THURSDAY, 7 JUNE 2007 __

                PROCEEDINGS OF THE NATIONAL ASSEMBLY
                                ____

The House met at 14:03.

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

                          NOTICES OF MOTION

Mrs C DUDLEY: Madam Deputy Speaker, on behalf of the ACDP, I give notice that I shall move:

That the House debates the plight of unaccompanied minors who enter South Africa in significant numbers and face every kind of deprivation, danger and abuse, and the need for relevant legislation and other interventions in order to adequately protect these children.

Mev D VAN DER WALT: Mevrou die Adjunkspeaker, hiermee gee ek kennis van my voorneme om die volgende voorstel voor die Huis te bring:

Dat die Huis dringend die huidige stand van ál 11 ons amptelike tale en die beskerming en bevordering daarvan bespreek. Dit is die tweede keer dat ek hierdie voorstel maak. Ek hoop hy kry aandag. Baie dankie. (Translation of Afrikaans notice of motion follows.)

[Mrs VAN DER WALT: I hereby give notice that at the next sitting of the House I shall move:

That the House urgently discusses the current status of all our 11 languages and the protection and promotion thereof. This is the second time that I am giving this notice. I hope that it will receive attention. Thank you very much.]

                    TAXATION LAWS AMENDMENT BILL

                           (Introduction)

The MINISTER OF FINANCE: Deputy Speaker, hon members, it gives me great pleasure to introduce the Taxation Laws Amendment Bill for 2007. The Bill enacts some of the main tax policy changes that we announced in the Budget Speech in February this year. Amongst other things, the Bill contains measures to assist individuals, with a special emphasis on savings. The Bill also seeks to assist small businesses by extending the small business tax amnesty by a further period. Given the continually growing economy and administrative efficiency of the SA Revenue Service, government is once again able to provide individuals with across-the-board personal income tax relief. At the low end, income up to R43 000 a year will now be tax-free, instead of the former threshold of R40 000. The 18% bracket now ends at R112 500, instead of the previous threshold of R100 000. At the top end, the 40% rate now kicks in for taxable incomes above R450 000 instead of R400 000, where it had been hitherto. The net result is that over R8,8 billion of personal income tax relief will be granted by the passage of this legislation.

However, some of the most notable changes have come in the area of savings. First and foremost, the tax on retirement funds is being repealed; long- term savings for pension provident funds and individual retirement annuities can now grow tax-free so as to maximise the savings nest eggs of future retirees.

Outside this process, it should also be noted that the National Treasury is simultaneously undertaking regulatory reform so that this savings nest egg ultimately works to the benefit of hard-working individuals, not to the benefit of intermediaries and financial institutions. So, a range of measures has been introduced as part of this.

In respect of the extension of the small business tax amnesty, in the Budget Speech last year, I announced that an amnesty for small businesses focusing, amongst other areas, on taxi operators would be introduced, and that was approved by this House. The amnesty application ran from 1 August 2006 to 31 May this year, and I had to speak to the chairperson of the portfolio committee to ask that we tweak the clock so that the 31 May deadline could run a bit longer than normal. The date of 31 May, for administrative purposes, ended at lunch time on Saturday, and I would like to express my appreciation to the hon Nene for allowing us to deal with the administration of the amnesty in that way.

Now, when we introduced the amnesty last year, we thought that we’d get about 100 000 applicants, and members of this House who participated in the Budget Vote of the National Treasury in venue E249 on 24 May would know that at that stage the number had reached 60 000. As a result of the arrangements we had made, we received 275 398 applications for amnesty by lunch time on Saturday. It’s clear that members of this House don’t know the value of tax and tax-paying citizens, otherwise they would have given those who applied for amnesty a standing ovation, not us. [Applause.]

Earlier this week we met with some of the organisations that asked for extensions. We squeezed to try to get their participation out of the process going forward. Arising from that interaction and considering the overwhelming response from small businesses, I decided to ask Parliament to approve an extension of the deadline.

The Bill before this House therefore makes provision for one further month of extension to 30 June 2007. In addition, the Bill will allow us to have a further two months – to 31 August this year – to get applicants to submit all of their documentation that would support their applications for amnesty. I trust that the House will support this. We provided this rethink on the amnesty from a position of strength because of the overwhelming response from small businesses.

I’d also like to express my very sincere appreciation to the staff of Sars for their active participation over long hours and in many different parts of the country on the streets, engaging in discussions with people. It has been worth every bit of it.

I hereby table the Taxation Laws Amendment Bill of 2007 as well as its companion, which is the Taxation Laws Second Amendment Bill of 2007 for consideration. Thank you. [Applause.]

