as Chairman, presented the Report of the Select Committee on the Constitution (on the subject of the Black Local Authorities Bill [B. 60—’82]).

Report, proceedings and evidence to be printed.

Mr. Speaker, I move without notice—

Agreed to.

Mr. Speaker, I move—

During the Good Hope Conference held in Cape Town on 12 November 1981 the hon. the Prime Minister announced a strategy for regional development in Southern Africa which, inter alia, included a considerably improved package of incentives in a limited number of industrial development points away from metropolitan areas. One of the improved incentives envisaged was the conversion of the existing tax rebate in respect of approved training costs into a non-taxable cash allowance. At present industrialists in decentralized areas are allowed to deduct an additional 125% of approved training costs for tax purposes.

In the White Paper on the Information Document concerning the Promotion of Industrial Development as an Element of Coordinated Regional Development Strategy for Southern Africa, released on 31 March 1982, it was announced that an agreement had been reached between the Government of the Republic and the Governments of the national States on the promotion of industrial development on a regional basis. In this process it was decided to divide the country into eight development regions; a number of de-concentration and industrial development points were identified in each region; the level of industrial incentives, including the cash training allowance for every such point was determined; and it was decided that the improved incentives should come into operation on 1 April 1982.

As a result of the above, it became necessary to amend the Manpower Training Act, 1981, to make provision for the payment of a cash allowance in respect of approved training costs.

The Amendment Bill before the House makes provision for the payment of cash training allowances to employers in designated industrial development areas, under conditions determined by the Minister of Manpower with the concurrence of the Minister of Finance. The allowance will only apply in respect of courses approved by the Registrar of Training of the Department of Manpower.

It is important to note that the allowance may be made payable to any employer, except the State, and that the training need not necessarily take place on the premises of the employer or in the same area. It may even take place in a self-governing or independent national State.

Employers in industrial development areas in self-governing States will also qualify for the payment of cash allowances, but this will be arranged administratively with the co-operation of the relevant Governments. In independent States the administration of the allowance will be dealt with by the relevant Governments themselves, but the Government of the Republic will contribute a rand for every rand contributed by the State itself, while the Department of Manpower will provide technical assistance and advice in connection with the approval of courses if the relevant Governments require this.

Because the entire incentive package for industrial decentralization applies with effect from 1 April 1982, it is being proposed that the Amendment Bill, if agreed to, shall be deemed to have come into operation on that date. It is also the intention to pay the envisaged cash allowance for training instead of the tax rebate to all employers who have established themselves in the industrial development areas since 1 April of this year and have provided their workers with approved training. Employers who established themselves in those areas prior to that date will have a choice of claiming either the tax concession or the cash allowance.

Mr. Speaker, we have no trouble in supporting this Bill. In fact, we welcome it.

This amending legislation flows quite naturally from the Government’s announced plans for decentralization and de-concentration. Yet, we would be wrong to let this opportunity simply go by without underlining the new appreciation which the Government obviously has of the fact that South Africa has to be regarded as a single economic entity. This is something which—although on the face of it—sounds very easy to accept. It is something which the Government itself has found extraordinary difficult even to realize or to appreciate until now. Therefore it is with real approval that we note the developments which are taking place, and the amending of the Manpower Training Act, 1981, is simply one indication, one aspect, of the plans which will have to be unfolded.

There are a couple of points which I should like to stress. Firstly, the very fact that the South African Government is prepared to assist not only employers in South Africa itself, in this way, but also employers in the national States, and of course in the independent States as well, is indicative of the fact that, economically, South Africa, and indeed a very large part of what has now become Southern Africa, must be regarded as one entity. Further, the very fact that the Government is prepared to contribute a rand for a rand to the training schemes initiated by an independent State, is in itself an indication of how serious the Government regards the need for this kind of development, not only in South Africa but in the surrounding newly independent States as well.

The courses have to be approved by the Registrar, and we believe that this is a very sensible qualification. I should, however, like to warn the hon. the Minister against the possibility of red tape and delays. Even now employers already complain about the constant delays, almost ever-recurring delays, the red tape and bureaucracy that they have to contend with in order to take advantage of the schemes that are available and of the assistance that are available in both tax concessions and cash payments.

I should also like to ask the hon. the Minister a question regarding clause 3. This clause is, of course, the very heart of this amending Bill. The proposed new section 37A(l)(e) refers to a centre or scheme conducted in an area or territory. But nowhere is “centre” or “scheme” defined, and I should like to ask the hon. the Minister whether these two words refer to section 48 of the Labour Relations Act which lays down that industrial councils will make that decision, or that employers act with the approval of an industrial council, or do these words merely refer to paragraphs (a), (b) and (c) of the proposed new section? It is certainly not clear to me as it stands at present.

Sir, we welcome this further investment in training, and I am quite confident that employers, not only in South Africa, but in the adjoining States will take advantage of this. We believe that it should be retrospective to 1 April 1982, as it makes good sense. We also appreciate the choice that is given to employers.

For all these reasons we will support this amending Bill in all its stages.

Mr. Speaker, we on this side of the House are indebted to the official Opposition. Last year already they gave an indication in connection with all the package legislation that as far as labour and its regulation was concerned, they were adopting a very sympathetic attitude; in fact, a far more responsible attitude than in many other respects. [Interjections.]

There is just one matter I want to raise with the hon. member for Pinelands. He tried to drag a bit of politics into this by alleging that the NP had finally accepted the economic interdependence of the national States and the homelands, and that he considered it to be a positive step. However, this is not true. The NP has consistently adopted the standpoint that there is economic interdependence in Southern Africa. There were never any arguments about this. At an earlier stage there were arguments about development with White capital within the homelands, but in this regard the Government made its standpoint quite clear in later years.

The hon. member raised a few matters with the hon. the Minister and I assume that the hon. the Minister will react to this.

In my support for this measure there are just a few minor matters I want to mention. In the first place a great deal of criticism has been voiced and many questions have been asked regarding the positive results which were envisaged or were expected to flow from the Carlton and Good Hope Conferences between the Government and the private sector. This measure is one of the positive results. The Manpower Training Bill was discussed and passed by this House and discussed and accepted by the public with acclamation, but one aspect which in practice did not seem to be as enticing as it was held out to be in the legislation was the mere tax rebate as regards training costs in remote areas. For this reason the Government ought to be thanked and congratulated for converting the tax rebate into a non-taxable cash allowance. The major problem businessmen who are prepared to establish their undertakings at decentralization points, in deconcentration areas or even in the national States are grappling with is in fact the problem of manpower training and the costs involved. Last year we went on a tour of the TBV countries and this was one of the most general problems raised by industrialists with whom we came into contact, namely that if they established their industries there, they not only had to start from scratch but also had to deal with raw labour and that it would consequently take quite a few years before they would obtain the necessary productivity from their employees.

It is important that industries be kept labour-intensive in order to create as many employment opportunities as possible in the national States. For this reason industrialists must not lose hope if they show low production figures. We must try to prevent these industrialists from resorting to technological mechanisms. In other words, we must try to help them with regard to the training of manpower.

The existing legislation in respect of manpower training provides that in ordinary areas in South Africa industrialists can get a 100% tax rebate in respect of training costs. In decentralized areas, in other words, in remote areas and also in the national States, industrialists receive that 100% rebate plus a further 125% tax rebate in respect of training costs. They in fact receive this as part of the incentive on the part of the Government to promote decentralization of de-concentration, but particularly to promote development within the national States. The measure before us today still makes provision for a 100% tax rebate, but the industrialists are offered a choice between taking the additional 125% tax rebate or being paid out that tax rebate in the form of a cash allowance. I consider the payment of a cash allowance to be a very positive step, and I think industrialists will appreciate it as such. A company paying tax at a rate of say 42% will, instead of receiving R58 out of R100 as a tax concession for training, receive R58 by way of a cash allowance.

Eventually you will have to pay the people to vote as well.

That remark is typical of the hon. member and I shall not even react to it.

Any industry or undertaker who must start from scratch and with raw labour, has a tremendous disadvantage as far as productivity is concerned, and this cash which is now being given to him will help him immediately, in contrast with the tax rebate which will only have a real effect in two or three years’ time. As a matter of fact if a company is suffering a loss the existing measure merely creates a further loss instead of benefits. I believe this is now being rectified by the measure under consideration. That is why I believe this concession will be received with gratitude and appreciation by industrialists in remote areas. It is in the interests of South Africa that this money be obtained from the Treasury to pay the allowances, because the success of regional development in South Africa depends on the extent to which it is made attractive for the industrialist to decentralize. This measure is another demonstration of the earnestness with which the Government views decentralization and de-concentration in South Africa. The programme they have launched with a view to this, will receive tremendous impetus from this legislation. Measures such as those contained in this Amendment Bill contribute to encouraging and motivating industrialists in a constructive way to participate in this regional development programme.

The large metropolises can no longer carry the burden of everything which industrial development involves. The costs of transportation are becoming almost impossible, the costs of housing are becoming almost impossible and the influx of people to the metropolises of South Africa must be halted. For this reason it is a privilege for me to support this positive measure of the hon. the Minister.

Mr. Speaker, the CP, too, gladly supports this measure. I want to agree with what the hon. member for Turffontein said about this being a particularly good measure to encourage decetra-lization, to encourage industries and to encourage industrialists to establish themselves in the national States, etc. It is in fact an experience to go to the national States, to visit them and to find that labour is so readily available there. Actually, it is to a great extent incomprehensible why industrialists have so far been rather reluctant to participate in decentralization. The industrialist ought to be where the labour is. Since they are being given this additional incentive to establish their industries in the deconcentrated areas, we should like to support this measure. However, we also support the measure because it actually gives added impetus to the policy in which all of us believe, namely the policy of separate development. In this regard I want to cross swords with the hon. member for Pinelands, because although there is interdependence, in the economic field as well as regards the BLS countries, we are politically independent of one another. It is on this basis that we support this amending Bill.

Mr. Speaker, it is a pleasure for me to comment on the speech of the hon. member for Brakpan. On behalf of hon. members on this side of the House, I should like to congratulate him on the positive remarks he made in this connection. We know that he is very interested in this field and I think it can only benefit South Africa if, when we are dealing with training, the growth of South Africa and the prosperity of all the people of South Africa, we consider and discuss these matters coolly and clinically and determine what will ultimately be best for all of us.

I also want to make a single observation with regard to what the hon. member for Pinelands said. The hon. the Minister will probably reply to him as well. However, we must not confuse matters when we have to distinguish between Southern African economic interdependence and political independence in Southern Africa. The official Opposition is trying to cast these two things into one mould, and this is in fact where we differ radically from each other. It is true that the economies are interdependent. However, it is also true that as far as political affairs are concerned, we act in an independent and sovereign way, but we enter into agreements with one another. On the level of training, this Amendment Bill makes provision for ways of entering into a dialogue with national States, and also with States which have not yet attained their independence, by means of a contribution by the Republic of South Africa on a rand-for-rand basis to the training costs of workers in those States, if those States also contribute their share. I think this is a very meaningful provision in this measure.

I also want to associate myself with the hon. member for Turffontein, who identified very positive aspects in this Bill for us. He referred to the results of the Carlton and Good Hope Conferences. He also pointed out that there were tax rebates which benefited our industrialists. I know the hon. the Minister is also aware of the fact that in addition to all these wonderful incentives for industrialists in the border areas and also in the regional development area, there are still definite problems which we shall also have to take into consideration.

Although I know that this does not really fall under this hon. Minister, I want to refer in particular to the matter of transport concessions which have ceased to exist. People far from the large markets, are definitely being affected by this. I am referring specifically to a measure which has just been introduced by the Department of Transport whereby transport concessions have been reduced by 19% and whereby certain concessions involving the industrial sector and commerce, have been reduced by 20%. I am now thinking of a specific dealer in my part of the world. He is now losing 39% of the advantage he had last year or with regard to the previous package. I am asking that the hon. the Minister investigate this matter thoroughly with his hon. colleagues. I know this has already been brought to the attention of the Government, but I want to bring this specifically to the attention of the hon. the Minister and ask him with all due respect to give attention to this matter, along with his hon. colleagues.

I think it is also necessary this afternoon to make a few observations with regard to this measure as such. We must not forget that it is money which is involved here, and industries, and decentralization and de-concentration. In order to establish an industry which is productive and to have manpower which is trained, there are, in addition to the transportation of the processed products with regard to which there are certain concessions to which I referred, other matters which must also be taken into consideration, together with the entire question of training and training facilities, and that is the housing facet. In personal discussions with certain industrialists over a long period, it became apparent to me that one of the greatest problems at these industrial growth points where we have our training centres is the availability of subsidized housing—making housing available for the industrialist’s employees there. We are grateful for the fact that subsidies are being paid by the Government for the creation of housing schemes, but the industrialists are still battling when it comes to their implementation. This is a question of ways and means which are available and the channels through which they must work to be able to make use of these wonderful facilities which are available.

I just want to refer to this one aspect and then I should like to return to this wonderful amendment Bill, on which I should also like to congratulate the hon. the Minister. When it comes to the payment of training allowances, the Government now says with regard to certain aspects of training that on the conditions laid down by the Minister, and in consultation with the Minister of Finance and the Minister of Industries, Commerce and Tourism, certain areas are being identified as industrial development areas. These areas are available to any industrialist, no matter how large his enterprise is. Parliament is now able to make money available specifically for this purpose so that those identified areas can be developed. Development will also take place by means of training. There is no better way of achieving this aim than the way proposed by the hon. the Minister. The training allowance will be payable to any industrialist with regard to any training his employees are receiving or have received from a group of institutions, which are clearly spelt out for the edification of the hon. member for Pinelands. I have no problem with the interpretation of this matter. Mention is made of group training centres, private training centres, training schemes and a scheme or centre in terms of the Labour Relations Act, which have been approved and—this is an important addition—a centre or scheme conducted in a national State or a non-national State. Specifically in this regard new measures can be adopted regarding how this vitally important development can take place, not only inside our borders but also on and outside our borders. It is therefore not necessary for an industrialist to create these facilities at one of his industries to cause the training to take place there, he may also have employees trained elsewhere if this would be best for his industry.

