, J D; Asmal, A K; Balfour, B M N; Baloyi, M R; Bekker, H J; Belot, S T; Benjamin, J; Bhengu, N R; Biyela, B P; Bloem, D V; Bogopane, H I; Booi, M S; Buthelezi, M G; Buthelezi, M N; Carrim, Y I; Chalmers, J; Chauke, H P; Chiba, L; Chikane, M M; Cindi, N V; Cronin, J P; Davies, R H; De Lange, J H; Diale, L N; Didiza, A T; Dithebe, S L; Dlamini, B O; Doidge, G Q M; Du Toit, D C; Duma, N M; Ebrahim, E I; Fankomo, F C; Fazzie, M H; Feinstein, A J; Ferreira, E T; Fihla, N B; Fraser-Moleketi, G J; Gandhi, E; Gerber, P A; Gigaba, K M N; Gillwald, C E; Gogotya, N J; Goniwe, M T; Goosen, A D; Gumede, D M; Gxowa, N B; Hajaig, F; Hanekom, D A; Hangana, N E; Hendrickse, P A C; Hlangwana, N L; Hlengwa, M W; Hogan, B A; Jassat, E E; Jeffery, J H; Joemat, R R; Kalako, M U; Kannemeyer, B W; Kasienyane, O R; Kasrils, R; Kgarimetsa, J J; Kgauwe, Q J; Kgwele, L M; Kotwal, Z; Landers, L T; Lekgoro, M K; Lekgoro, M M S; Lekota, M G P; Lishivha, T E; Lobe, M C; Lockey, D; Louw, S K; Lucas, E J; Luthuli, A N; Lyle, A G; Magashule, E S; Magubane, N E; Mahlangu, G L; Mahlangu, M J; Mahlawe, N; Mahomed, F; Maimane, D S; Makasi, X C; Makwetla, S P; Malebana, H F; Maloney, L; Maluleke-Hlaneki, C J; Malumise, M M; Manuel, T A; Maphalala, M A; Maphoto, L I; Mapisa-Nqakula, N N; Mars, I; Marshoff, F B; Masala, M M; Masithela, N H; Masutha, M T; Mathebe, P M; Maunye, M M; Mayatula, S M; Maziya, A M; Mbombo, N D; Mbulawa-Hans, B G; Mbuyazi, L R; Mdladlana, M M S; Mfundisi, I S; Mgidi, J S; Mlambo-Ngcuka, P G; Mnandi, P N; Mngomezulu, G P; Mnumzana, S K; Modise, T R; Modisenyane, L J; Mofokeng, T R; Mogale, E P; Mohai, S J; Mohamed, I J; Mohlala, R J B; Mokoena, D A; Moloto, K A; Momberg, J H; Mongwaketse, S J; Montsitsi, S D; Moonsamy, K; Morobi, D M; Moropa, R M; Morwamoche, K W; Moss, M I; Mothoagae, P K; Motubatse, S D; Mpontshane, A M; Mshudulu, S A; Mthembu, B; Mtsweni, N S; Mufamadi, F S; Mutsila, I; Mzizi, M A; Mzondeki, M J G; Nair, B; Nash, J H; Ncinane, I Z; Ncube, N B; Ndlovu, V B; Ndou, R S; Ndzanga, R A; Nel, A C; Nene, N M; Newhoudt-Druchen, W S; Ngaleka, E; Ngcengwane, N D; Ngculu, L V; Ngubeni, J M; Ngwenya, M L; Nhleko, N P; Nhlengethwa, D G; Njobe, M A A; Nkomo, A S; Nkosi, D M; Nqakula, C; Nqodi, S B; Ntuli, B M; Ntuli, M B; Ntuli, S B; Oliphant, G G; Omar, A M; Oosthuizen, G C; Pahad, E G; Phala, M J; Phohlela, S; Pieterse, R D; Radebe, B A; Radebe, J T; Rajbally, S; Ramakaba-Lesiea, M M; Ramgobin, M; Ramotsamai, C M P; Rasmeni, S M; Ripinga, S S; Routledge, N C; Saloojee, E; Schneeman, G D; Schoeman, E A; Seaton, S A; Sekgobela, P S; September, R K; Serote, M W; Shilubana, T P; Shope, N R; Sigcawu, A N; Sigwela, E M; Sikakane, M R; Sithole, D J; Skhosana, W M; Slabbert, J H; Smith, P F; Smith, V G; Solo, B M; Solomon, G; Sonjica, B P; Sosibo, J E; Sotyu, M M; Thabethe, E; Tinto, B; Tolo, L J; Tshivhase, T J; Turok, B; Twala, N M; Vadi, I; Van den Heever, R P Z; Van der Merwe, S C; Van Wyk, J F; Van Wyk, N; Woods, G G; Xingwana, L M T; Yengeni, T S; Zita, L; Zondi, K M; Zondo, R P.