Bill referred to the Portfolio Committee on Finance for consideration and report.

             MUNICIPAL FISCAL POWERS AND FUNCTIONS BILL

                       (Second Reading debate) The MINISTER OF FINANCE: Thank you very much, Deputy Speaker. I haven’t been at the podium in a very long time, so I appreciate the opportunity. The DEPUTY SPEAKER: I thought you were querying the time. Have we given you too much time?

The MINISTER OF FINANCE: No, no, no. The Constitution assigns the responsibility for macroeconomic policy, an integral part of which is fiscal policy, to the national sphere of government. The national executive is therefore charged with the responsibility of ensuring the coherence of the tax system across all three spheres of government.

To this end, government has embarked on a significant tax-reform strategy, the goals of which are to develop a system that is sufficient, equitable, internationally competitive and, of course, simple to administer.

In 2003 this House passed the Provincial Tax Regulation Process Act, which sets out the framework for regulating provincial taxes. The Bill, which we are debating here today, sets out a similar framework with respect to local government.

It is with this constitutional framework as the basis that we ask the House to support the Municipal Fiscal Powers and Functions Bill today. This piece of legislation will regulate the imposition of charges and fees by municipalities, as provided for by section 229(1)(b) of the Constitution. A municipality may impose other taxes, levies and duties appropriate to local government, or to the category of local government, into which such municipality falls if authorised by national legislation.

Viewed in this context, the Bill is an enabling piece of legislation. Without it, municipalities cannot legally impose any new taxes. This Bill presents our municipalities with the opportunity to introduce new taxes, but within a carefully managed national macroeconomic policy framework.

The Bill gives the Minister of Finance the authority to evaluate requests for the introduction of new municipal taxes by a municipality, by a group of municipalities, or by organised local government in order to ensure consistency with national economic policy or other constitutional requirements. If an application is approved, then the Minister of Finance will issue regulations that will prescribe the date from which, in the framework, in terms of which the municipal tax may be imposed.

The legislation will therefore put in place a proactive framework for the exercise of local fiscal powers and functions by ensuring that there is appropriate interaction between the spheres of government prior to the introduction of any new municipal taxes.

The Bill is intended to strike an appropriate balance between the right of municipalities to impose taxes, levies, duties and surcharges that will enable them to play a more meaningful and effective role in the development of their communities by delivering additional and better services to them on the one hand, and with the constitutional responsibility of national government to oversee sound policy of the country on the other.

The intention is to ensure that our municipalities are financially viable in order to guarantee that the communities they serve benefit, especially with regard to basic services. We do not want to allow a situation in which taxes are imposed without appropriate control mechanisms that ensure that these same communities don’t suffer directly either by having to pay more taxes than they are able to afford; or, alternatively, by losing through loss of jobs and income when it becomes economically unsound for businesses to remain in a particular area due to high tax burdens imposed by municipalities.

The Municipal Fiscal Powers and Functions Bill also deals with surcharges in municipal taxes referred to in the Constitution. The surcharge in a municipal service is an additional charge levied by a municipality in addition to the fee or tariff charged for the provision of a service. The surcharge can therefore be viewed as an indirect tax as it is a payment in addition to the normal charge. Surpluses generated from trading services, such as electricity and water, are used by municipalities for the funding or subsidising of other essential municipal activities where limited or no charges are levied. The legislation will prescribe, through regulations, compulsory national norms and standards for imposing surcharges, including maximum surcharges that may be imposed by municipalities on fees for services provided by them or on their behalf. The norms and standards for surcharges on specific municipal services will be developed in consultation with relevant industry stakeholders. As pointed out, we want to ensure that the taxes and surcharges do not impede the development of the local economy. This function of regulating this authority is best placed centrally with national government.

As national government, the interests of the members of our communities have always been given priority, and this proposed piece of legislation seeks to continue to protect our communities through the regulation of taxes and surcharges at the level where it affects their daily access to basic services.

Although proposals have been made that an independent regulator be appointed to undertake these functions – as I previously indicated in this House during our deliberations on the Division of Revenue Bill – as elected representatives we have a collective responsibility in ensuring proper co- ordination of macroeconomic policy objectives across all three spheres of government. The legislation will not set specific taxes which municipalities may impose, but provides the Minister of Finance, or a municipality, or a group of municipalities, or organised local government, if approved, with the kinds of taxes that they would like to introduce.