Having said this, I believe that as far as the future is concerned we can feel optimistic about the elimination of a deficiency which existed at this level, namely the training by industrialists of their workers in specific fields which have now been identified. In this respect there will now be incentives on the part of the Government in the economic sense. I think we can look forward with optimism to the realization of the ideal of the Government to bring the policy of deconcentration into full swing in the deconcentration areas.

Mr. Speaker, firstly I just want to say that we support the plea which the hon. member for Brits made to the hon. the Minister with a view to finding a balanced approach with regard to finding solutions. For example, he referred to the necessity to look at housing, etc., as well. We support the hon. member fully.

†Needless to say, the NRP welcomes the legislation. It is something for which we have petitioned for a long time. We have pointed out that incentives should be provided for the training of skilled workers in South Africa. I think our record is well-known to all parties concerned. This is something about which we feel very strongly, and therefore we welcome the legislation in the same spirit.

Often very innocuous legislation or apparent innocuous legislation which deals specifically with manpower also has very wide ranging implications at the political and social level as well. The hon. members for Pinelands and Turffontein as well as other speakers have touched on this; in other words, the significance of the economic interdependence of all the regions of South Africa.

Is that so?

Absolutely, and the hon. the Minister’s legislation today confirms that fact. We welcome that and we are not opposed to it at all.

There is, however, also a political lesson to be learnt from the declaration of interdependence contained in the Bill, and that is that no matter how independent one makes regions of South Africa in terms of constitutions, one cannot get away from the realities of interdependence on the economic or social field. I think the time is ripe for the hon. the Minister to tell us whether the negotiations that were conducted with the independent States in an effort to reach agreement about this Bill were undertaken by the Department of Foreign Affairs and Information or whether the hon. the Minister’s department had interface negotiations with the Ministers of Manpower or Labour in the independent States. If the hon. the Minister’s answer to that question is that all the negotiations had to be undertaken by the Department of Foreign Affairs and Information, I believe it is time we made an appeal to the hon. the Minister to see to it that we start creating the necessary infrastructure for a Minister of one department in an independent State to be able to negotiate with a Minister in this State on a face-to-face basis, so that we do not have to channel all negotiations through the Department of Foreign Affairs and Information. [Interjections.] Perhaps the hon. member for Turffontein already knows the answer, but he will just have to contain himself and give the hon. the Minister an opportunity to reply. [Interjections.] There is now a very specific need to create the infrastructure for the confederation of southern African States, so that Ministers of different departments can sit around a table and negotiate on a face-to-face basis. My question to the Minister is whether, in fact, his department had an opportunity to have interface negotiations with those departments, or whether the hon. the Minister of Foreign Affairs and Information had to do the work for his department.

We also have a number of other questions for the hon. the Minister to reply to. The explanations are not only important to us, but also to the industrialists who are going to take advantage of the very excellent benefits provided for in this Bill. My first question to the hon. the Minister is whether the roughly R9 million provided for under the heading “Training of persons under special schemes” in the Estimates for the department—programme 4 on page 12 of the White Book—is the money that the hon. the Minister has in mind to provide the fiscal backup for this particular scheme. If not, perhaps the hon. the Minister could tell us how much has, in fact, been budgeted for the present fiscal year, in order to make provision for payments in terms of this amending legislation. The reason why I am asking that is obviously because the legislation is going to be retrospective to 1 April 1982.

This brings me to a further aspect about the training of people. We take note of the fact that the hon. the Minister’s department has provided us with a very excellent synopsis of Manpower Survey No. 14, dated 24 April 1981. We should, however, bear in mind that this legislation only refers to companies operating in areas designated as decentralized or growth areas, and that excludes a very large section of the existing, highly developed metropolitan areas of South Africa. The hon. the Minister’s departmental survey, which we welcome, indicates that in section B, that of artisans, there is an existing shortage of 27 000 people in the category of “artisans and apprentices”. Obviously that refers essentially to the metropolitan areas, but that must be a gross under-estimate for the real needs of the country, especially if one looks at the underdeveloped or developing areas of South Africa. I recently saw an estimate that indicated that for the whole of South Africa our present shortage of engineering skills is in the region of 50 000. When one considers that it requires R10 000 of development capital and infrastructure to train one artisan, one gets some idea of the magnitude of the fiscal requirements to catch up on the shortage.

From that stems my very next question to the hon. the Minister, and it contains two parts. Does the hon. the Minister visualize, in the light of the necessity to train skilled workers in engineering, that the schemes for the formal training of apprentices in any of the recognized skills—those of the boilermaker, electrician, welder, fitter and turner, toolmaker, etc.—would qualify as approved training schemes? In other words, if a company employs an apprentice for a period of, say, four years in order to train him to be an artisan, would all the training costs relating to that apprentice’s training possibly qualify for a scheme that would be eligible for rebates in terms of this legislation? That is of course the obvious answer. The obvious shortage in South Africa is a shortage of skilled engineering workers, of whom we have at least 50 000 today.

Secondly, in the growth areas visualized in the Bill, the designated decentralized areas, one very often does not have the source of raw material in terms of personnel to train to overcome these shortages. I am sure the hon. the Minister appreciates that. In other words, although a certain business may have been set up in the area of the hon. member for Brits, one may find that in that area—this often happens—there are not suitable applicants to be trained for skilled jobs. One then has to go to Johannesburg, Pretoria and Durban to find the source of raw material.

It is very unlikely.

It is very unlikely that one will find them in Brits, yes. Very few skilled people come from Brits. [Interjections.] Politicians, that is. One gets, for instance, mining companies and manufacturing companies with head offices in Johannesburg and branch offices or subsidiary companies established in decentralized areas. It is in the designated growth areas that there is a need for skilled workers and to have workers trained. If the company trains the worker in Johannesburg and then uses him in the decentralized area, would that company qualify? That is my question to the hon. the Minister. Would the parent company be able to claim the benefits provided for in this Bill if it trained the worker at its head office and then employed him in a designated decentralized area? Very often the source of raw material, the men to be trained, are not available in the decentralized area but are available in the non-decentralized areas such as Johannesburg, Pretoria and Durban.

Once again, my party welcomes these provisions. I may say that the hon. member for Jeppe of the CP seems to be very unsure of himself today. One can only ask oneself: Why? Does he anticipate certain difficulties coming up for his party fairly shortly when the hon. the Prime Minister makes his recommendations regarding the President’s Council?

Why are you so happy about it?

Are Blacks excluded?

I am supporting the excellent Bill we have before us today. In welcoming this Bill, I want to say in conclusion—this does not affect the hon. the Minister directly—that we know that the hon. the Prime Minister also promised South Africa at his Good Hope Conference, from which this philosophy stems, that section 3 of the Physical Planning Act would be repealed. That section deals very specifically with the employment of people in the current metropolitan areas. I should like to ask the hon. the Minister whether he can tell us what progress has been made with that, because it does affect the employment of people. That is why I am asking the hon. the Minister. What progress has been made since the Good Hope Conference towards the repeal of section 3 of the Physical Planning Act, which limits the number of people who can be employed in the metropolitan areas and particularly in the PWV area? Perhaps the hon. the Minister will be able to enlighten us on that.

I think it is abundantly clear that we support this legislation.

Mr. Speaker, I should like to begin by referring to the questions put to me by the hon. member for Pinelands. He asked me whether the words “a centre or scheme” also refer to the Labour Relations Act or only to the Bill before us. As the hon. member will know, the Labour Relations Act is not applicable in the independent States. Therefore those words only refer to the Bill before us.

*I just want to refer to the observation made by the hon. member for Turffontein to which various other hon. members also reacted. I thank the hon. member for Turffontein for that. I also thank the hon. member for Brits and the hon. member for Brakpan for what they said. The reference I have in mind is of course that regarding the interdependence in this connection, as well as the co-operation we want to try to implement in this way as far as training of people in South Africa is concerned, and of course within the national States as well. I feel that all three the hon. members who reacted to this were quite right. Of course the fact of the matter is that the legislation now before us is intended to be a practical measure, and to realize our intention—this has of course always been our purpose—of training people to make them prepared and capable of furthering economic development in South Africa. That is why we are adopting various measures of this nature. Consequently if it then becomes necessary to introduce incentive measures, we shall do so in accordance with the requirements of circumstances. The hon. member who made this observation should not see in this an obscure plan with ideological undertones. The fact of the matter is that in the past we went out of our way to train people and to provide people with the necessary education. This is a plan to improve this process. Nothing else should therefore be read into this but an honest attempt to provide those persons with the greatest need for it with the necessary training.

After all, the South African economy is built on a very large foundation of untrained or very poorly trained people—Black and Coloured people. We have said repeatedly that unless we can improve the quality of the work which is being produced and unless we can develop the abilities of our workers, South Africa does not stand a chance of competing with other countries. In addition we shall not be able to create opportunities for workers to earn a better living; or to have a better share in the economy. That is why these steps have been taken. I thank hon. members for the remarks they made in this connection.

I feel that the hon. member for Turffontein in fact argued quite correctly in this connection. However, in this connection I want to refer briefly to the hon. member for Brakpan. The hon. member for Brakpan made a statement here which was absolutely correct. The hon. member said that he felt that if we did not help the homelands in this way—and naturally it is our policy to do so—the question arises in what better way we can do so. This is quite correct. I feel that the best way in which one can help a country develop is in fact by improving the abilities of its people. I feel it is also correct that if we in fact want to assist the homelands, there is no better way in which we can assist them than by exporting to them or offering to them the opportunity to train their people. The training that is taking place is after all not only to the direct advantage of the homeland, but it is also likely that a large number of people who will be trained in the homelands will come to South Africa to work here. It therefore serves a dual purpose.

Now I should also like to refer to the speech of the hon. member for Brits. In this connection he also made a few observations, and referred, inter alia, to the other factors involved in the development of growth points. What he said was true. It does not only affect the question of the training of people; it is not only people who are involved, but also the additional needs which exist, for example housing, etc. When the Government must therefore give attention to the development of economic growth points, it must take all the circumstances, all the needs into consideration. As far as the Bill under discussion is concerned only one part of this is involved, however. However, I shall leave the matter at that for the moment. I want to give the hon. member the assurance that the Department of Manpower, because it is directly involved in this, is also very aware of all the other needs which exist, but that there is also tremendous co-operation between the various State departments involved with the aim of trying to satisfy all these needs.

†The hon. member for Durban North wanted to know whether the Department of Manpower negotiated with the national States on its own or whether such negotiations were channelled through the Department of Foreign Affairs. There are certain instances in which our negotiations are conducted through the Department of Foreign Affairs. Certain high level negotiations are, however, not only undertaken directly by the Department of Manpower, but I also personally participate in such negotiations. I can therefore give the hon. member for Durban North the assurance that the Department of Manpower maintains that it is very important to maintain the position of the department vis-à-vis the national States of such a nature that the department can conduct direct negotiations with the governments of the national States.

*The hon. member also asked whether the money would come from the almost R9 million voted in the budget for training. The intention is not to utilize those funds for this purpose. These funds will be used to train unemployed persons. A start has already been made with this and results have already been achieved.

In addition the hon. member also asked whether there was a possibility that assistance would be rendered in the case of the training of all artisans in all respects. I think the hon. member wants to know whether State assistance in regard to training will only apply when undeveloped people are being trained at growth points. However, this is not the case. The same assistance will be rendered for the training of all races, provided it is industrial training. A White or Coloured apprentice, from the far North to Cape Town, can enjoy the benefit of the assistance which the Government will render in this connection. This assistance, therefore, not only relates to growth points but is intended for the whole of South Africa. However, I want to point out that it is being made more attractive at the growth points and this is being done for a very good reason. This is being done because we specifically want to encourage training at the growth points because the need exists there. The cash payment therefore applies for growth points; this does not mean that assistance will not be rendered to people outside the growth points. However, it is important to take cognizance of the fact that provision is being made here only for the growth points.

I think that I have now replied to the most important questions and once again I want to thank hon. members most sincerely for their support for this measure.

Mr. Speaker, may I ask the hon. the Minister to react to a question that I put to him in regard to a company that has a subsidiary in a developing area? I should like to know whether such a company could transfer their staff and get the benefits.

This is actually a technical matter, but if I may reply to the hon. member’s question off the cuff, I would say that any training is covered by the legislation, irrespective whether the training is channelled from a head office. The intention of the legislation is to help industrialists with all their training. However, I shall have to consider the point raised by the hon. member, because the possibility exists that industrialists may channel the training of their people in such a way that they are able to enjoy a somewhat greater benefit than that intended by the legislation. However, the principle is to render assistance in connection with all training in the way contemplated in the legislation.

Question agreed to.

Bill read a Second Time.

Bill not committed.

Mr. Speaker, I move, subject to Standing Order No. 56—

Mr. Speaker, I want to thank the hon. the Minister for his reply to my question. The force of the question was whether it is possible for an industrial council existing in South Africa itself to make an agreement that will be binding on areas outside South Africa. That is really what I was after, and perhaps we could take it up some other time, because I think it is a very vital question.

I should like to make two brief, but I think very important points. Firstly, in the contributions by hon. members on the other side during the Second Reading debate it was stressed that the Government has always believed in decentralization and the interdependence of the various areas. The first point I want to make is that we have always agreed on that point. Where we have differed is that we have maintained that decentralization, or de-concentration if you like, should always be on economic and not on ideological grounds. That is why we congratulate the hon. the Minister, and indeed the hon. the Prime Minister, the Government, for moving in this direction.

