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Speech by Malusi Gigaba, MP, Minister of Finance, during the National Assembly 01st Reading Debate on Rates and Monetary Amounts and Amendment of Revenue Laws Bill, 2017, the Taxation Laws Amendment Bill, 2017, and the Tax Administration Laws Amendment Bill, 2017, in Cape Town on 21 November 2017

Honourable Deputy Speaker, Honourable Ministers Deputy Ministers, Honourable Members, Ladies and Gentlemen

Thank you for the opportunity to participate in and respond to this debate.

Whereas there are real challenges faced by the South African economy since the 2008 global downturn, we however still remain positive about its growth prospects.

During the MTBPS, we mentioned that given the downward revision to our growth prospects, we were projecting a R51 billion revenue shortfall during this year and that in order to stabilize debt below 60% of GDP over the coming decade, a combination of spending cuts or tax hikes amounting to 0.8% of GDP will be required, translating to R40 billion in 2018 / 19.

Accordingly, given both these fiscal consolidation measures we have to plug the revenue shortfall - addressing both the expenditure cuts and revenue-enhancement - as well as the economic stimulus measures we are pursuing, underpinned by structural reforms, we are confident that our economy will soon recover and keep pace with the global trends.

Our economy has been here before, following the downfall of apartheid.

It took a concerted national effort to recover and reach the GDP growth levels we had reached by 2007, prior to the commencement of the global downturn.

It is the same concerted national effort that is still required to improve our economic performance today.

We need all hands on deck; we need everyone to act in the best national interest.

In this regard, nothing should be sacrosanct; taxes must also be considered.

Many of the changes proposed in the Rates Bill are already effective and were intended to increase tax revenues by around R28 billion this fiscal year as part of government's efforts to ensure the sustainability of our public finances.

The unexpected recession in the earlier part of the year and the lackluster economic growth since then has reduced the expected amount of revenue from these tax changes, and with a large expected revenue shortfall our fiscal position has become more precarious.

The impact of tax increases on economic growth cannot be ignored, and a careful balancing act is required between spurring on growth and fiscal consolidation.

The 2017 Taxation Laws Amendment Bill contains more complex technical amendments announced in the Budget aimed at closing loopholes, providing certain tax incentives and clarifying current provisions to create a simpler and more effective tax system.

Furthermore, this Bill contains specific rules dealing with the tax treatment of banks and financial institutions due to changes in the financial reporting standard from IAS39 to IFRS9.

Meanwhile, the Tax Administration Laws Amendment Bill deals with the Administrative tax proposals aimed at refining the administration of the tax cuts.

It also contains rules aimed at improving the effectiveness of combating refund fraud, and in response to representations by members of the financial sector.

Accordingly, and to give full effect to these amendments, concerns regarding the effectiveness of the SARS are worth paying attention to.

In this regard, the Commission I have promised to established will help us address these concerns and good public and customer confidence in our tax administration.

Honourable Members, there can be no trade-off between economic growth and good public health.

We cannot ask our people to choose whether they want good health and growth in the economy as if one can happen without the other.

This is a fictitious choice!

These taxes are progressive and very necessary to safeguard our tax base and ensure all individuals and corporations pay their fair share.

I would like to thank the Honourable Members for the broad support for these amendment bills and particularly the Chairperson and Members of the Standing Committee on Finance (SCOF) for their efficient processing of these bills.

I thank you.

     
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