Lastly, I want to thank the Portfolio Committee on Finance, ably presided over by – there he is – the hon Nhlanhla Nene, for the hard work they put in to finalise the proposed legislation, and the hon Lechesa Tsenoli. The other committee should also be thanked for its participation. We recognise the importance of the processes of consultation undertaken, and we thank you for the frank and in-depth discussion with regard to the provisions and implications of the Bill. Thank you very much, Deputy Speaker. [Applause.]

Mr N M NENE: Madam Deputy Speaker and hon members, in terms of section 229(1)(a) of the Constitution of the Republic of South Africa, a municipality is empowered to impose rates on property and surcharges on fees for services provided by or on behalf of the municipality. However, in order to impose other taxes, levies and duties appropriate to local or to the category of local government into which that municipality falls, it requires authorisation by national legislation. This is what this legislation seeks to do.

There are further conditions imposed by subsections 2 and 3 of the same section 229 of the Constitution. In imposing these rates and surcharges or other taxes, levies and duties, this may not be exercised in a way that materially and unreasonably prejudices national economic policies, economic activities across municipal boundaries or the national mobility of goods, services, capital or labour. It also has to be regulated by national legislation.

Section 3 also continues to say that when two municipalities have the same fiscal powers and functions with regard to the same area, an appropriate division of those functions must be made in terms of national legislation. This subsection continues to list the criteria that must be taken into account when this division of powers is made. Among others it mentions the need to comply with the sound principals of taxation, the fiscal capacity of each municipality, the effectiveness and efficiency of raising taxes, levies and duties and finally equity. This is the test that the regional services councils levy could not pass and therefore was scrapped in 2005, giving way to a regime that will be in line with our national agenda of a developmental state.

This legislation is one piece in a number of building blocks for this envisaged state machinery that is responsive to the needs of people. As the three-sphere co-operative governance model evolves to meet the new challenges of our democratic state, we need to continually evaluate its effectiveness and whether it is promoting the ideal of a better life for all. While the institutional structures and mechanisms are of primary importance in building the national democratic society, so is our legislative framework.

Because of the strategic positioning of local government at the coalface of service delivery, the ANC-led government continues to pay particular attention to this sphere of government. When the regional services council levy was scrapped for the reason I have alluded to earlier and that the Minister has mentioned, a grant was subsequently allocated to municipalities in order to augment the revenue they might have lost as a result. According to submissions received by the committee, we are aware that to some municipalities this grant is inadequate and we urge National Treasury to continue engaging with those municipalities in order to find an amicable solution.

When dealing with legislation in the committee, the stakeholders, in relation to the implementation of this Bill and its implications, raised a number of concerns and I wish to deal with them. The matter of consultation and the processing of the Bill was addressed and the committee is satisfied that adequate consultation did take place and any comments to the contrary have no basis. The issue of the constitutionality of the Bill and whether it does not encroach on the constitutional mandate of another sphere of government came up sharply in some submissions. The committee took legal opinion on the matter and we are assured that this Bill does not encroach on the constitutional mandate of local government. Instead it does precisely what section 229 of the Constitution requires. The committee, therefore, has no reason to believe that there is any violation of the Constitution. The other matter was that of capacity of the municipalities to implement this legislation and that local government is already overregulated. It is the committee’s view that this legislation fits perfectly into the existing legislative framework in order to enhance service delivery in the best interest of the national democratic society we seek to build. Accountability, transparency and good governance are at the centre of the developmental state that is responsive to the needs of our people, and therefore this legislation should be viewed in that perspective.

In terms of capacity we urge National Treasury and provincial treasuries to continue their legal obligations in terms of the municipal finance management Act and the Public Finance Management Act of building the capacity required in this sphere of government. We also urge municipalities to adhere to the minimum competency levels for officials when employing and developing existing staff. The committee was recently briefed by National Treasury on these minimum competency levels for different categories of senior officials in municipalities and believes that this will go a long way in dealing with the issue of capacity in local government.

Let me also take this opportunity to thank the Portfolio Committee on Provincial and Local Government for their participation and their co- operation in processing this Bill. I would also like to thank the staff at National Treasury for the wonderful work they have done and trust that this piece of legislation will realise the desired objective.

Lastly, let me mention that this Bill does not impose new taxes and the Minister did allude to this fact. This Bill does not impose new taxes at local government level, but provides for a legal framework within which this sphere may impose these taxes, levies or duties in terms of the Constitution. The ANC supports the Municipal Fiscal Powers and Functions Bill. Thank you. [Applause.]

Mr S J F MARAIS: Madam Deputy Speaker, I want to start off by again commending National Treasury and the Portfolio Committee on Finance for the open, frank, objective and transparent way this Bill and the various submissions thereto have been approached. National Treasury was consistently empathetic and susceptible to the constructive and credible input from various sources.