Secondly, it is ironic that the further we push certain groups of people in South Africa constitutionally, the closer we seem to come in accepting South Africa as an economic entity—not merely interdependent—in itself. This is something we have tried to stress over and over again. I want to ask hon. members to take note of that. The further we push people out by constitutional means, the closer we are coming all the time, and this is one of the reasons why we support the Third Reading of this Bill.

Mr. Speaker, the question has been asked whether a binding agreement is being entered into by an industrial council in regard to a territory outside South Africa. The answer is “no”. An industrial council can only enter into agreements that apply within South Africa.

With reference to the hon. member’s final remark, I just wish to say that it is pointless our debating that during the discussion of this Bill. The fact is that we are here trying to place legislation on the Statute Book that is in accordance with a great deal of other legislation—I am not only referring to legislation which I have introduced—which is a continuation of the long tradition of improving the development of our people by way of training. This measure is only a part of that and I do not read any strong ideological overtones into it. That was not the intention then nor, indeed, is it so now.

Question agreed to.

Bill read a Third Time.

Mr.

Speaker, I move—

Since 1946, the principal Act has provided that persons who enter the Republic from other countries for the purpose of carrying out a term of service, are not regarded as contributors to the Unemployment Insurance Fund. This provision has meant that such persons entering the RSA from Transkei, Bophuthatswana, Venda and Ciskei after independence, were no longer regarded as contributors to the Unemployment Insurance Fund of the RSA. However, in the case of Transkei, Venda and Ciskei, an arrangement has been made by way of an agreement between States that the payment of benefits to former contributors within these States will be continued over a period of three years after independence. Bophuthatswana has decided to introduce its own fund and has accepted a non-recurring grant from the Unemployment Insurance Fund of the RSA, as well as the obligation to deal with all applications for benefits received from the date of independence.

The possibility of the establishment of separate unemployment insurance funds of their own in Transkei, Venda and Ciskei on independence was investigated thoroughly at the time, but due to the meagre sum it would have been possible to collect from contributions within these States, it became apparent that in the case of each of the States mentioned, separate funds of their own would not be economically viable.

The aforementioned arrangement presented a number of practical problems. Firstly, it meant that new entrants to the labour market who entered the Republic from the States mentioned to carry out a period of service, had no cover against unemployment. Secondly, it meant that the following persons could not further accumulate benefit credits: Persons who had been contributors before independence, and persons who contributed up to and including the expiry of their period of service which was in operation at the time of independence. Only for a period of three years after independence could such persons claim benefits calculated on the benefit credits which had already been built up. Thirdly, it meant that such persons found themselves in a less advantageous position than citizens from the same States who permanently reside in the RSA as far as unemployment insurance benefits were concerned.

In order to rectify this position, high-level talks were held with the Governments of the States concerned. These talks resulted in these States undertaking to establish their own unemployment insurance fund with the necessary administrative and technical assistance by the RSA, and to pay benefits to contributors who reside within the States and who are entitled to them.

It was also agreed that the RSA Government would consider amending the Unemployment Insurance Act, 1966, so that such persons could be regarded as contributors during their term of service in the RSA, and so that their own contributions, as well as the contributions of employers, would be collected by the RSA Fund and could be paid to the unemployment insurance funds of their Governments.

The proposed amendment provides that such persons from independent states may be regarded as contributors, by way of interstate agreements between the RSA and any other states involved, and that contributions may be paid to such States. This is therefore simply an enabling provision, and the commencement of any arrangement will take place by way of agreement.

In conclusion, I wish to point out that the RSA’s own fund is not affected by this arrangement, since what is being paid, are the contributions of employers and employees.

Mr. Speaker, die official Opposition will be supporting this measure, but I must say that I do have certain misgivings in certain respects. Those of us who were in the House when the legislation was passed which made allowance for a three-year period during which employees would still be regarded as being covered by the Unemployment Insurance Fund of the Republic, expressed the view at the time that it seemed unlikely that some of the newly independent States would be able to set up their own organizations and have their own funds. That has now been proven correct. The misgiving I have is that I hope very much that the agreement which is made between the South African Government and the several States concerned will guarantee that the amounts of money paid in by the contributor and by the employer of that employee will go to that employee concerned. I think it is very important to underline this, because this legislation is most timely. We are in a situation of fluidity as far as our industrial sector is concerned. We know that we have workers with different status in terms of citizenship often working side by side and therefore enjoying different and varying benefits.

Obviously this amending legislation is going to assist enormously in making sure that friction will not develop between the worker who is able to enjoy unemployment benefits, should unemployment come his way, and another worker who is doing exactly the same work but, coming from another area, would not enjoy those benefits. This measure makes it possible for there to be parity in terms of the employees, but if it should so happen that the employee from an independent State, for example, should find himself unemployed and that he has to return to the place from which he has come and there are long and endless delays in receiving that unemployment insurance, or not receiving it at all, then I believe we shall exacerbate the situation rather than ameliorate it. I hope therefore that the hon. the Minister will give the House the assurance that the agreement which is entered into by South Africa and the State concerned, e.g. Transkei or Ciskei or Venda, will be binding so as to ensure that the money that is paid over, the contributions by the employer and the employee, will be guaranteed to arrive at its correct destination, namely the employee concerned. If this is not done then we are going to experience very, very real problems.

May I ask a question? Can the hon. member suggest any sanction which can be included in the agreement that will come to force if the independent State does not comply?

Then, of course, the agreement will be rendered null and void. If an agreement is solemnly concluded between two independent States and one of those States does not comply with the terms of that agreement then the agreement falls away. It is as simple as that. My argument is that for the sake of our own industrial peace let alone for the sake of the employee concerned, we dare not enter into an agreement which does not have a guarantee in this regard. It is no good our simply making allowance for the money to be paid. We must insist that that money goes to the employee concerned.

Don’t you trust them to pay it over?

Sir, I do not know where that hon. member comes from but, wherever it is, I wish he would go back there! He knows nothing about labour, he knows nothing about management and he knows nothing about anything. Let us rather confine this discussion to hon. members who know something about the subject.

The argument I am advancing is based on the fact that there are many people in South Africa who very often qualify for unemployment insurance but who because of various reasons have never received that money. The same thing holds good as far as awards under the Workmen’s Compensation Act are concerned. We know that the difficulties in regard to distance, language and infrastructure make this impossible. It is a problem to which we have referred in this House on many occasions. All I am saying is that we are now extending the probability of nonreceipt of this money by means of this arrangement. I agree with it because I think we must have some sort of cover. Our basic disagreement is, of course, that we do not think that these States should be independent at all in which case this would not be necessary. However, because this is a fact, I believe it is right and proper that people who are employed here and who are assisting the growth of our industry in South Africa should be properly protected. I believe it is very much in the hands of this Minister and this Government to do just that. Although I am sure that that is what they are going to do, I should like an assurance from the hon. the Minister that that is what will happen.

The amending legislation refers, of course, to the principal Act, the Unemployment Insurance Act, No. 30 of 1966, as amended. When we look at section 2 of this Act which deals with the definition of “contributor”, it is interesting to note that the following persons who up to the present have been excluded are now being included, namely—

I think this is of enormous benefit to the individuals concerned. In fact, this is the major reason why we on these benches wholeheartedly support the Second Reading of this Bill with the qualification that I have already stressed.

I have another question I should like to raise with the hon. the Minister, and I hope he will reply to it when he replies to this debate. The States referred to in the hon. the Minister’s Second Reading speech are all newly independent States, but the wording in the Bill is “any other State”. I therefore assume that “any” other State applies in the case of people coming to work in South Africa. If that is the intention, I think it is a very good one.

Finally, let me say that I am very pleased about the fact that the Government’s own contribution is not going to be transferred, and I hope that here the hon. the Minister will also be able to give us the assurance that all the States concerned, as well as other prospective independent States—some of which are, of course, minute—will also be involved in the same kind of contribution, over and above the contribution made by the employer and the employee. As the hon. the Minister knows, every year we allocate a very large sum of money to the Unemployment Insurance Fund. I therefore hope that in the agreement we will have the assurance that the independent State concerned will have the necessary capital to ensure that there will not only be a contribution from the employee and the contributor, which the relevant State will then send off, but also the contribution from the State itself. Otherwise, of course, the scheme is not viable.

We are pleased that this amending legislation is before us and we support it.

Mr. Speaker, the hon. member for Pinelands put a few specific questions to the hon. the Minister, and I leave it at that, since I should like to comment briefly on the hon. member’s analysis of the measure before this House.

The hon. member commenced by saying that at the time when we introduced the three-year period, that hon. member’s party did, in fact, warn the Minister of the possibility that the three independent States concerned would not make the grade in respect of the establishment of their own fund. After all, one did not need a prophet to predict that. It was for that very reason that this Government introduced the three-year period.

Yes, but only three years.

Yes, for the moment. I am only talking about the three years. Once again this is an example of that party’s paternalism towards the Black people. Already at that stage that party and its followers wanted to decide for the Black people in South Africa who had chosen to become independent that this was not to their advantage.

I just said it was not viable, and I was proved right.

That hon. member must just listen for a while. I never interrupted him. There is one thing that hon. member cannot get away from, and that is that he always wants to look into the future to find occasion to say to the Black people: We told you that you were wrong at the time. The country to which they sent a delegate, the hon. member for Bryanston, turned out to be the country which became independent and established its own fund, and that fund still exists today! This, then, was the country where they tried to bedevil matters! I think the hon. member meant well when he said that he should like a guarantee from the hon. the Minister that the money we pay to those Governments by way of agreement will, in fact, reach the workers who are entitled to it. However, let us accept two things. Let us accept the integrity and the word of this Government that it will indeed be paid. That is one side of the matter. Let us, then, also accept the integrity and the word of the State to which the money is transferred, that that State will make every effort to ensure that the worker concerned receives it. It is at this point that the weakness in the argument of the hon. member becomes apparent. He is aware that in South Africa there are thousands of cases of people who, although they are entitled to an unemployment insurance fund benefit, and to moneys from the Workmen’s Compensation Fund, never receive it. Why not? They do not receive it because of distance, ignorance, misunderstanding, incorrect interpretation and so on, but the hon. member actually wants the Government to give a guarantee that this will happen somewhere in the bush in another country, whereas we cannot always even manage to do this in our own country, despite our infrastructure. This is foolishness; no one can argue in this way! What does the hon. member expect of the Government? That we should appoint inspectors in a foreign, independent country to determine whether the payments are made? I find fault not with the sentiments of the hon. member’s argument, but with its implementation. Surely the hon. member is aware that it is just not practicable.

I shall explain it to you.

The measure before this House—I thank the hon. member for Pinelands for his support in this regard—is an extremely positive one. It is true that since 1946 there have been those who have come to South Africa from abroad who did not have the right to belong to the Unemployment Insurance Fund when they came here to do contract work. Who were these people? They were people who either came on contract to the mines, or who came to South Africa to do construction work. They later returned to their own country, and they were denied these privileges. However, the position has changed with the establishment of our own national States, and that is why we are now creating the possibility for it to be transferable.

I want the hon. member for Pinelands to consider that the Minister is not bound by such an agreement. If we pass the Bill, there are still two safety factors built into clause 1. The first is that the Minister, if he should be approached by a country, is not obliged to enter into such an agreement. Secondly, the two countries can agree as to the category of worker who will be involved. What makes this even better, is the fact that it is expressly provided in clause 3 that this money cannot simply be paid to any Government; it must be paid to a Government in whose country there is an unemployment insurance fund. The built-in safety factor is, therefore, that it has to be paid to a fund.

This is an extremely flexible measure, a measure which lends itself to co-operation among states, not only with the national states or the self-governing states, but also with other states in Southern Africa. I think we should congratulate the hon. the Minister, the Director-General and his staff on so breif and compact a measure, which nevertheless entails such far-reaching implications.

It is right that we look after our workers, since this is how we project the image of “South Africa first”, but it is right, too, that we assist our neighbouring States to look after the needs of their workers, since a poor neighbouring State is not a good neighbour. It is even worse when, in addition, its workers are unemployed. South Africa is the generator of Southern Africa. We generate initiative here. We generate ideas here. Under NP rule, we shall also generate courageous leadership for Southern Africa. I therefore support the Second Reading.

Mr. Speaker, the CP also supports this Bill. I wish to associate myself to a large extent with the words of the hon. member for Roodeplaat with regard to the understanding which has been reached with the three States the hon. the Minister referred to, and with regard to the understanding which will be reached with other States which also wish to conclude such an agreement with the Government.

The hon. member also referred, inter alia, to the so-called paternalism of the hon. member for Pinelands. He said that he could not find much fault with the sentiment that the Government should guarantee that that money would be paid out to the employees. However, I think it is a veiled insult to the States concerned to ask them for a guarantee of this nature. They are independent States and they should look after their employees. I think they are capable of looking after their workers who are employed in other countries and I do not think it behoves the hon. member for Pinelands to express such a doubt in respect of the integrity of the States concerned.

We shall see what happens.

Furthermore, in reply to a question of mine, the hon. member said that if the State did not pay the money, the agreement would be null and void. The point is that if this should happen, the money will already have been paid to that State. What happens to that money then? What control does the Government have over that money then? It is therefore really a senseless argument, and it is a veiled insult to these States.

As I have said, the CP supports this Bill. However, there are just two aspects I wish to bring to the attention of the hon. the Minister in this regard, although they do not fall altogether within the scope of the Bill. Since an interstate agreement is being concluded with the national States as well, we have the problem that when workers come to South Africa under contract, they do not become unemployed, but simply disappear, after which one no longer has any control over them. This is not altogether within the scope of this Bill, but I just wish to ask the hon. the Minister to consider this aspect, since one receives many complaints in one’s constituency that people who are recruited in the national and independent States, come to the RSA, work here for a while and also qualify for unemployment insurance, and then disappear. There is no interstate method according to which one can clamp down on these people. It seems to me as if the penalty imposed on industrialists or employers who take those people into their employ, does not effectively counteract this practice either.

