COSATU Letter of Support for the Residence Basis of Taxation Sent to the Portfolio Committee on Finance, 5 October 2000

We understand that the Finance Portfolio Committee will be holding public hearings on the draft Revenue Laws Amendment Bill. Whilst this Bill contains a number of proposed amendments, one of the key proposals is the introduction of a residence basis of taxation. Without commenting on the Bill as a whole, we would like to register our support for this particular aspect.

COSATU welcomes the proposed shift to a residence basis of taxation. This is appropriate particularly in an environment of increased capital mobility and the use of new technology in for example e-commerce. We thus commend the South African Revenue Services for taking this step. A letter of support from COSATU was sent to SARS on 11 August to this effect.

COSATU believes that advantages of the proposed shift could include the following:

• It can potentially limit opportunities for tax avoidance and evasion.

• The proposed shift will broaden the tax base and bring in additional revenue, which can be channelled into higher social and infrastructure spending.

• It is likely to make the distribution of the effective revenue burden slightly more progressive given that it is the wealthy that are better able to minimise their tax burden under source-based taxation.

While we support the proposed shift in principle, we have not analysed the detail of the proposed legislation. COSATU thus encourages the Committee to ensure that clear legislation is urgently put in place that closes tax loopholes (including avoiding the potential for practices such as transfer pricing), maximises compliance, and limits exemptions. The principles to inform the finalisation of the legislation should be the maximising of revenue in a progressive structure. There will certainly be voices opposed to the proposed legislation, but in our view this is motivated by narrow financial self-interest.

Home |  Policy |  Affiliates | Publications |  Site Utilities |  Structures |  News |  Labour Links

 
© COSATU