Tans is daar verskeie munisipaliteite wat swak presteer en bestuur word hoofsaaklik omdat die kapasiteit of die vermoë nie bestaan by baie raadslede en amptenare nie: Eerstens, is dit om die langtermyngevolge van hulle finansiële besluite te kan skei van korttermyn politieke voordele.

Tweedens, is dit die motivering by die aanstelling van amptenare, veral in spesialiteits- en seniorposisies, te skei van subjektiewe oorwegings. Derdens, is dit om die makro-ekonomiese impak en die gevolge van hulle finansiële besluite te begryp en te interpreteer.

In die praktyk gebeur dit dat munisipaliteite soms onbillike en onbekostigbare bobelastings en heffings, bo en behalwe die redelike winste uit belasting- en diensteheffings, instel. Hierdie hoë bobelastings en heffings plaas nie net druk op die makro-inflasie verwagtinge nie, maar kan ook ’n spesifieke gemeenskap verarm tot die mate waar dienste onbekostigbaar raak met gevolg dat slegte skulde kan vermeerder.

Dienslewering deur munisipaliteite raak die meerderheid van ons bevolking direk deur die kwaliteit daarvan en die waarde vir geld dienste wat daagliks aan hulle gelewer word. Ons het ’n verantwoordelikheid en ’n verpligting om te verseker dat volhoubare dienslewering geoptimaliseer word op munisipale vlak. Dit is immers waar die lewenskwaliteit van die meerderheid mense geraak word en waar die basis vir die volhoubare bou van ons demokrasie gesetel is.

Daar kan dus ongetwyfeld baie regverdiging gevind word vir die doelwitte van die voorgestelde wetgewing en die magte wat dit aan die Minister sal gee om onder andere te verseker dat die makro-ekonomiese beginsels en doelwitte, selfs tot op die derde vlak van regering, nagestreef en bevorder word. Dit is so dat artikel 229 van die Grondwet bepaal dat die Parlement die bevoegdheid het om regulasies en wetgewing te kan instel om te verseker dat munisipale fiskale magte en bevoegdhede behoorlik en verantwoordelik nagekom word. Dit is egter belangrik dat die oorsigrol van die Parlement hierin behoorlik nagekom moet word.

In die praktyk word daar ervaar dat konflik ontstaan tussen B en C munisipaliteite oor die magte en funksies wat hulle enersyds tans uitoefen, en andersyds oor die magte en bevoegdhede wat hulle aanvoer hulle addisioneel kan en behoort uit te oefen. Hoewel die voorgestelde wetgewing soortgelyke magte en bevoegdhede van twee of meer munisipaliteite binne dieselfde gebied reël, kan dit egter ’n bron van verdere konflik tussen B en C munisipaliteite wees met moontlike onstabiliteit in dienslewering.

Minister, daar is egter ook bekommernisse wat voorspruit uit hierdie voorgestelde wetgewing waarvan nou reeds kennis geneem moet word en wat deurlopend bestuur moet word juis om te verseker dat die oorwoë doelstellings deurlopend nie nadelig geraak sal word nie. Die interpretasie van die Grondwet is dat die drie sfere van regering onafhanklik van mekaar is en dat munisipaliteite met hulle behoorlik verkose politieke leiers die magte en bevoegdhede het om self te bepaal watter belastings, heffings en tariewe ingestel behoort te word.

Hoewel artikel 229 van die Grondwet wel bepaal dat addisionele bobelastings en heffings ingestel kan word net wanneer nasionale wetgewing en regulasies dit magtig, kan hierdie voorgestelde wetgewing geïnterpreteer word dat dit inbreuk maak op hierdie geagte grondwetlike magte en bevoegdhede. Dit sal belangrik wees om te verseker dat ook die tyd wat die Minister sal benut in gebruik om die voorgestelde bobelasting en heffings te oorweeg so kort as moontlik sal wees, juis om te verseker dat dienslewering nie nadelig hierdeur geraak word nie.

Minister, niemand wil sien dat hierdie voorgestelde wetgewing beperkend op en as `n straf vir die suksesvolle en volhoubare munisipaliteite dien wat wel effektief en doelmatig bestuur word nie, ongeag die tipe en die vlak van munisipaliteit. Ons moet bedag wees hierop. Tekortkominge en probleme met spesifieke munisipaliteite moet eerder konstruktief en gefokus aangespreek word. Hierdie probleme en tekortkominge kan geïdentifiseer word via die jaarlikse ouditverslae wat inkom, verslae van die provinsiale departemente van plaaslike regering, asook ander belangegroepe en deelnemende politieke partye.