In conclusion, I wish to express a word of criticism. I believe that this Bill was already in the pipeline on 8 February when Act No. 1 of 1982, which also deals with unemployment insurance, was passed in this House. I find it just a little incomprehensible that we dealt with an amending Bill in February and that we amended certain sections again in May. With these few words, I support this Bill on behalf of the CP.

Mr. Speaker, I find that I can agree with the hon. member for Brakpan to a certain extent, particularly when he still adheres to NP policy. Where he deviates from it, of course, I cannot agree with him.

I think this legislation really represents a milestone in our relations with the independent States. Since this legislation now makes provision for salaries and wages earned in the Republic and deductions made in the Republic, to be paid to the States concerned, this creates funds for those States which may be put to good use. These are funds which, like our own Unemployment Insurance Fund, will surely not only be used to compensate contributors, as the hon. member for Pinelands suggested. They are also used productively by the State for its own financing purposes. I believe that in this way, the Republic of South Africa is contributing to the establishment of a fund in the independent national States which will greatly benefit those States. Of course, this will also be to the advantage of the employees. To try to suggest now, as the hon. member for Pinelands did, that the Governments of those national States should receive a guarantee that the funds will be paid out to the employees, to the contributors, is in the first place incorrect, since the whole principle of insurance, after all, amounts to the fact that one contributor contributes more than the value of the benefit he eventually receives, as opposed to another contributor who contributes less than the value of the benefit he eventually receives. It is therefore not possible for the Government to require the Governments of the national States to pay out the amounts of money they receive in this way to the employees, to the contributors. As I have already stated, I agree with the hon. member for Brakpan when he says that it is, in fact, an insult to the national States to demand such a guarantee from them.

However, I do not agree with the hon. member for Brakpan’s criticism of the legislation. After all, it is clear that what was agreed on in February, is not necessarily the same as what is agreed on in May or June. This legislation simply gives substance to an agreement which was made at a later date. What would therefore still have been contingent in February, is relevent now.

I wish to congratulate the hon. the Minister on this agreement he has reached with the national States. I believe that it will be to the benefit of the national States, and that it will be of great assistance to them, as well as to the employees concerned.

Mr. Speaker, I just want to react very briefly to the hon. member for Pinelands, and join with the hon. member for Brakpan by stating that we are totally mystified by his request to the hon. the Minister that the latter should try to ensure that the moneys transferred should ultimately reach the employee concerned. For a liberal South African, for a member of the PFP …

Left wing!

Yes, left wing. I find that very, very strange indeed. [Interjections.]

Why?

Is the hon. member for Pinelands suggesting that the majority of these contributions would not find their way back to the employee?

I want to ensure that they do receive that money.

But the hon. member for Umhlanga asked that question of the hon. member for Pinelands. That was when the hon. member for Pinelands reacted by saying that the hon. member for Umhlanga knew nothing about nothing.

Of course he does! [Interjections.]

What sort of argument to use. If one knows nothing about nothing, at least one knows something about something. [Interjections.] I believe that was not a very good remark by the hon. member for Pinelands. I should like to ask the hon. member for Pinelands: If circumstances were such that this scheme were to be extended now, in terms of the legislation, to KwaZulu, would the hon. member make exactly the same remarks?

Of course I would.

I am pleased to hear that. Then I should also like to ask the hon. member, besides cancelling the agreement, what sorts of guarantees did he have in mind? The hon. member can tell us that perhaps during Third Reading because he does not have the opportunity of doing it now. He should tell us what sort of guarantees he had in mind because the hon. member is aware, I believe, of the difficulties one has, even within our society, with disposing of all the benefits owing to employees in terms of workmen’s compensation. The hon. member mentioned that himself. It would be very difficult to fulfil such a request.

We in the NRP welcome this legislation as well. We shall be supporting it fully. We have very little difficulty with it, and I should just like to state that our attitude is that it is a sign of a further development in the Black national States. It is a sign of their maturing that they should now be looking at unemployment insurance within the framework of the type of unemployment insurance legislation that we have in South Africa. We also believe it is a tentative expansion of the commitment of those national States to private enterprise and capitalism inasmuch as they are probably opting for the same type of unemployment insurance legislation and benefits that we have in South Africa. That is what makes the national States and South Africa comparable, and also what makes it possible to have this transfer of benefits between the States. It is apparently following the philosophy of South Africa in unemployment insurance. I say that against the considerable difficulties that the national States are going to have, because they will come across exactly the same problems as South Africa when it comes to unemployment. The question arises when somebody is unemployed. A Black itinerant worker who has given up his work to return home to plough the fields, is he unemployed, or does he take AWOL? In other words, has he gone on leave to suit himself, having worked three or four months and then going back to the homelands for six months or more? This has always been a problem that South Africa has experienced in attempting to classify the number of unemployed people in South Africa, namely, who from an agrarian peasant society actually qualifies to be an unemployed person. I am merely stating this to illustrate that it is not going to be easy for the Black national States to adopt exactly the same system as we have in South Africa, although they are working towards that type of structure.

We welcome the fact that the Black national States are attempting to emulate us, because South Africa of all capitalist countries in the world probably has the lowest or minimum facilities for social security. Compared with those of all other countries, including the United States of America, Britain, Canada, Australia and New Zealand, our unemployment insurance facilities—if that were to be taken to be social security, and it is virtually the only form of social security that we have—are extremely low in quantity, and conforms to the minimum requirements. This, I think, will also apply to the national States, that they will find that these benefits are actually the minimum benefits one can give to an industrialized nation. However, very possibly they will be cushioned against the effects of unemployment within the national States because they still operate on the extended family basis, and this would hopefully prevent a considerable drain of the funds that the new fledgling funds have at their disposal.

Sir, we welcome this legislation, and we hope that those national States who embark on this course will continue to be supportive of the private free enterprise capitalist system.

Mr. Speaker, I expected hon. members who took part in this debate, to support this measure, since I believe that it is, in fact, sound and important legislation. I also wish to point out immediately that this legislation was initiated by us and that it is not being submitted on someone else’s initiative. We are submitting it ourselves, and for a very good reason, viz. because we realize that within the foreseeable future, there will be many more independent Black States than there are at present, and that many more people will come to work in South Africa, either on contract or as commuters. We will therefore increasingly be confronted with the situation where people work in South Africa, lose their jobs here, and then return to their places of residence and will then be unemployed there. If we do not make provision for this, industrialists who do not look after their people in times of unemployment, will, in any case, accuse us of unfairness. Therefore it is simply a natural development in our relations with the various states.

However, we are making a few additions. Firstly, the legislation provides that an agreement must be concluded between South Africa and these states. It is therefore not automatic, but is made possible by enabling legislation. An agreement is being concluded with the States, but we are also party to the agreement and it is South Africa’s duty to take note of that agreement. Part of that agreement will also be that there should be legislation to protect this fund. Furthermore, there must be the assurance that there will also be a fund, but we are going even further and say that we want the assurance that the machinery being created for the handling of this measure will be the same type of machinery as that which exists in South Africa. We have gone even further and have established an interstate committee which will attend to this. We are therefore not simply going to leave it at that, but in future there will be an interstate committee which will see to the application of the fund and it will ensure that this takes place in the way envisaged in the original legislation. There can therefore be no suspicion that a fund is being created and excess payments are being made which will not be looked after properly.

Hon. members who took part in the debate reacted almost unanimously to what the hon. member for Pinelands said. In the same spirit, I wish to say to the hon. member for Pinelands that he represents a party which is prepared to give Black people and Black states, particularly our own Black people, far greater responsibilities than those of looking after an unemployment insurance fund. It therefore surprises me that the hon. member, who is otherwise prepared to give Blacks greater responsibility, does not wish to trust them with such a fund. In addition I am of the opinion that we cannot offend any state—I am not only referring to States which have gained their independence from the Republic, but also to States outside South Africa, for example, Malawi—by telling it that we do not have the necessary confidence in it to manage its own affairs. In particular, we cannot say to them that we do not believe that they are in any way capable of dealing with something of this nature. If we cannot entrust them with a matter like this, what can we trust them with in future? I think that we are expressing confidence in the future of these countries by creating this fund. That is why I reject the hon. member’s insinuation that the fund may be dealt with in such a way that the money will not be used for the purpose for which the fund was established.

However, the fact of the matter is that we have now reached the point where we could make a special arrangement which is valued highly by the various states we have recently had dealings with. The hon. member for Brakpan put a question, a reasonable question, to me in this regard. He wanted to know why we submitted legislation to this House at the beginning of the year and why we did not dispose of this matter then. He wanted to know whether we could not have foreseen this. The fact is that we did not wish to force this matter through. Discussions were held with all the countries concerned and we did not wish to submit legislation before we had the assurance that the countries did not only feel the need for this, but that they were also prepared to conclude such an agreement with us. Because it was not clear at an earlier stage whether we would reach finality during this session, we went ahead with the previous legislation in the meantime. Fortunately, however, the negotiations made very satisfactory progress and we concluded the necessary agreements with all the countries. That is why we are now able to submit legislation to this House. The hon. member might not ask me why we do not wait for next year’s parliamentary session. The fact is that if we were to wait too long, there could be losses in contributions which could accumulate and be transferred in the meanwhile. That is why we are submitting the legislation to this House.

I think I have dealt with all the matters raised by hon. members. I also just wish to thank the hon. member for Roodeplaat for his clear exposition of the matter. I shall let that suffice.

Question agreed to.

Bill read a Second Time.

Bill not committed.

Mr. Speaker, I move, subject to Standing Order No. 56—

Mr. Speaker, I hesitated as to whether I should ask for the Committee Stage, but in order not to delay the House unduly I thought I would deal during the Third Reading with some of the comments made by some hon. members on remarks which I made in the course of my Second Reading speech. I want to say that I make no apology whatsoever for what I said at that stage. Indeed, the remarks by the hon. the Minister, if they were listened to at all by some of his own members, would have given them understanding as to why I in fact made those very remarks which I have made.

The hon. the Minister in his reply indicated quite clearly that as part of the implementation of this Bill there has to be an agreement and in the course of drawing up that agreement the Government is going to seek certain assurances. Firstly, there is going to be legislation in the states concerned. Secondly, there is going to be similar legislation obtaining in this country; in other words, we cannot trust them to do that; it must be based on our own. Thirdly, the assurance will be given that the countries concerned will have those unemployment insurance funds available. Those are the exact guarantees that one asks for. I ask the hon. the Minister whether he will give this House the assurance that there will be the necessary infrastructure to guarantee—with the qualification which I shall come to in a moment and which I myself made, incidentally—that the money which is owing to the contributors will actually find its way into their hands. I do not think that there is anything wrong in asking for that assurance. I think we would ask for exactly the same assurance for our workers in this country. We believe that they must be protected. We believe that there must be legislation to ensure that wherever possible unemployment insurance benefits get to the people concerned. That is one of the reasons why advertising takes place. That is also one of the reasons why every employer—they do not always do so but they should—must keep adequate records so that these people can receive the benefits which are due to them. After all, they have been making contributions. Why then should the hon. member for Durban North be so mystified? Why should other hon. members suggest for a moment that I am insulting these states? [Interjections.] I shall tell hon. members one of the reasons why.

First of all, the hon. member for Umhlanga was so upset by my reaction to him that as the Whip for that party he instructed the hon. member for Durban North to have a go at me, to put me in my place. It was a nice try, but he really made a fool—if that is possible because I think somebody else got in before him—of the hon. member for Durban North. That hon. member’s definition of a liberal is wide off the mark. He seems to suggest that if one is a liberal, and “nogal” a left-wing liberal, then anything that a Black man does must be right and everything that a White man does must be wrong. That is the stereotyped caricature of the old idea of a liberal. It is absolute rubbish. I want to make it very clear to that hon. member as well as to the House that we believe that one goes according to merit in every instance. In every newly independent state—whether it be Angola, Mozambique, Zimbabwe or Transkei; it makes no difference whatsoever—that infrastructure should be there. The protection should be there and if people abuse that protection and they are in charge, whether they be the president, the Governor-General or anything at all, whether they are Marxists or whether their system is based on private enterprise or, indeed, if they are racists, I believe they should be called to book. There is no doubt about that at all.

You are a racist.

The hon. member for Brakpan has so little understanding—he is still trying to inch his way into the 20th century—that he does not really understand what is going on here. I have great sympathy for him. In fact, it is quite clear to me that he is actually moving towards the 19th century. I appeal to that hon. member to turn around and to come into the 20th century at least.

I believe you are going to your downfall.

I believe that the reason why we are introducing this legislation and why it is before this House is that there are certain employees who will come from recently independent states into our economy and will be working here. Therefore, for two major reasons this legislation is vitally important. If it is undermined in any way the benefits which are apparent in this legislation will not be implemented. What are these reasons? Firstly, that in our own self-interest the economy should be stable in every possible way so that if we make a provision we must ensure from our side—and I think the hon. the Minister has made it clear that the Government will do that and that is the assurance that I sought—that this scheme will be viable. The hon. member for Roodeplaat made the point—and I agree with him—that a neighbouring State which is poor, is a bad neighbour. Therefore we should do everything we possibly can to support and strengthen one another. If there are a large number of employees coming from neighbouring States—and there are—and if they have not been given an absolute assurance that as far as is feasible and possible the scheme is going to work, we are going to create further instability in that State which is something we do not want. Therefore, in order to maintain stability in our own interests and in order to maintain and encourage stability in neighbouring States that are affected by this legislation, I believe it to be of the utmost importance that every effort be made to ensure not only that this Bill is passed by this House but that the agreements, when finalized, will make every provision to ensure that the infrastructure is available and that the insurance fund and everything else that is required is there to make a success of this legislation. After all, the discretion which the Director-General has, is very limited. Once the fund has been established and the agreement has been concluded, he has no further discretion. That is why I say that the discretion must be built into the agreement. That is also why I made those remarks and I stand by them. We support the Third Reading of this Bill.