NOES - 72: Abrahams, T; Abram, S; Andrew, K M; Aucamp, C; Bell, B G; Beukman, F; Blaas, A; Blanché, J P I; Borman, G M; Bruce, N S; Camerer, S M; Clelland, N J; Cupido, P W; Da Camara, M L; Davidson, I O; Delport, J T; Dowry, J J; Durand, J; Ellis, M J; Farrow, S B; Frolick, C T; Gaum, A H; Geldenhuys, B L; Gibson, D H M; Gore, V C; Green, L M; Grobler, G A J; Heine, R J; Jankielsohn, R; Kalyan, S V; Koornhof, G W; Le Roux, J W; Lee, T D; Leon, A J; Mabeta, M E; Maseka, J T; Mbadi, L M; McIntosh, G B D; Mkono, G D; Moorcroft, E K; Morkel, C M; Mothiba, L C; Mzimela, S E; Nel, A H; Niemann, J J; Ntuli, R S; Odendaal, W A; Olckers, M E; Opperman, S E; Pillay, S; Pretorius, I J; Rabie, P J; Ramodike, M N; Schalkwyk, P J; Schippers, J; Schmidt, H C; Selfe, J; Semple, J A; Simmons, S; Singh, A; Smit, H A; Smuts, M; Sono, B N; Swart, S N; Taljaard, R; Van der Merwe, A S; Van Deventer, F J; Van Jaarsveld, A Z A; Van Niekerk, A I; Van Wyk, A (Anna); Van Wyk, A (Annelizé); Waters, M.

Question agreed to.

Bill accordingly read a first time.

                      UNPARLIAMENTARY LANGUAGE

                              (Ruling)

The DEPUTY CHAIRPERSON OF COMMITTEES: Order! Hon members, I have a ruling to make and I would like you to give attention to this ruling.

Mr J H MOMBERG: What about the Second Reading?

The DEPUTY CHAIRPERSON OF COMMITTEES: Order! Yes, hon member, I am coming to that.

On Wednesday, 4 April 2001, while a member was speaking on the Report of the Ad hoc Committee on Filling of Vacancies on the Commission for Gender Equality, the hon the Minister of Home Affairs rose on a point of order and asked whether it was permissible for the hon Ken Andrews to remark, ``You are selling out at a low price’’.

I ruled that the remark was permissible as it reflected on a political party and not on an individual member. At the request of the hon S Seaton, I then undertook to consider my ruling. I now wish to rule further on this matter.

Firstly, while references to parties are normally allowed, because they do not necessarily and specifically refer to members of this honourable House, in this instance reference was clearly and unambiguously being made to a decision of the parliamentary party, and thus to individuals who are members of this honourable House. [Interjections.] Order!

Secondly, concerning the expression used - that is, that certain members were selling out at a low price - the expression ``selling out’’ reflects on the integrity of those members by suggesting a betrayal of principle. This is unparliamentary. I require that the hon Ken Andrews withdraw those words. Mr K M ANDREW: Chairperson, as far as I am aware, there is no Ken Andrews in the House. If you are referring to me, I withdraw.

The DEPUTY CHAIRPERSON OF COMMITTEES: Hon Ken Andrew, thank you very much. I apologise.

                    TAXATION LAWS AMENDMENT BILL

                       (Second Reading debate)

Order disposed of without debate.

Bill read a second time (Democratic Party, New National Party, United Democratic Movement, African Christian Democratic Party, Federal Alliance and Afrikaner Eenheidsbeweging dissenting).

The House adjourned at 19:06. ____

            ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS

TABLINGS: National Assembly and National Council of Provinces:

Papers:

1. The Speaker and the Chairperson:

 (1)    Report of the Auditor-General on the Financial Statements of
     Vote No 11 - Environmental Affairs and Tourism for 1999-2000 and a
     Performance Audit of the Management of Marine Resources [RP 120-
     2000].


 (2)    Report and Financial Statements of the Municipal Demarcation
     Board for 1999-2000, including the Report of the Auditor-General
     on the Financial Statements for 1999-2000.

1. The Minister for Justice and Constitutional Development:

   Report of the South African Law Commission for 2000 [RP 19-2001].