Dan ook, die laaste ding net, ek dink dit is noodsaaklik dat daar volhoubare kapasiteit en kundigheid van munisipale raadslede en amptenare opgebou en deurlopend verbeter word. Ek dank u. [Applous.] (Translation of Afrikaans paragraphs follows.)

[Currently there are several municipalities that are managed poorly and hence performing poorly, mainly because many councillors and officials do not have the capacity or the capability: Firstly, to separate the long-term consequences of their financial decisions from short-term political benefits.

Secondly it is to separate the motivation for the appointment of officials from subjective considerations, especially with specialist and senior positions.

Thirdly, it is to understand and interpret the macro economic impact and the consequences of their financial decisions.

In practice it happens that municipalities sometimes institute unreasonable and nonaffordable surcharges and levies, over and above the reasonable profits from tax and service levies. These high surcharges and levies do not only place pressure on the macroinflation expectancies, but can also impoverish a certain community to the extent where services become unaffordable, with the result that bad debt can increase.

Service delivery by municipalities affects the majority of our population directly through the quality thereof and the value-for-money services that are delivered to them daily. We have a responsibility and an obligation to ensure that sustainable service delivery is optimised at municipal level. It is, indeed where the quality of life of most of the people is influenced and where the base for the sustainable building of its democracy resides.

Undoubtedly justifications can be found for the objectives of the proposed legislation and the powers that it will give to the Minister, to, among others, ensure that there is striving towards and the promotion of the macroeconomic principles and objectives, even up to the third level of government. It is so that section 229 of the Constitution stipulates that Parliament has the competency to institute regulations and legislation to ensure that municipal fiscal powers and competencies are properly and responsibly adhered to. It is, however, important that the oversight role of Parliament is complied to herein.

In practice it is experienced that conflict develops between B and C municipalities, on the one hand about the powers and functions that they exercise, and on the other hand the powers and competencies that they argue they must have and should exercise additionally. Although the proposed legislation arranges similar powers and competencies of two or more municipalities within the same area, it can however be a source of further conflict between B and C municipalities with possible instability in service delivery.

Minister, there are, however, also concerns that originate from this proposed legislation that should be noted, and which should be managed continuously, to ensure that the considered objectives are not continuously affected negatively. The interpretation of the Constitution is that the three spheres of government are independent from each other, and those municipalities with their properly elected political leaders have the powers and competencies to determine themselves which taxes, levies and tariffs should be instituted.

Although section 229 of the Constitution provides that additional surcharges and levies can be instituted only when national legislation and regulation has authorised it, this proposed legislation can be interpreted so that it infringes on these respected constitutional powers and competencies. It will be important to ensure that the period that the Minister will use to consider the proposed surcharges and levies should be as short as possible too, to ensure that service delivery is not affected negatively by this.

Minister, nobody wants to see this proposed legislation as restriction on and as punishment for successful and sustainable municipalities that are indeed managed effectively and efficiently, irrespective of the type and the level of the municipality. We must be mindful of this. Shortcomings and problems with specific municipalities should however be focused on and constructively addressed. These problems and shortcomings can be identified via the annual audit reports that come in, reports from the provincial departments of local government as well as other interest groups and participating political parties.

Then, as well, one last thing, I think it is necessary that the sustainable capacity and expertise of municipal councillors and officials be built up and continuously be improved. I thank you. [Applause.]

Mr H J BEKKER: Madam Deputy Speaker, as a party that believes in the devolvement of powers to the lowest level of government possible, the IFP would under most circumstances not support legislation that expands the national Minister of Finance’s role in the finances of local government. However, with the state of municipal finances being a continuing and serious concern, the Bill before the House is both timeous and necessary, and the IFP will therefore support it.

Primarily, the Bill seeks to do two things: Firstly, it will regulate the manner in which municipalities can impose surcharges on fees for services, and secondly, it will provide for the authorisation of municipal taxes, levies and duties by the Minister of Finance.

The Bill insists on a consultation process before the review of taxes can be implemented. The IFP welcomes the part to be played by the Minister of Finance in consultation with his colleague, the Minister for Provincial and Local Government, and the fact that he will also have to consult with the relevant MEC in the applicable province with regard to local government taxation.

It is very important to note that the Bill will not apply to user charges for electricity, water, etc, that is, those that are already levied by municipalities and which make up a very large part of their revenue base. This exclusion is welcomed by the IFP.