Mr. Speaker, I think it would be meaningless to cover once again the whole field that has just been covered by the hon. member for Pinelands. The hon. member reacted to a few remarks I made. I just wish to repeat that if in future we wish to enter into agreements with various States to promote economic development, then that means that we must trust one another in this sphere, because if not, we shall not be able to give the independent States that confidence in themselves. For its part, the Government is doing everything to assist these States not only to establish their fund but also—I omitted to say this a moment ago—by making staff available for the training of their own people.

There is another way, too, in which we can help. There is equipment—here I have in mind computers, for example—which we do not require at present and which is therefore at their disposal and can also be used to train their people and to be at the service of their own States and the development of their own scheme. However, the important point is that we have reached a stage at which we can co-operate with one another in this way in this important sphere and in which we can also assist these States to look after their own people in the same way as we should have looked after them if they had worked here with us.

I think this is a memorable day, in that we can ensure in this way that these agreements can be entered into.

Question agreed to.

Bill read a Third Time.

Mr. Speaker, when the debate was adjourned last night, I was outlining the reasons why we were opposed to clause 7. I said that we believed that it infringed the basic rule that Parliament should control all taxation, certainly wherever possible and except in very exceptional circumstances. This particular provision will enable a very important element of taxation, namely GST, to be left in the hands of the executive, It will not in practice be subject to the control of Parliament until such time as it has already taken effect. I want to reiterate that in this respect this measure will make it impossible to repay the tax to the people who paid it in the first place if Parliament declines to pass the measure.

We are opposing this measure because we believe that it will be bad in practice as well as in principle.

Mr. Speaker, the Bill before this House seeks to amend the Sales Tax Act, Act 103 of 1978. The legislation now before this House is aimed primarily at eliminating beyond any doubt certain problems and deficiencies which have presented themselves in practice.

In the first place the deficiencies in the principal Act have been identified and the Bill contains certain provisions aimed at rectifying them. I do not intend to comment on all the clauses this afternoon, because I feel that previous speakers dealt very clearly with every clause.

As has also happened with other laws, certain loopholes sometimes arise. It is only when one is applying the legislation in practice that one becomes aware of the loopholes in it. This was also the case with the legislation we are now discussing, and for this reason the Bill was submitted with a view to eliminating the problems.

It also happened that a double payment of sales tax occurred. Of course this is unfair to the person responsible for the payment of the tax. This deficiency is also being rectified.

As far as the withdrawal of a registration certificate for sales tax is concerned, there were cases where people got away with this and consequently evaded paying tax. In terms of the provisions of the principal Act as they now stand, they are still succeeding in evading the tax. The uncertainty in this connection is now being eliminated in that two circumstances which contributed to the tax evasion are now being eliminated.

There is also the matter of the payment of tax pending an appeal. In this connection a percentage of the tax is paid. To date this has been 7,5%, but it is now being increased to 10%. However, this leads to a consequential amendment to a subsequent provision which deals with persons who pay less tax than they are liable for. The rate of 7,5% payable in that case is also being increased to 10% now.

The hon. members for Yeoville and Cape Town Gardens are experiencing many problems with clause 7. I think it is necessary for us to consider for a moment what the proposed amendment seeks to achieve. It is quite clear to me that it is because this involves greater power for the Minister, that the official Opposition is not in favour of it. However, we do not find this strange because the official Opposition has no confidence. It is owing to its lack of confidence that they are objecting to the clause. What clause 7 seeks to achieve can be quoted as follows from the Explanatory Memorandum—

1. (a) any proposal tabled in Parliament for an increase in the rate of sales tax; or
2. (b) any proposal by the Minister for a decrease in the rate of sales tax,

so as to give to any such proposal the force of law until the promulgation of an Act passed by Parliament during that session giving effect to the proposal, or until other provision is made.

As sales tax affects virtually every person in this country, it is desirable that the general public be informed of any change in the rate of sales tax by means of a notice in the Gazette.

This is the amendment, and we on this side of the House have no problems with it.

This afternoon I must react to the speech of the hon. member for Yeoville in his absence. However, I want to say to him: “Practice what you preach”. Yesterday evening the hon. member had many things to say here about the payment of sales tax. I think for the sake of the record I should just indicate this afternoon what the reaction of the hon. member for Yeoville was when the hon. the Minister walked out of this Chamber. It is noticeable that yesterday evening in his speech for the third time during this session the hon. member launched an attack on that hon. Minister and his department on sales tax.

Not on his department. No way!

I should like to quote from Hansard of 25 February 1982, col. 1691—

I find it very interesting that the hon. member for Yeoville is conspicuous by his absence in this House although he knew …

You know perfectly well why.

As far as I am concerned, no reasons were given. [Interjections.] I think that hon. members on the Opposition side should take cognizance of this. [Interjections.] As the main speaker of the Opposition party the hon. member for Yeoville once again used this legislation and this platform yesterday to try to get at the Government, to try to show that this Government does not have any sympathy with people in the lower income brackets and our pensioners. However, he knows that he was speaking for the benefit of the Press gallery. I therefore feel it is necessary that we indicate once again here this afternoon—also for the sake of the record—that it is not easy for the Government to take decisions on tax increases. This only happens after thorough and serious consideration. I looked up in Hansard what the hon. member for Yeoville said here yesterday evening. Yet again he tried to prove that the Government is not interested in our people who are having a hard time because of inflation, and does not care about them. However, the hon. member for Yeoville and his party must take cognizance of the fact that this Government increased pensions by R154,4 million for the 1982-’83 year. The bonuses paid were also increased by R47,3 million, and civil pensions by R66,4 million. This was for that one financial year.

As far as housing is concerned, it is very easy to say that we should provide housing. However, I feel we should take cognizance of the fact that the housing provided by the State is mainly intended for those people in the lower income bracket who are experiencing problems. In the 1981-’82 year, R258 million was spent on housing, and in the 1982-’83 year R330 million. There was therefore an increase of 28%.

We can also consider the increase in subsidies. Yesterday evening the hon. member for Yeoville insisted that we should increase food subsidies. Allow me to single out one subsidy. The subsidy payable on bread for the 1982-’83 financial year was increased by R45 million.

What? No way!

It would be better if the hon. member for Port Elizabeth Central kept quiet. When this legislation was debated in this House in 1978, he was still a member of the NRP, and he then made fun of the behaviour of the hon. member for Hillbrow, but today he is in the official Opposition and now the hon. member for Hillbrow is his Whip. He had better keep quiet about this.

Now the hon. main speaker on the Opposition side has moved an amendment which amounts to their not being prepared to support the Second Reading of this Bill until such time as the Government decides to exclude foodstuffs from general sales tax. However, these people conveniently forget that the Government must also take cognizance of the attitude of the commercial sector. In this connection I want to refer to a report which appeared in the Rand Daily Mail on 26 February of this year. Let us see what people in the commercial sector say. I am quoting—

We also know that an official of the department reacted to that. It is all very well for a man like Mr. Raymond Ackerman to say that it is possible, but when that report was published Mr. Mickey van der Walt also mentioned the many smaller business undertakings which simply do not have the cash registers to make it possible to single out those items. Those increased costs will in turn become the responsibility of the consumer. The official Opposition is launching attacks against the Government in this House. However, the increased sales tax channels R600 million to the Treasury in a single year. None of the speakers on the Opposition side gave this House any kind of indication as to how we should supplement this amount if we make this concession. We do not get any positive contributions and proposals from the official Opposition.

Let us just consider whether the sales tax in South Africa compares favourably with that in other countries. I think we should also take cognizance of this. In Kenya sales tax totals 21% of the State’s income. In Ghana it is 22%, in Egypt 43%, and in India 35%—as against 12% in South Africa. Should we therefore not be grateful for the fact that the Government has contributed to the tax in the Republic being kept as low as 12%? I think one should take cognizance of this with gratitude and appreciation. However, since we are now moving towards a new dispensation, and because we must do so with an Opposition such as the one we have in this House, which is not prepared to contribute its share, I foresee problems for us in the future. However, the NP will accept the full responsibility for the governing of this country. I know that we do not have any problems in the NP. [Interjections.]

Just ask Andries!

The hon. member for Yeoville alleged that the NP Government was hiding behind the officials of the Public Service, and that the Government would have to bear the full responsibility for this in the future. I just want to react to this afternoon by telling both the official Opposition and the other Opposition parties in this House that they can rest assured that the NP and the NP Government is governing this country. For this reason things will go well. The NP will in future serve the interests of all the inhabitants of the Republic of South Africa.

Mr. Speaker, to begin with I just wish to put forward a few brief ideas. The Commissioner of Internal Revenue and the Commissioner of Customs and Excise spend weeks drawing up very comprehensive explanatory memoranda which are then made available to hon. members of this House. The reason we do this is that financial legislation of this nature is very complex and is often very technical as well.

However, it goes further than that. We have meetings with hon. members of the Opposition parties, and they spend as much time as possible with the officials of the commissioners mentioned, in order to be fully au fait with each clause of such legislation and what it means. Once again the reason for this is the highly technical and complex nature of the legislation. I believe that the aim of the discussion, of the provision of information to hon. members, is to ensure that a meaningful debate on legislation of this nature can take place in this House, so that we can debate with one another meaningfully as regards the technical aspects and the financial aspects of legislation of this nature. While we are now dealing with the third piece of legislation of this nature in the past two days, I have an uneasy feeling that hon. members of the Opposition are misusing this information we make available to them in order to conduct petty political debates in this House. [Interjections.] I believe that this is not our aim as regards the discussions and the information we provide them with. I do not want hon. members of the Opposition to regard this statement of mine as a threat that in future we shall cease to make information available to them, or that we have any wish to refrain from discussing these matters with them; on the contrary, we should prefer more discussions to take place on legislation of this nature. However, I just wish to put this thought to them, so that when in future we deal again with legislation of this nature, we do not use the information we obtain in this way in an effort to win petty political arguments across the floor of the House. When we do so, we fail to achieve the aim of the hours, days and weeks spent on making information available to hon. members.

†The hon. member for Yeoville informed me last night that he would unfortunately not be here today. He apologized for his inevitable absence, and I accept his apology. The hon. member, however, moved an amendment stating that the official Opposition would ask that the House decline to pass the Second Reading of this Bill unless and until the Government undertook to abolish the Sales Tax payable on basic foodstuffs. I believe we can call this a hardy annual, because whenever possible the official Opposition comes along with the very same request. Therefore I should like to deal with this specific aspect in detail in an attempt to convince hon. members of the PFP that there are specific reasons why, in the light of our current general sales tax rate, this cannot be done. It does not mean that we are not considering it. We have considered this on many occasions.

Are you still considering it?

We will continue to consider it, but at this stage we believe that it cannot be done, and I want to deal with this in detail.

The reasons for and against exempting foodstuffs and the so-called basic foods in particular, have been canvassed on numerous occasions in this House. The only cogent reason that has been advanced for the abolition of the imposition of sales tax on foodstuffs is that in the absence of such an exemption the incidence of the tax is greater on those in the lowest income groups. That was the argument advanced by the hon. member for Yeoville as well. However, while such an argument may hold good when only the taxing side of the budget process is viewed, when the benefits of the expenditures which this tax supports are taken into account, the net effect should be an improvement in the welfare of those people on behalf of whom the exemption is advocated. Even if the taxing side of the budget process is taken in isolation, it is still a moot point as to whether an exemption from sales tax on foodstuffs would be of substantial value to those in the lower income groups in particular and to the economy as a whole, for it is extremely doubtful if such a concession would take place.

The first important result and effect of such an exemption is that it would cause a loss in revenue. It has been estimated that the exemption of food would cause a loss of between 15% and 20% in the total revenue from sales tax. The available information indicates that in our own situation a 15% reduction in revenue from such a source would amount to approximately R496 million and a 20% reduction to approximately R663 million. While it is conceivable that a loss in revenue of such magnitude could be recouped either by increasing the rate of sales tax on other goods or increasing the individual and corporate income tax rates, I firmly believe that such a move at this point in time would be unwise because of the stifling effects it would have on our productivity, our total output and real income to meet our pressing economic and social needs.

The second important factor that would have to be considered is that an exemption of foodstuffs would cause a major administrative problem. The delineation between what should constitute exempted food and what should not, would first of all be extremely difficult to determine. What rationale can there be for exempting meals in expensive restaurants on the same footing as meals served to employees in canteens? Furthermore, because supermarkets and many other shops carry food and non-food items, the retailer would first have to distinguish between sales of exempted and taxable commodities and then have to report such sales separately. Experience in those States of America that exempt foodstuffs has shown that for clerks to ring up the two types of items properly involves additional time, it is a nuisance and mistakes are numerous. While investigating the working of the sales tax system in the United States prior to introducing it in South Africa, one of the problems always encountered by the Commissioner for Inland Revenue was the defining of exempt commodities, thereby the identification and accounting by the vendor and the subsequent audit problems for the department. The additional administrative work involved would undoubtedly result in increased cost to the vendors, who, because they could hardly be expected to absorb such costs, would in all probability seek to recoup the added costs by increasing prices which would result in the benefits from a concession being cancelled out. On the other hand, with broad-based sales tax as we have at present, the necessity of complicated procedures and accounting is kept to an absolute minimum.

