The South African Institute of Chartered Accountants

Ref: #71495 vJ/JAA/NN/CBW/PdM/BJC/EJM/GCB/KIM
Call for comment file
2 June 2004
Mrs C Brodrick
South African Revenue Service
Private Bag X923
PRETORIA
0001
By e-mail: [email protected]
Dear Madam

CALL FOR COMMENT: DRAFT 2004 TAXATION LAWS AMENDMENT BILL
AND EXPLANATORY MEMORANDUM
We refer to the call for comment on the above-mentioned documents. Set out below please
find SAICA' submission in this regard.

TAXATION LAWS AMENDMENT BILL, 2004
1. Clause 12 - Amendment of section 23 of Act 58 of 1962
The Explanatory Memorandum refers to the disallowance of interest and penalties incurred due to the late payment of taxes and levies. It states that the burden of interest and penalties arising from non-compliance with legislation should not be partially subsidized by the fiscus.

While this line of reasoning may be appropriate in respect of penalties it is inappropriate in respect of interest. Penalties are charged as a punishment for non- or late compliance. Interest is charged to compensate for the time value of money. It thus
seems inappropriate to impose a further (double) penalty by disallowing a deduction for such interest.
It is thus recommended that the prohibition of the deduction(s) referred to in section 23 be limited to penalties and exclude interest.

2. Clause 20-Amendment of paragraph 2 of Fourth Schedule to Act 58 of 1962
Paragraph 2(b) deals with the effective date of the amendment relating to labour brokers. The effective date is proposed as being "on the date of promulgation of this Act and shall apply in respect of any application for an exemption certificate on or after that date."

For the sake of clarity, we suggest that it should apply in respect of any application processed by the Commissioner on or after that date. The reason for our suggestion is; to avoid taxpayers having to resubmit applications made prior to the promulgation of this Act which have not yet been processed by the Commissioner in the event of the proposed wording being interpreted as being effective for applications received by the. Commissioner on or after date of promulgation.
3. Clause 57 -Insertion of section 13A in Act 38 of 1996
The amendment dealing with interest on overpayments of the tax on retirement funds does not contain an effective date. Clause 57 should stipulate a date from which interest will be paid. As it is unfair that retirement funds were always liable to pay interest - from 1996 - but that these taxpayers were not entitled to interest on overpayments, the effective date should also be 1996 or the date the draft Bill was first made public.
' 4. General comment
Clause 2, Clause 26 and Clause 42(c) and (d) indicate that the effective date is the date the Minerals and Petroleum Resources Development Act comes into effect. This date is I May 2004, and should be worded as such'- it is correctly worded in Schedule 3.

EXPLANATORY MEMORANDUM
5. Clause 4 of the Explanatory Memorandum: There is a typing error in the first line, which should be amended to read "... definition of "prescribed rate" determines the…"
6. Clause 5 of the Explanatory Memorandum, subclause (b): There are typing errors in the first sentence, which should be amended to read "... definitions of "pension fund", "provident fund" and "retirement annuity fund", the Commissioner ...".
7. Clause 14 of the Explanatory Memorandum: The last sentence has a typing error. The word "one" after "come into operation" should read "on".
8. Clause 42, subclause (b) and (e) of the Explanatory Memorandum: First line states "It is proposed that he definition.." this should be amended to read "... that the definition..".
The second last line of this same paragraph states "... documents were a..." this should be amended to read "...documents where a ...".
9. Clause 46 of the Explanatory Memorandum: On the second line, "tax registration number" should be amended to read "VAT registration number".

10. Clause 47 of the Explanatory Memorandum: On the second line, "tax registration number" should be amended to read "VAT registration number".
11. Clause 48 of the Explanatory Memorandum: On the second line, "tax registration number" should be amended to read "VAT registration number".
12. Clause 49 of the Explanatory Memorandum: The wording of the second line should be amended to read "... when customs and Excise collects tax ...".
13. Clause 50 of the Explanatory Memorandum: 0n the second line, "tax registration number" should be amended to read "VAT registration number".
14. Clause 55 of the Explanatory Memorandum: On the second line, "tax registration number" should be amended to read "VAT registration number".

Please do not hesitate to contact me should you require further information.
Yours faithfully

J Arendse (Mrs) • .
PROJECT DIRECTOR: TAX
The South African Institute of Chartered Accountants