The Bill also recognises the municipal base tariff that is needed to cover overheads and operating costs, as well as provide a reasonable rate of return to municipalities. We support this as a realistic mechanism.

With the phasing out of regional services councils and joint services board levies, it is expected that as much as 7% of municipalities’ revenue stream could theoretically be lost. This income source must thus be replaced in one or other form.

The IFP agrees that the RSC levies were not an optimal instrument in terms of sound taxation principles, as was found by the Margo and Katz Commissions, and that they had to be phased out to provide a fair and equitable tax system in South Africa. National government has already indicated that the revenue lost owing to the phasing out of these levies would be returned to municipalities via the national Budget, and that alternatives would be considered.

The IFP applauds the government’s commitment to a smooth transition from the old to the new system by providing the replacement allocations to municipalities, which would be based on the historic RSC and JSB levy income that was collected.

We also welcome the fact that the Bill will make sure that the manner in which municipalities exercise their fiscal powers is not detrimental to the national economy on which so much rests regarding the improvement of the lives of so many South Africans. The IFP will support this Bill.

In conclusion, with reference to the Minister’s previous Bill that he presented here, we also support the aspect of amnesty for the small and medium organisations. I would also like to remind the Minister of the success that was achieved way back at the time when we introduced the amnesty on foreign exchange and the repatriation of capital. I am glad to say that the Minister will remember that at that time it was the IFP that first mooted that idea, and I wish him well in this new exercise as well. Thank you.

The DEPUTY SPEAKER: Hon members, at this juncture I would like to just make the point that you have permission to conduct your personal business outside the House. So don’t think that you are compelled to have meetings in the House.

So the next step is that we are going to call you by name and ask you to excuse yourself.

Mr H B CUPIDO: Hon Deputy Speaker, the ACDP supports the Municipal Fiscal Powers and Functions Bill. The correct implementation of this Bill will give district and metropolitan municipalities an opportunity to meet their expenditure in terms of poverty alleviation and improve on social and economic development projects.

The ACDP wants to express its concern that this income-generating Bill should not be used by local authorities on business as a soft target to satisfy their wish list but to bring into effect sustainable infrastructure supply of affordable bulk resources and long-term maintenance on such infrastructure. Permanent job opportunities can be secured through sustainable income to local authorities.

With the phasing out of the regional services council and joint services board levies, this Municipal Fiscal Powers and Functions Bill is now a necessity in order to enhance service delivery. The ACDP supports the Bill.

Mnr P J GROENEWALD: Adjunkspeaker, die wetsontwerp gee nie ’n lys nie en dit identifiseer ook nie die tipe van belastings wat munisipaliteite na aanleiding van hierdie wetsontwerp sal kan hef op belastingbetalers nie.

Die VF Plus neem kennis van die beheer en die kontroles deur die agb Minister van Finansies. Agb Minister, ek kan vir u sê ek vertou u want u is ‘n goeie Minister van Finansies, maar ek weet nie of u na 2009 nog die Minister van Finansies gaan wees nie – miskien is u President, ek weet ook nie. [Gelag.] Die feit van die saak is ons kan ongelukkig nie ’n wetsontwerp ondersteun wat net gebasseer is op die subjektiewe oordeel van ’n minister wat dink dit is billik en geregverdig nie.

Hierdie is in ’n mate ’n blanko tjek ook vir stadsrade om addisionele belastings te hef en ’n oorbelaste inwonertal en belastingbasis nog verder te belas. Die vraag is: Gaan dit nie wees om munisipale bestuurders en burgermeesters wat selfs pakette van tot R1,3 miljoen reeds kry nog verder te vergoed nie? Die VF Plus sal nie die wetsontwerp ondersteun nie. Dankie. (Translation of Afrikaans speech follows.)

[Mr P J GROENEWALD: Deputy Speaker, the Bill does not provide a list and it also does not identify the type of taxes that municipalities, with reference to this Bill, can levy on ratepayers.

The FF Plus takes cognisance of the control measures and counterchecks by the hon Minister of Finance. Hon Minister, I can tell you that I trust you because you are a good Minister of Finance. However, I do not know whether you will still be the Minister of Finance after 2009 – maybe you will be President, I also do not know. [Laughter.] The fact of the matter is that we cannot, unfortunately, support this Bill that is based only on the subjective judgment of a Minister who thinks it is reasonable and fair.

This, in a way, is also a blank cheque for city councils to levy additional taxes and to burden an overtaxed number of residents and tax base even further. The question is: Will it not be to pay municipal managers and mayors, who are already receiving packages of up to R1,3 million, even more? The FF Plus will not support the Bill. Thank you.]