*Our basic philosophy is that we want to keep our sales tax as widely-based as possible for as long as possible because the wider the base, the lower the rate at which the tax can be held. Accordingly our aim is to make the base of our entire income tax structure as wide as possible so that the tax can be kept as low as possible for as long as possible. The impression has been created that we decide in a casual fashion on specific income tax structures. I wish to say today with all the force at my command that that is not so. Our tax structure as a whole is considered. The State has a specific need for funds and these funds have to be tapped from specific sources. These sources are approached as a package and are not considered in isolated compartments. Income tax on companies and individuals and sales tax are not, therefore, considered separately in watertight compartments but are seen as a total tax package. The hon. the Minister of Finance has often said that we must consider the total tax structure and that we should not, therefore, consider certain aspects of taxation in isolation.

†Mr. Speaker, the hon. member for Yeoville made certain remarks in respect of advertising services. I think it is important that I deal with this in some detail. The hon. member had difficulty with the words “to the public or a section thereof”, in clause 8, on page 13. He wanted to know what was really intended by “or a section thereof’. One must look at these words in their ordinary meaning. For instance, housewives are certainly a section of the public, and an advertisement for kitchenware would no doubt be aimed mainly at them. There are also other sections of the public which are easy to recognize, e.g. garage proprietors, hotel people and farmers. Many advertisements are directed only at these sections, e.g. tractors for agricultural use. The hon. member used the example of a public relations firm whose activities are directed towards an individual firm. The question is: Is this advertising? It surely depends upon how this is done. If a public relations firm merely writes to the other firm extolling the virtues of the goods or services on offer, this is no doubt a form of advertising in the ordinary sense. As the Bill reads, however, it is doubtful if this by itself is advertising. If the public relations firm at the same time sends all its literature on the goods or services in question to a number of firms in the same line of business, then it is surely dealing with a section of the public. One must be careful, however, to distinguish between the functions of a mere salesman and those of an advertiser. It is not the intention that an activity extolling a particular product, should be treated as advertising. It is not the intention to limit the provisions unnecessarily. The hon. member mentioned the case of a person addressing a letter to every member of Parliament inviting him to buy a book. As the amendment reads, it does certainly seem that a mere letter in these circumstances would not be an advert. As has already been pointed out, there are certain difficulties. It is probably a matter of degree whether some of the activities which have been referred to are advertising, salesmanship or something else. The question of what exactly constitutes advertising, together with other problems, will most certainly receive our attention during the recess in conjunction with the advertising media.

Mr. Speaker, may I ask the hon. the Deputy Minister a question for clarification? When a company instructs an advertising agent to place an advertisement in a newspaper, the newspaper bills the advertising company for the space bought and the advertising company then bills to the company. In terms of this clause, would the cost of the space bought in that newspaper attract sales tax?

I would like to give certain confirming replies to that question, but I want the hon. member to accept that in the recess, in the months that lie ahead, these aspects will be defined with the advertising media in detail before final decisions are taken. The examples that I referred to in my reply to the hon. member for Yeoville were merely intended to give an indication as to what sort of problems would have to be met. I therefore ask the hon. member to accept the fact that these different forms of advertising possibilities will be discussed in detail with the advertising agents and media in the months to come.

*The hon. member for Yeoville also had difficulties with clause 6, the clause in which we make certain proposals in regard to sales tax when contracts are involved, in other words, when sales tax is either increased or reduced during the implementation of a contract, e.g. the contract for the construction of a house. We understand the objection in principle of the hon. member for Yeoville, and when clause 6 is discussed during the Committee Stage we shall look at it in more detail. We are even prepared to propose an amendment in this regard.

In the absence of the hon. member for Yeoville I shall react in detail, for purposes of the record, on the statements he made. He also objected to the possibility that we would impose tax on services. He referred specifically to legal advisers and advocates and asked whether we were going to extend the tax to services. In general I wish to state that as far as sales tax is concerned, consideration is constantly being given to the possibility of adjustment or expansion. This is considered on an on-going basis. It is possible that we may extend it, but I do not wish to say at this stage whether we shall in fact include services. What can be said, however, is that we wish to keep extending the scope of the tax structure and keep it as low as possible. Accordingly, any type of service rendered is given constant consideration.

†The hon. member also referred to an exemption that is being provided for in this legislation namely in respect of grit used for blasting the hulls of ships undergoing repair. I want to refer very briefly to this by saying that the ship-repair industry has made representations for the exemption from sales tax of the grit they use. The use of grit in the ship-repair industry constitutes a substantial cost component and the imposition of GST on this input would, it has been urged, discourage foreign ship owners from having such repairs carried out in the Republic. The ship-repair industry is said to be highly competitive and the imposition of a tax which would affect that industry should be avoided. That is why we have included grit for the ship-repair industry in the exemption list.

*The hon. member for Overvaal is not present. He apologized for this and I just want to say that the hon. member made a very comprehensive and supportive speech and I wish to thank him sincerely for it.

As far as the contribution of the hon. member for Langlaagte is concerned there is just one remark I wish to make. There is a tendency nowadays in any debate for one or other religious or Christian aspect to be dragged in. With regard to the tax on advertising the hon. member again used the example of advertisements for church bazaars. I really think we must make an appeal that the church should not be dragged into these matters. We should rather use other examples. [Interjections.] I want to give the hon. member a short and businesslike answer. The pamphlets by which a church advertises a church bazaar are not subject to sales tax. [Interjections.] Those hon. members are terribly sensitive in this regard. I, too, am sensitive about this and I accordingly appeal to hon. members not to drag the church into these matters.

What would the position be if the Voortrekkers were to issue a pamphlet?

Mr. Speaker, if the Voortrekkers were to issue a pamphlet then that would not be subject to sales tax either.

The hon. member for Langlaagte also referred to the major problem of whether the tax should be inclusive or exclusive. The hon. member asked that we should only apply the inclusive system and that we should drop the exclusive system. He asked that the inclusive system be applied because the exclusive system gives rise to deception. Am I right in my interpretation of what the hon. member said?

You are right.

I want to say here and now that I do not think that statement is entirely correct. I shall tell hon. member why I say this. If we implement the inclusive system, the purchaser will have still less control in regard to the percentage increase included in the price of the product of the purposes of general sales tax. He would then have no indication whatsoever of the percentage of general sales tax included. He would only see the final price, and that would be the price he would have to pay. When the exclusive system is implemented, then he at least has an indication of what the percentage of general sales tax is. [Interjections.] Surveys show that both dealers and the public are at this stage still divided as to what system is the best for them. Therefore it is a system which the commercial world will have to settle within its own ranks. The trend is to exclusivity, because then more people can see how much tax is included, and it is not hidden. That is the trend to be observed at the moment.

The hon. member for Langlaagte put an interesting question when he asked why the Bill provided that it was only in the case of mines that the rendering of service was exempted from sales tax. My concise reply is that the hon. member’s statement is not entirely correct. The rendering of service is exempt in the case of industries, farming and various levels of the economy where there is a possibility of double taxation. Therefore it is not the case that it is only exempted in the case of mines.

I thank the hon. member for Amanzimtoti for the support he gave the Bill on behalf of himself and his party. He also referred specifically to the issue of double taxation. He said that we should under all circumstances try to prevent an element of double taxation from entering the price of commodities. I want to give the hon. member the absolute assurance that this is one of the aspects of sales tax which keeps the Commissioner for Inland Revenue and his staff very busy. They are constantly examining the possibility of double taxation. If they become aware of anything of this nature they put forward proposals to eliminate it. The very fact that this Bill is before us at present is evidence that there is constant investigation of this matter on the basis of complaints received. Efforts are made to eliminate double taxation as far as is humanly and practically possible. In this regard I should like to refer the hon. member to the following extract from my introductory speech, which I wish to quote because I think it is important that it be quoted in the context of the hon. member’s question—

I think this is the fundamental principle on the basis of which we deal with this aspect. I hope that satisfies the hon. member.

I thank the hon. member for Middelburg for his support. He performed a statistical calculation, but then the hon. member for Cape Town Gardens attacked him and performed his own calculation. I say to the hon. member for Cape Town Gardens that one can juggle with statistical calculations. Just take the following example: If one has bought something for R100, then according to the old system one paid R4 in GST. In terms of the new system one pays R5, viz. R1 more on R104. Therefore, if one calculates on a statistical basis how much more one pays, the answer is 0,956%. Therefore one can really juggle with this kind of thing.

But the tax has gone up by 25%. [Interjections.]

However, I do not think there is any point in climbing down one another’s throats in this regard. [Interjections.]

The hon. member for Cape Town Gardens is going to move an amendment to clause 7 in the Committee Stage, and when we discuss clause 7 during the Committee Stage I shall react to that further. However, what I want to say about clause 7 at this point is that I do not intend granting more powers to the hon. the Minister. During the recess the hon. the Minister has full power to announce any sales tax, as along as it is agreed to by way of legislation in the next Parliamentary session, and from the date the hon. the Minister of Finance announces that tax, it is implemented. All we want to do now is to streamline Parliamentary procedure to a greater extent. We are not giving the hon. the Minister any additional powers. We only want to make Parliamentary procedure more streamlined. However, a precedent is not being created either. After all, there are other indirect taxes, too, that are dealt with on the same basis throughout the year, for example, Customs and Excise levies on tax that are only announced in the Gazette and are imposed from that moment. However, the hon. members have a problem: If Parliament does not approve that tax, will the additional amount which the consumer had to pay, be repaid to him? But we need only look at other taxes. They are often reduced, or even abolished, but after all, they are reduced or abolished from a certain date, and no-one gets back the money they had to pay before that date. A new tariff is introduced from a specific date and it is then increased, reduced or even dispensed with, but what happened in the past is not relevant.

I think I have replied to most of the speeches by hon. members. I thank the hon. member for Witbank for his support of this legislation. I think the hon. member for Witbank, too, discussed the issue of the tax on food very thoroughly. He also referred to what had been said in this regard by Mr. Raymond Ackerman. We have used the same argument in previous debates. I want to thank hon. members on both sides of the House most sincerely for their support.

Questions put: That all the words after “That” stand part of the Question,

Upon which the House divided:

Mr. Chairman, at this stage I should like to thank the hon. the Deputy Minister for his lengthy explanation of why it was impossible to separate basic foodstuffs from the provisions of the Sales Tax Act. While I appreciate the fact that he has given us this explanation, I confess that we in these benches do not accept it as realistic. We do believe that it is entirely possible to remove general sales tax from basic foodstuffs; indeed from all foodstuffs. We are aware that a major supermarket chain has said that more or less overnight they could rearrange their tills so that it would be quite easy to separate food from other articles in terms of the application of sales tax.

The main reason, however, why I wanted to address myself to clause 1 of this Bill was to answer the hon. member for Witbank, who made an attack on the hon. member for Yeoville. It was an attack, which, I believe, was totally unjustified in that it is well understood in this House that hon. members have from time to time previous commitments and that that makes it impossible for them to take part in the discussions on Bills which are discussed on more than one successive day. The hon. member for Yeoville is not in the House today to support his amendments. It was made perfectly clear, however, that he had an engagement which he could not break. Regrettably we on this side of the House have absolutely no control over when Bills are going to come up for discussion in the House. We cannot therefore rearrange our schedules so that we are here when certain Bills are discussed. That is not always possible. I think therefore it is very ungracious of the hon. member for Witbank to attack the hon. member for Yeoville in this way and with such contempt.

I should, however, also point out that the hon. member for Witbank indeed misinformed the House on one specific matter this afternoon. That was when he said that we had increased the bread subsidy this year. That is simply not the case, and if the hon. member for Witbank would use the eyes which God gave him, and have a look at the budget estimates of the hon. the Minister of Finance, he will find, to begin with, that the amount budgeted for in the 1981-’82 financial year was R160 million, and in the original estimates, the amount budgeted for the bread subsidy was reduced for this year to R113 million—a reduction of some R47 million. Then, in the revised estimates, it was increased again by a further R45 million, but the net effect in terms of the bread subsidy is that the subsidy, by comparison with last year, has dropped from R160 million to R158 million. I believe the hon. member for Witbank should bear in mind that he should first make sure of his facts before he makes statements in this House.

Mr. Chairman, I just want to ask the hon. member for Port Elizabeth Central a question. I now accept his explanation as to why the hon. member for Yeoville cannot be present in this House today. Can the hon. member for Port Elizabeth Central tell us, however, whether it is not so that the hon. member for Yeoville, before he launched his attack on the hon. the Minister of Finance, should also have made sure that the hon. the Minister of Finance did not have appointments elsewhere?

Mr. Chairman, it is not a question of a different day being involved. As far as I am aware, this actually happened on that occasion. I shall, however, certainly pass that question on to the hon. member for Yeoville.

Clause agreed to.

Clause 6:

Mr. Chairman, there are two amendments on the Order Paper standing in the name of the hon. member for Yeoville. I understand from the hon. the Deputy Minister’s reply to the Second Reading debate that while he accepts the basic aims of these amendments, in the opinion of his law advisers, they could be framed in a better way. He has therefore done me the courtesy of sending across a copy of the amendment that he will be moving. We in these benches have no objection to this whatsoever, and consequently I shall not be moving the amendments standing in my colleague’s name on the Order Paper.

Mr. Chairman, I move the following amendment—

Amendment agreed to.

Clause, as amended, agreed to.

Clause 7:

Mr. Chairman, I move the amendment to this clause printed in my name on the Order Paper, as follows—

This clause, as was mentioned during the Second Reading debate, seeks to give the Minister powers to bring about changes in GST during a parliamentary session and prior to the promulgation of an Act. This clause is in many respects similar to section 49 of the Act which gives the hon. the Minister those powers during a recess, and to that extent the hon. the Deputy Minister was correct when he said in his Second Reading speech that this was not an absolutely new principle that is involved. However, I would suggest that the reason why the powers permitted in section 49 were included there*, was to cater for what one might call an emergency situation—although that is possibly overstating it slightly—an abnormal situation where the hon. the Minister of Finance cannot wait until a parliamentary session before bringing about a change. It was for that reason that these powers were provided under section 49.

