Lynda Loxton
The Congress of South African Trade Unions (Cosatu) this week gave notice that it was losing patience with the way the African National Congress-led government, in its rush to attract foreign investment, was failing to consult its old alliance partners.
General Secretary Sam Shilowa told the parliamentary finance committee that it was “unacceptable” that Cosatu had been given a very limited time to comment on the Revenue Laws Amendment Bill before it was tabled in Parliament.
To add insult to injury, Deputy Finance Minister Gill Marcus claimed that the National Economic Development and Labour Council (Nedlac) had been extensively consulted about the proposed new tax changes, including tax holidays, since 1995.
Shilowa produced a letter from Nedlac chamber co- ordinator Shan Ramburuth that proved “there has in fact been little discussion [on this] at Nedlac. We do not want to enter into any squabble about who is right and who is wrong, but that does indicate that there are some areas where it will be important, as part of building participatory democracy in lawmaking, to be able to take into account that there was a problem with the way in which the process was handled,” Shilowa said.
Cosatu expressed strong reservations about the proposed tax holidays for new investments and recommended changes to the proposed legislation that would ensure tax holidays would not disadvantage existing investments and that details of all applications be subject to hearings before they were granted.
It also asked that the government guarantee that tax holidays should not be compensated for by increases in value-added tax, a decrease in the number of zero-rated items or higher taxes for low income earners while tax holidays remained in force.
“The key thing we want to raise is to first make clear that … we are opposed to the issue of tax holidays, but we have not come here to argue that we should not implement them,” Shilowa said.
“We have come here to inform you that if we had things our way, that is what we would do, but that we take account of the fact that there is a decision to move in that particular direction and therefore we are here to raise our concerns and put forward proposals which we hope will be able to be taken on board.”
As a finance bill, however, it cannot by convention be changed by the committee, which has to either accept or reject it.
Shilowa said that despite this, he hoped that the amendments could be accepted. “It would be unfortunate … if our recommendations … were just to be thrown out,” he said.
Cosatu’s main objections to tax holidays are that they incorrectly rely on tax incentives to channel private sector investment, would erode the tax base and would shift the burden of taxation from the rich to the poor. They could also disadvantage existing investments and lead to job losses.
Shilowa recommended that the committee launch a public investigation into the range of options that could be considered to mobilise public investment and create jobs.
Shilowa said this would help “avoid an ad hoc situation like this one in which we try to deal with a comprehensive, complex situation.
“You have got a responsibility as lawmakers to ensure that at least the process of participation is itself not denied,” he said.
He accepted that at times there would be legislation that had “to be rushed through … but it is not like waking up in the morning and saying you need some legislation.”
Policymakers started planning months ahead of any situation and that was the time when they should consult the committee, Nedlac and other parties.