Mr R B BHOOLA: Madam Deputy Speaker, the MF is pleased with the introduction of this Bill and the clarity it offers regarding municipal powers in terms of fiscal powers and functions. However, in view of the local business community, the MF feels that some form of consultation should take place concerning the local municipalities, if and when the Minister introduces a tax on local businesses, in line with clause 4.

In view of clause 5, we feel that it may impede the rights of local government. Efforts should be made to look at shortening the time in which the Minister would inform municipalities and the prescription of regulations.

We are also concerned that if we are to encourage the growth of our economy, the development of local business and extend an invitation to potential business, then we should not overburden businesses with taxes. In view of this, national tax already exceeds the recommended 25% and the MF thinks that a greater tax burden should not be placed on business. The MF will support the Bill. I thank you.

Mr Y S BHAMJEE: Madam Deputy Speaker, the transformation of local government has been, and is, guided by the Constitution. Three key pieces of legislation and their respective subordinate legislative regulations have added meaning to our developmental state in general and the transformation of local government in particular. These are the Local Government: Municipal Structures Act, Local Government: Municipal Systems Act, and Local Government: Municipal Finance Management Act, which also enhance the quality of service to residents and users of municipal services in general.

This set of legislation, including the Intergovernmental Fiscal Relations Act, the Intergovernmental Framework Relations Act, the Property Rates Act, the annual Division of Revenue Act, legislation regulating water and electricity and the Municipal Fiscal Powers and Functions Act form the basis for revamping municipal management.

This set of legislation, together with the Bill before us today, holds public representatives, and in particular councillors and officials accountable as it is intended to maximise the capacity to deliver sustainable services. This may be called a performance-driven approach to services delivery.

The Local Government: Municipal Systems Act and the Local Government: Municipal Finance Management Act and their respective regulations adequately deal with municipal user charges. When the Portfolio Committee on Finance deliberated on the Municipal Fiscal Powers and Functions Bill, it was sensitive not to compromise the municipalities’ right to exercise their powers or perform their functions, as per section 152 and 153 of the Constitution.

These sections also stipulate that national legislation envisaged in these sections may be enacted only after organised local government and the Fiscal and Financial Commission have been consulted and all recommendations have been considered, including that of the Department of Provincial and Local Government. This department also made inputs at a special workshop hosted by National Treasury.

These stakeholders also attended the hearings of the Portfolio Committee on Finance and indeed made their presence felt. All these respective stakeholders, including the business sector, had a second opportunity to engage with the Portfolio Committee on Finance. They raised all issues that, in their opinion, had not been adequately addressed. The Portfolio Committee on Finance was sensitive to the issues raised and was, once again, mindful not to compromise the relative autonomy of local government.

Having listened and studied the verbal and written submissions and deliberations on the Bill, the committee is satisfied that the Bill strengthens the principle of co-operative governance.

The Bill before this House is not intended to introduce new municipal taxes but to set a framework which any proposal for a new municipal tax would be subjected to and to ensure that it is in line with the national and local government fiscal taxation framework, and not to place undue burden on any sector.

This Bill, at one level, is a stand-alone Bill. It is an exact Bill. It gives meaning to section 229(2)(b) of the Constitution, which gives local government certain financial functions and powers.

This Bill is an enabling framework to usher in checks and balances, with the objective of giving effect to section 229 of the Constitution by providing appropriate norms and standards to proactively prevent the potential negative consequences of inappropriate surcharges, and to create an enabling framework for the authorisation and implementation of municipal taxes.

This Bill also takes into account and effectively addresses the delays in approving a proposed new municipal tax by the Minister, which may impact negatively on service delivery and may have cost implications on the municipal fiscus – taxes and other collected monies used by government. This concern is accommodated by the provision of a six-month period rather than the initial 18-month period to consider an application.

Why is this necessary, it may be asked? Well, how long do we think a detailed analysis should be undertaken to determine a possible impact of a proposed new tax on taxpayers?

The objective of this Bill is not to introduce new municipal taxes. It is to provide a set of guidelines that will subject a proposed municipal tax to scrutiny. In the main, the intention is to ensure that such proposals are in keeping with national and local government fiscal and taxation frameworks. It must be stressed that our scrutiny of regulations is a constitutional requirement and, as members of this House, we are desperately found wanting in the execution of this responsibility.

Section 42(1) prescribes that, prior to the Minister of Finance authorising a municipal tax, the Minister must consult the Minister responsible for local government, and consultation with organised local government is imperative. I believe that the portfolio committee on local government is adequately sensitised on the content of this significant Bill. It is critical that both the Portfolio Committee on Finance and the Portfolio Committee on Provincial and Local Government jointly exercise a meaningful oversight role on its implementation once it is enacted.