However, that same reasoning does not apply during a parliamentary session because, if there is a need, almost irrespective of the urgency, legislation can be brought before this Parliament for consideration. In addition, because section 49 is clearly meant to deal with an abnormal situation, there is a limitation which provides that the hon. the Minister, if he chooses to increase GST, can do so only by an amount of up to 2%. I think that again is a clear indication that it is intended to meet an abnormal situation. The amendment that I am moving therefore seeks to limit the rate by which the GST can be increased, using this section as a mechanism, to 2%. While we do not like this clause at all, when amended in the way it will at least provide some limitation.

I should like to point out that the proposed new section 49A provides that “The Minister may” and there is therefore no obligation for him to use this provision. He can use the same procedure as he did earlier this year if he wants to change GST. The restriction of 2% does not mean that throughout a parliamentary session the Minister cannot increase the GST by more than 2% but, if he wants to do it, he must do it by the normal method of introducing legislation.

Finally, I should like to point out that I really do not believe that the hon. the Deputy Minister has given us any sound reason why we need this clause. He has given us no reason as to why the existing mechanism of bringing legislation before Parliament during session cannot be made to work just as well as this clause will, and why in terms of the notice period or in terms of convenience it cannot be done. For these reasons we cannot accept it.

Mr. Chairman, I want to add to the amendment of my hon. colleague for Cape Town Gardens the amendment which stands in the name of the hon. member for Yeoville on the Order Paper, and I accordingly move—

As the hon. member for Cape Town Gardens has already said, we do not agree with this particular clause, but what we are trying to do by these amendments is to try to make the clause slightly more acceptable. The effect of the amendment proposed is that in the event of the hon. the Minister increasing the tax there will have to be an Act of Parliament to ratify it within a period of 90 days. We feel that 90 days is a more than adequate period for the hon. the Minister of Finance or his deputy to bring an amending Bill before the House and for Parliament to ratify the raising of the extra funds from the public. It is of course the raising of extra funds from the public that we are particularly concerned about. As we are all aware, the whole parliamentary tradition has been that additional taxes must be put before Parliament. Parliament is the only body which has the right to impose these taxes. I do not think it is unreasonable therefore to suggest that an increase in sales tax should be ratified by Parliament within a period of 90 days.

Mr. Chairman, I regret to say that both these amendments are unacceptable. I shall very briefly tailor my reply to both amendments simultaneously. If these amendments are accepted they will limit the Minister unnecessarily while his proposals are under the scrutiny of and subject to debate in Parliament. I say this specifically in regard to the amendment by the hon. member for Cape Town Gardens. The principle of limitation during the recess is sound—I thank the hon. member for also agreeing with that—in that there is no immediate parliamentary control. However, while Parliament is in session it has absolutely full control and does not require a statutory limitation to assist it in carrying out its functions. This is the brief and basic reason why I cannot accept the amendment.

Any proposals by the Minister of Finance in regard to changes in the rate of sales tax during a parliamentary session must be translated into law during that session. This is a basic statement of principle. In practical terms this would fall within 90 days of the announcement in ordinary circumstances. If, on account of some unforeseen circumstances, the period between the proposal and the enactment should happen to exceed 90 days, a special enactment to ratify the proposals will have to be rushed through, followed by a further Bill dealing with the rest of the measure. This is an unnecessary encumbrance on Parliament, especially where the proposal or announcement is in the records of Parliament and always under the scrutiny and control of Parliament. In the levying of an indirect tax it is a sound policy that the taxes levied should come into force on the date of announcement and not on the date of promulgation of the enabling legislation. This I also say in reply to the point raised by the hon. member for Cape Town Gardens that I did not give sufficient reasons as to why it was not necessary. I am afraid I cannot accept these amendments.

Amendment moved by Mr. K. M. Andrew negatived (Official Opposition and New Republic Party dissenting).

Amendment moved by Mr. D. J. N. Malcomess negatived (Official Opposition dissenting).

Clause agreed to (Official Opposition and New Republic Party dissenting).

Clause 8:

Mr. Chairman, I am not at all happy with the hon. the Deputy Minister’s reply in connection with the advertising situation. Clause 8 deals with that matter. The hon. the Deputy Minister has told us that negotiations are still proceeding with the advertising industry and that therefore he does not actually want to answer the question that I put to him. He says they have not yet decided on all the aspects of this particular area of sales tax. I think it is very unsatisfactory that a clause should be introduced in a Bill for discussion and acceptance by Parliament when the hon. the Deputy Minister says that he is still having discussions with the advertising industry as to how it shall be applied. I believe that all those matters should have been sorted out before the hon. the Deputy Minister came to this House with legislation to tax a particular service. In principle we in these benches do not have anything against the principle of advertising services being taxed in terms of GST, but when we pass this legislation let us at least know what we are taxing. We can understand that art work, copy work and all this type of service needs to be taxed, but if the hon. the Deputy Minister cannot even give us an answer as to whether the space bought in a newspaper is going to attract GST or not, then I think we are being asked to sign somewhat of a blank cheque. Therefore I should like to ask the hon. the Deputy Minister to reconsider his answer on this because, as I understand it, one could arrive at a situation where, if an advertising agent advertises in a newspaper, gets billed for that advertising and then in turn bills his customer for that advertising, it could attract GST at 5% in terms of this clause. But what happens if that client goes direct to the newspaper, places an advertisement and gets directly billed by the newspaper? Is that also going to be taxable?

I think that these are questions that this House is entitled to ask. I also think that this House is entitled to expect a clear answer from the hon. the Deputy Minister on these matters.

Mr. Chairman, I think that the hon. member is being either stupid or wilful. If the hon. member had only read the clause, he would have seen that the proposed subparagraph (i) reads as follows—

There it is in black and white. The problem is actually: How does that advertisement get there? That is the basic problem. That is where the grey area develops. That is where agreement has to be reached that an element of double taxation is not being introduced into the tax structure. That is the point at issue. That is what the discussions are about. The definition of an advertisement in a newspaper is, however, expressly provided in the Bill, and if it appears in a newspaper it is taxable.

That is the definition of an advertisement.

If it appears in a newspaper, then it is taxable. However, the question is: How does it get there? It may get there via four channels. After all, we are not going to impose tax at every level of that whole chain of channels. We are only going to impose tax at one point so that double taxation can be avoided at all costs. It is to draw the lines as far as these subtle grey areas are concerned. That is what the discussion is about; not about how the tax is to be applied. That has already been accepted. It is going to be applied, and we know what its scope is. We know all about that. The only difference is that we are now deleting the date 1 July 1982 from the legislation and providing that the date will be announced by the Minister in the Gazette. That is the only basic change we have effected, and for the rest it remains unchanged. There are grey areas as far as the surcharge is concerned, too, and accordingly we have appointed a committee to investigate the position of the surcharge. This committee is also investigating the problem areas. The Commissioner of Inland Revenue is also authorized by legislation to review all the aspects of sales tax on an on-going basis. Every year legislation is submitted which grants certain exemptions and inserts certain provisions specifically in order to prevent double sales tax. I think that is basically what is at issue.

Clause agreed to (Official Opposition dissenting).

House Resumed:

Bill, as amended, reported.

Bill read a Third Time.

Mr. Speaker, I move—

In presenting last year’s Income Tax Bill I pointed to the fact that because of rapidly changing circumstances it had not been possible to repeat the generous concessions made in 1980 but that at the same time it had not been necessary to increase the rates of tax in spite of the increasing demands for funds being made on the Treasury. I need hardly remind hon. members that financial conditions have continued to tighten during the past few months and that, at the same time, it has been necessary to allocate bigger sums of money for certain specific purposes, as the latest budget clearly indicates. In the circumstances it has not been possible to avoid tax increases entirely this year, but at the same time every effort has been made to keep those increases to a minimum.

In so far as individual taxpayers are concerned, resort has been had to the imposition of a very modest loan levy which does not alter the maximum basic marginal rate of tax—that is, 50%—while in the case of the corporate sector the rates of tax have been increased by what is also a relatively modest amount.

The opportunity has also been taken to modify the basis on which the taxable income of long-term insurers is determined, and in case that group of taxpayers should feel that they have been singled out for special attention I would remark here that that basis has stood unchanged for more than 20 years. During all of that time the insurance business has been privileged in that, by reason of various tax reliefs, there has been a very strong incentive to taxpayers to set aside funds through the medium of insurance policies rather than through other channels which do not enjoy the same measure of fiscal assistance. Moreover, in contrast with other forms of investment such as deposits in building societies and banks, the interest of which is subject to tax, the gains on insurance policies are, except in certain special circumstances, not subject to income tax even though those gains are, in part at least, a return on the capital invested. The increased tax payable by long-term insurers will correct this imbalance to some extent.

As mentioned in my Budget speech on 24 March, I am of the opinion that the taxation position of the long-term insurance industry requires further investigation and I have therefore instructed the Standing Commission on Taxation Policy and the Commissioner for Inland Revenue to consider the matter in depth during the recess and to report to me as soon as possible. The members of the special committee to be formed for this purpose will consist of representatives of the long-term insurance industry, various organizations having an interest in the matter, Inland Revenue, the Standing Commission on Tax Policy and the Registrar of Financial Institutions. The chairman will be the Commissioner for Inland Revenue.

The Bill before hon. members seeks to achieve a number of things, namely, (1) it gives effect to the taxation proposals tabled at the time of my Budget speech, (2) it introduces amendments to the Income Tax Act required for the effective functioning of the Final Deduction System, (3) it introduces further amendments consequent upon the changes to be made to the taxation incentives in accordance with the Regional Development Plan tabled by the hon. the Prime Minister on 31 March. (4) it incorporates certain further concessions which should be welcomed by many taxpayers, (5) it proposes certain administrative amendments and, finally, (6) it proposes amendments designed to close certain loopholes in the Act.

In accordance with long-standing practice, copies of the Bill and of a comprehensive Explanatory Memorandum were made available to hon. members more than a week ago. Clause by clause comment on the Bill is therefore unnecessary, but some general remarks will, I trust, be of interest to the House.

The introduction of the Final Deduction System with effect from the first of March this year represents a logical step forward in our programme of tax reform. I am confident that the scores of thousands of taxpayers whose taxable income is less than R7 000 per annum and is derived predominently from remuneration will welcome the new system which will free them from the somewhat burdensome task of having to complete an annual income tax return. The new system has been so structured that the liability of most taxpayers will be reduced slightly, while those taxpayers who are entitled to tax reliefs in excess of the standard amounts will be able to claim a refund on the amount by which their employees tax deductions exceed their actual tax liability. The extent to which the system may be further refined so as to include those taxpayers whose investment income, although modest, exceeds R100 per annum, requires further investigation. A major obstacle is the low commencing rate of income tax in our country which makes the introduction of a withholding tax on investment income very difficult. At the same time any substantial increase in the starting rate of income tax would give rise to other difficulties. A satisfactory solution has not yet presented itself.

The amendments relating to economic incentives do no more than give effect to the proposals put forward by the Prime Minister’s Office at the end of March, and I cannot profitably add here to what is said in the Explanatory Memorandum except perhaps to emphasize that the changes do not in any way affect industrialists operating in metropolitan and in other areas outside economic development areas.

Turning now to the matter of the further concessions I would draw the attention of hon. members to the following:

Residential buildings

One of the ancient landmarks to be found in our Income Tax Act is the prohibition on the granting of any allowance in respect of the depreciation of buildings or other structures or works of a permanent nature. This principle has never been breached directly, but provisions incorporated in the Act some years ago do grant taxpayers an initial allowance and an annual allowance in respect of certain factory and hotel buildings, effectively enabling the owners of the buildings to write off the cost over a number of years. The proposed allowances in respect of residential buildings follow a similar pattern and will enable the owner to increase the effective rate of return on his investment by means of a reduction in his income tax liability. This new form of incentive to erect new residential accommodation, which I am sure will increase South Africa’s stock of housing, must be not seen in isolation, but must be looked at in conjunction with other relief such as that provided in terms of section 11(t) of the Act to employers who either erect accommodation for their employees or financially assist their employees to erect their own dwellings. I may add here that in terms of one of the amendments effected by clause 7 of the Bill, the section 11(t) allowance is being increased from R4 000 to R6 000 per dwelling. Taken together, these incentives should provide taxpayers with material assistance in making a substantial contribution towards the alleviation of the housing shortage, particularly where the accommodation being erected is for the use of employees of the taxpayer or their families.

Educational deductions

Hon. members will recall that the Income Tax Act was amended last year in order to widen the scope of the tax relief available to persons who donate money to certain educational institutions. Broadly speaking, what was done in terms of those amendments was to permit the deduction, within certain limits, of donations to be used for the erection of new facilities, the expansion of existing ones or the acquisition of certain items of capital equipment, not only at universities and technikons, but also at secondary schools. Representations made to me during the past few months have brought to light the fact that in some cases particularly the older private schools, the most pressing need is no longer for new or additional accommodation or facilities of a capital nature, but some means of meeting the ever-increasing costs of running these institutions, particularly in so far as the payment of salaries is concerned. As indicated by me on 30 April, when introducing the debate on the Vote of my department, it has been decided to extend the scope of the provisions introduced last year by removing the condition that the donations must be used exclusively for capital purposes. This means that donations made for the purpose of defraying current expenditure will also qualify for tax relief within the prescribed limits.

Long-term insurers

I referred earlier to the long-term insurers whose tax liability is being increased somewhat. Other provisions in this Bill will, however, operate in their favour. I have in mind, particularly, the amendments effected by clauses 6 and 19 of the Bill which exclude certain items of investment income from the base on which the taxable income of these taxpayers is calculated. When we take with the one hand, we at least try to give back something with the other!

Power lines to farms

The concession being made to farmers in this connection arises out of a change made by Escom in the manner in which a farmer must pay for the cost of extending a power line to his property. Whereas the farmer has hitherto made monthly payments for an indefinite period, he will now be permitted to commute those into a lump sum payment. We are happy to be able to assist farmers so that they can have the benefit of electric power on their farms, something which will no doubt add to production efficiency and to the lowering of costs on their energy bills.