It is this process of oversight and the vigilance of organised local government that will ensure that the relative autonomy of local government, within the co-operative governance constitutional principle, is not compromised.

The ANC supports this Bill. Thank you, Madam Deputy Speaker. [Applause.]

The MINISTER OF FINANCE: Madam Deputy Speaker, let me express appreciation for the broad support. However, it’s necessary to deal with some of the issues members raised here. For the life of me, I can’t understand whether all of the members of the portfolio committee sat through the hearings together, because it appears that it’s not possible to find a meeting point somewhere in respect of this!

We appreciate what the hon Marais raised and I’m glad that he came a little way, though I think he is still held back by the likes of the hon Van Dyk and so on and can’t come all the way. But I want to ask him to go back and read the Constitution. Section 40(1) says:

In the Republic, government is constituted as national, provincial and local spheres of government which are distinctive, interdependent and interrelated.

It’s not “onafhanklik” [independent]; it’s distinctive, interdependent and interrelated. So that gives the basis then for the other issue which the hon Groenewald missed, which is 229(b) and is also abundantly clear because it says:

… taxes, levies and duties appropriate to local government or to the category of local government into which that municipality falls, but no municipality may impose income tax value-added tax, general sales tax or customs duty.

So we are enabling municipalities to go forward.

This is not a random power, hon Cupido, to impose whatever taxes they want or to simply see some soft targets and keep going for them. It sets in place a framework that is not about Trevor Manuel but is durable framework that can provide a basis for testing such new taxes appropriate to municipalities that they want to or need to introduce. [Interjections.]

Mnr P J GROENEWALD: Mevrou die Adjunkspeaker, is die agb Minister bereid om ‘n vraag te beantwoord?

Die ADJUNKSPEAKER: Vra eers die Minister self, agb lid.

Die MINISTER VAN FINANSIES: Ja, vinnig, agb lid.

Mnr P J GROENEWALD: Ek wil net by die agb Minister weet, Adjunkspeaker, aangesien streeksdiensterade se heffings afgeskaf is, gaan munisipaliteite volgens hierdie wetsontwerp nou daardie geldelike verliese weer kan in en op watter wyse gaan hulle dit kan doen?

Die MINISTER VAN FINANSIES: Sedert voorverlede jaar, agb Adjunkspeaker, is ons alreeds besig met die munisipaliteite. Die agb Nene het daarna verwys. Sy mening is dat wat ons aan munisipaliteite gee miskien nie genoegsaam is nie, maar dit moet vir ons `n toets wees. Ons het in samewerking met munisipaliteite gesê dat ons dit wat ons weggeneem het weer sal teruggee en ons sal gedurig toets of daar die moontlikheid is vir ‘n nuwe belasting vir plaaslike regerings. Ons sal dit toets en hierdie wetgewing sal die raamwerk wees vir die toetsing daarvan. (Translation of Afrikaans paragraphs follows.)

[Mr P J GROENEWALD: Madam Deputy Speaker, is the hon Minister willing to answer a question?

The DEPUTY SPEAKER: First ask the Minister himself, hon member.

The MINISTER OF FINANCE: Make it quick, hon member.

Mr P J GROENEWALD: I only want to know from the hon the Minister, seeing that regional services councils’ levies have been abolished, whether municipalities will now, in terms of this Bill, be able to recoup those financial losses, and in which way they will be able to do so.

The MINISTER OF FINANCE: Since the year before last, we have already been busy with the municipalities. The hon Nene referred to this. He is of the opinion that what we give municipalities might not be adequate, but this should be a test for us. We said, in co-operation with municipalities, that we would give back what we have taken away, and we shall continuously test whether there is a possibility of a new tax for local governments. We shall test it, and this legislation will be the framework for this testing.]

So, I have no fear about the way in which we deal with these issues going forward. But let me express our appreciation and it’s very necessary that we understand the interrelated nature of the different spheres of government.

Let me say to the hon Bekker: If you keep shooting randomly, hopefully, one of your little pellets will reach a target some day. Thank you. [Applause.]

Debate concluded.

Bill read a second time.

CONSIDERATION OF REQUEST FOR APPROVAL BY PARLIAMENT OF SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PROTOCOL ON FACILITATION OF MOVEMENT OF PERSONS

There was no debate.

Southern African Development Community Protocol on Facilitation of Movement of Persons approved.

The House adjourned at 14:50.