Housing of employees of farmers

One of the number of items of capital expenditure which a farmer may deduct in the determination of his taxable income from farming is the cost of providing housing for his employees. The deduction is, at present, limited to an amount of R5 000 in respect of any one employee. It is proposed to increase that amount to R6 000.

Administrative amendments

For as long as anyone working in Inland Revenue can remember, the rate of interest charged on overdue income tax has not exceeded 7,5% per annum. Back in the 1940s the rate was only 7%, but it was regarded as penal and, in fact, was a powerful incentive to taxpayers to “beg, borrow or steal” the money needed to pay their taxes rather than to owe the Receiver of Revenue. Today, of course, 7,5% per annum is a derisory rate of interest and almost an invitation to taxpayers to delay the payment of their taxes for as long as possible. It is to be hoped that the modest increase in the rate of interest to be charged as from 1 July will encourage taxpayers who have been tardy in paying their taxes to render more speedily unto Caesar what is due to Caesar. Where a taxpayer pays the amount of taxes assessed but has his assessment reduced as a result of a successful appeal, the amount overpaid is refunded with interest at the rate of 7,5% per annum. That rate will also be increased to 10%. I regret, Mr. Speaker, that we are not yet in a position to act like Zacchaeus who, if he had taken anything away from a man by false accusation, restored him fourfold. [Interjections.]

*The closing of loopholes

I now come to the final matter which I should like to discuss for a few moments, viz. the issue of the closing of loopholes in the Act. It is sometimes the case that when the Act is amended to achieve a commendable aim, persons who are always on the lookout for such things see a loophole, which is immediately exploited on an increasing scale. Sooner or later a situation is reached when the fiscus is compelled to take drastic action to prevent an unacceptable loss of State revenue and put a stop to an unfair situation. Unfortunately we have once again encountered that situation with regard to those provisions enabling an employer to claim as a deduction, in determining his taxable income, the premiums he pays in regard to a policy on the life of an employee.

The history of these specific statutory provisions has not been very fortunate. A little more than 20 years ago, these statutory amendments were introduced to place beyond all doubt the fact that the yield of an insurance policy on the life of an employee or director forms part of the gross income of the employee. Section 11 was amended at the same time to enable the employer to calculate the premiums paid on such a policy as a deduction when determining taxable income. The aim of the amendments in question was to enable an employer to make provisions for any financial loss he may suffer by way of a drop in profit if a key man in his enterprise were to fall away, or to enable the employer to pay a gratuity to the next of kin of such an employee or to the employee himself if, owing to disability, he was no longer able to work.

Unfortunately, certain taxpayers soon found that use could be made of these meritorious provisions of the Act to achieve substantial tax relief with a minimum of expense to the policy-holder, viz. the employer. One of the schemes designed enabled the policy-holder to borrow virtually the entire amount paid by way of premiums from the insurer. Considerable amounts in premiums were therefore deductible for income tax purposes, but the real expenditure of the taxpayers who took out these policies was for all practical purposes nil. Legislation to counteract this undesirable practice has been introduced from time to time, but in spite of that, other schemes have been devised to extract the maximum benefit from the statutory provisions in question. The latest schemes have been planned in such a way that an employer can reserve a large part of his net income tax-free in policies which are in essence nothing more than fixed deposit accounts. After a period of five years the amount paid by way of premiums, plus a certain return thereon, can be borrowed back, with the result that when the policy lapses—if ever—virtually nothing remains which could be labelled as gross income.

Broadly speaking, this is what is being done. There are variations on this principal theme, of course, and a virtually inexhaustible variety of refinements of the pattern, depending on the specific circumstances of the firm and the employees for whose benefit the policies are drawn up. One aspect of the latest developments that is giving rise to concern is the fact that large amounts are apparently being withdrawn from certain sectors of the economy and channelled in the direction of a single sector. Cases have come to the attention of the Commissioner for Inland Revenue in which the premium for one year alone has amounted to several hundreds of thousands of rands, and in at least one case, an amount of R1 million.

This situation can no longer be tolerated and in terms of the Bill as it is now being introduced, tax relief will in future be granted only in regard to premiums payable on policies usually known as term policies. Since the Bill was drafted and printed, representations have been received from the Life Offices Association, which have received the earnest attention of my department and myself. There is merit in the representations, and I intend proposing amendments in the Committee Stage, on the one hand to strengthen the provisions inserted by clause 3, and on the other, to temper somewhat the amendments introduced by clause 7. The amendment also means that the provisions will be applicable to policies for which applications are made on or after 1 June 1982.

Another provision in the Act which seeks to relieve the tax burden when the taxpayer receives income of an extraordinary nature is being exploited in an unfair and undesirable way. I refer here to section 5 of the Act, which provides for the levying of tax on certain special accruals at the average scale as payable on the taxpayer’s normal income. One of the items qualifying for this beneficial tax scale is the gratuity often paid to employees at the time of their retirement—the “golden handshake”, as it is known. It has been found that some employers have paid unreasonable sums to highly remunerated employees or directors and, by arranging to limit the remuneration of the employees or director in the year of retirement, and paying excessive gratuities which should really have been remuneration, to arrange for tax on the gratuity to be paid at a low rate. This amounts to shameless exploitation of an extremely generous provision introduced to ensure that in genuine cases, where the average taxpayer’s retirement gratuity had to be a nest-egg, the earnings from which had to serve as a pension or to supplement his pension, the State should not take an unfair share.

The amendment proposed by the Bill will in future qualify the amount to which the advantageous rate applies to some extent. The amount proposed is equal to three times the annual average of the taxpayer’s remuneration during the three years of assessment which immediately preceded the year of assessment under charge. This ought to be sufficient to ensure that in all deserving cases there will be no prejudice to the employee. I must emphasize that the gratuity to which I refer here is not the one that is paid out of a pension fund. The gratuities paid by pension funds are not affected by this amendment.

Other provisions of the Income Tax Act have also come under the spotlight in recent months. In terms of section 11(t), for example, an employer may claim as a deduction, in determining his taxable income, part of the cost price of a dwelling he has erected for use by one of his employees. However, it may be that if the dwelling is constructed on rented land, and in terms of the lease contract the employer is obliged to construct the building, he will be able to write off the full cost price of such dwelling over a number of years in terms of section 11(g). It follows, therefore, that if the appropriate arrangements were made, it would be possible for the taxpayer to claim more than 100% of his costs as a deduction, and to do so quite legally. I am of the opinion that it is unnecessary to be so liberal with our tax concessions and I am therefore moving various amendments which will have the effect that when deductions in regard to the same expenditures may be claimed in terms of more than one section of the Act, the total amount of deductions may not exceed the cost price to the taxpayer of the asset in question.

The final point I wish to discuss here relates to the initial and investment allowances deductible in the year in which new machinery or installations or hotel equipment are taken into use. In an effort to counter certain malpractices, the Act was amended last year and provides at present that when the lessee of the type of asset mentioned disposes of his interests in terms of a contract of lease within five years from the commencement of the period of lease, the portion of the initial and investment allowances returned to him may be taxable. It is already clear that these amendments have not gone far enough, since lessees are now simply disposing of a portion—usually the greater portion—of their interests in contracts of this nature. The amendments proposed in the Bill will, it is to be hoped, cover this new development and put a stop to the malpractice.

The several amendments proposed in this Bill are regarded as essential and seek to achieve a fair distribution of the tax burden across the entire spectrum of persons—individuals and companies—that are able to make a contribution towards society by way of this type of levy. I therefore believe that I need have no hesitation in submitting the Bill to this House for approval.

Mr. Speaker, in the first place I should like to thank the hon. the Minister for putting at our disposal advance copies of both the Bill and the explanatory memorandum. I also wish to thank the officials of the hon. the Minister’s department for coming across to explain the explanatory memorandum to us so that we would have a better understanding of the Bill.

We welcome a number of the provisions of this Bill and particularly those provisions that will benefit the farmers. We also welcome the increase in the allowance in regard to housing from R5 000 to R6 000, and the regulations regarding the supplying of electricity to farms and the line charges involved. These are indeed very welcome. However, there are obviously many impositions made by this Bill that we do not like, and I therefore wish to move the following amendment—

I want to start by quoting from a pamphlet that I have here written by Dr. A. D. Wassenaar: “Assault on Private Enterprise”. When one looks at tax, I think one should bear in mind what Dr. Wassenaar has to say about it. He first of all draws attention to the manifesto of the Communist Party that was drawn up by Karl Marx and Friedrich Engels and published in London in 1848. To this day this manifesto remains the blueprint for communist infiltration into every country in the world. To accomplish their aims various methods are advocated, three of which are regarded as being the most effective. First of all these is a heavy, progressive or graduated income tax. The author goes on to say—

Against this background perhaps hon. members will understand a little more clearly why we on these benches are opposing this Bill.

We welcome the closing of the loopholes which the hon. the Minister and his department have sought to close in the tax laws. I regret, however, to say that while there are tax laws there are going to be loopholes. There is going to be an on-going battle of wits between the officials of the hon. the Minister’s department and the taxpayers who try to escape paying tax. Whether it is avoidance or whether it is evasion or whether it is indeed “avoision”—that is a new word which has been recently coined—the ingenuity of man to avoid tax is obviously infinite.

The Bill before the House is most definitely, as the amendment says, “increasing the burden on individuals”. It is increasing it in times which are indeed very difficult for the individual. As the hon. the Minister has explained to us the private individual has to pay a 5% loan levy on his basic tax, which will in fact increase the tax which he pays at the maximum rate from 50% to 52,5%. This is an additional burden at a time when the economy of the country is perhaps not as buoyant as we would like it to be. For the purposes of this argument I regard the loan levy as a form of taxation because by the time the taxpayer is repaid that money the value has depreciated to such an extent because of inflation and because the rate of interest paid is so low, that he might as well have written it off in the first place. If one adds the 2,5% to the bracket creep that is continually happening because of inflation, one finds that the taxpayer is having to pay a considerably larger sum of money year after year out of his income. This seems to be a practice which is continuing all the time. The hon. the Minister actually does not have to do anything to increase tax annually because bracket creep or fiscal drag is doing precisely that job for him. When one refers back to previous Estimates of Revenue one finds that every year the amount of money taken from the individual taxpayer has increased.

In addition to the loan levy, which also affects the man in the street in terms of the dividends which he receives on his investments, we have company tax increased to 46,2%. This consists of a 42% basic tax, plus an additional percentage which the hon. the Minister has imposed in terms of this legislation. When one considers that inflation is currently running, according to the latest figures, at a rate in excess of 16%, one can only feel sorry for the commercial and industrial enterprises in this country which now have to pay this additional tax. Their pre-tax income is reduced by 46,2% to fill the hon. the Minister’s coffers. Unfortunately the hon. the Minister does not share in company losses—not that we would welcome the sort of company which shows a loss—but the Government is a partner in every commercial and industrial company in this country to the tune of 46,2%. On top of that the company has to retain a tremendous amount of its after-tax earnings in order simply to stand still and to be able to fund the additional costs, because of inflation, of its stock-in-trade, articles, replacement of machinery or whatever it may be, and not necessarily to expand. The company has to retain an increasingly large amount of its after-tax income in order to fund itself. If they want to expand their operation and increase their production and perhaps start additional companies, they need to retain even more money. Obviously we in this House would hope that all the companies would be wanting to expand because every company that expands and that we can encourage to expand provides additional job opportunities for South Africans and for the taxpayers. In the long run the hon. the Minister benefits from this process. Therefore to tax so heavily the goose that lays the golden egg, that creates job opportunities and has developed this country to such an extent over the past years is not wise. We think that to tax companies to the extent of 46,2% has gone considerably too far and we very much hope that the hon. the Minister will be able to reduce this in the relatively near future.

Inflation is an extremely worrying situation in that we have had one of the worse periods of price escalation in the little over a year since the last general election that we have ever had in the history of South Africa. One need only think back over the past year of the items that have been increased by this Government, i.e. the post-election items. One thinks, for example, of increases in railway tariffs and post office tariffs, two increases in the price of petrol, the 15,9% increase in the price of maize, the increase in sales tax and the increase in the import surcharge. On top of all this the private individual is being taxed additionally in terms of the loan levy and companies are being taxed additionally by 4,2% on their pre-tax income. This appears to represent nothing more or less than a total onslaught on the public. The man in the street is suffering daily and this Government is piling the burden onto the back of the man in the street. Obviously this is the euphoria of a post-election period of time when the Government is obviously saying to itself that it must increase the prices of its administered items as much as possible right now so that when the time comes to hold an election it can say that it has not increased prices much recently and that, therefore, it is such a good boy. I do not believe that this is going to continue to fool the South African public.

I have mentioned fiscal drag and this is extremely worrying in a lot of instances. I have spoken to the hon. the Minister about this before. Fiscal drag has not been taken into account in this Bill except in a few very isolated circumstances such as the farmers’ housing allowance to which I have already referred. When it comes to the question of estate duty fiscal drag is creating tremendous problems for farmers who wish to leave their farms to their children. Farms have excalated in value to such an extent, and inflation is certainly part of the problem, that we believe it represents an unfair burden on the farmers on this country if estate duty is levied on their estates. I am convinced that the longer this state of affairs continues, the more we shall find that our agricultural industry will be harmed by these very measures. In this year’s budget there has been no increase in the amount allowed for death duties.

How much further can you go?

There is no limit. There can be no limit to this type of problem because as long as we have inflation, as long as the value of money in South Africa depreciates and as long as it fails to buy in the following year what it bought in the past year, the hon. the Minister will have to continue to increase the allowances made for estate duty. In fact, the best thing that one could do would be to abolish estate duty altogether.