I move—

1. (1) That, subject to the provisions of Act No. 58 of 1962 (as amended) and of an Act to be passed during the present session of Parliament amending that Act and subject to such definitions, conditions, exceptions and exemptions as may be provided in the said Acts, there shall in respect of the relevant years of assessment referred to hereunder be paid as from the first day of March, 1966. on all incomes received by or accrued to or in favour of or deemed to have been received by or to have accrued to or in favour of all companies and other persons from sources within or deemed to be within the Republic, a tax (to be called the normal tax), the rates of which shall be as follows: —
   1. (a) in respect of the taxable income of any person other than a company for the year of assessment ending on the twenty-eighth day of February, 1967, or the thirtieth day of June, 1967, whichever is applicable, as prescribed in the tables below:

1. (b) on each rand of the taxable income of any company (excluding so much as is derived from mining operations carried on by it in the Republic and, in the case of any company referred to in subparagraph (d), so much as the Secretary for Inland Revenue determines to be attributable to the inclusion in its gross income of any amount referred to in paragraph (f) of the definition of “gross income” in section 1 of Act No. 58 of 1962) for each year of assessment of such company ending during the period of twelve months ending on the thirty-first day of December. 1967, thirty-three and one-third cents;
2. (c) on each rand of the taxable income derived by any company in respect of any year of assessment of such company ending during the period of twenty-four months ending on the thirty-first day of December, 1967, from mining in the Republic for gold (but with the exclusion of so much of the taxable income as the Secretary for Inland Revenue determines to be attributable to the inclusion in the gross income of any amount referred to in paragraph (/) of the definition of “gross income” in section 1 of Act No. 58 of 1962), a percentage determined in accordance with the formula:

y = 60-360/x in which formula (and in the formulae set out in the first proviso hereto) y represents such percentage and x the ratio expressed as a percentage which the taxable income so derived (with the said exclusion) bears to the income so derived (with the said exclusion): Provided that if the taxable income so derived (with the said exclusion) does not exceed forty thousand rand, the rate of tax shall not exceed a percentage determined in accordance with the formula:

y = 20(1-6/x)

and if such taxable income exceeds forty thousand rand, the rate of tax shall not exceed a percentage determined in accordance with a formula arrived at by increasing the number 20 in the formula 6

y — 20 (1-6/x) by one for each completed amount of two thousand five hundred rand by which the said taxable income exceeds forty thousand rand:

Provided further that there shall be added to the amount of tax calculated in accordance with the preceding provisions of this subparagraph in respect of any year of assessment ending during the period of twelve months ending on the thirty-first day of December, 1967, a sum equal to five per cent of such amount;

1. (d) on each rand of the taxable income of any company, the sole or principal business of which in the Republic is or has been mining for gold and the determination of the taxable income of which for the period assessed does not result in an assessed loss, which the Secretary for Inland Revenue determines to be attributable to the inclusion in its gross income of any amount referred to in paragraph (f) of the definition of “gross income” in section 1 of Act No. 58 of 1962—
   1. (i) a rate for any year of assessment of such company ending during the period of twelve months ending on the thirty-first day of December, 1966, equal to the average rate of normal tax or twenty-five cents, whichever is higher; and
   2. (ii) a rate for any year of assessment of such company ending during the period of twelve months ending on the thirty-first day of December, 1967, equal to the average rate of normal tax or twenty-eight and one-third cents, whichever is higher:

Provided that for the purposes of this subparagraph, the average rate of normal tax shall be determined by dividing the total normal tax (excluding the tax determined in accordance with this subparagraph for the period assessed) paid by the company in respect of its aggregate taxable income from gold mining for the period from the first day of July, 1916, to the end of the period assessed, by the number of rand contained in the said aggregate taxable income;

1. (e) on each rand of the taxable income derived by any company in respect of each year of assessment of such company ending during the period of twelve months ending on the thirty-first day of December, 1967, from mining in the Republic for diamonds, forty-five cents: Provided that there shall be added to the amount of tax calculated in accordance with the preceding provisions of this subparagraph a sum equal to ten per cent of such amount;
2. (f) on each rand of the taxable income derived by any company in respect of each year of assessment of such company ending during the period of twelve months ending on the thirty-first day of December, 1967, from mining operations (other than mining for gold or diamonds) carried on by such company in the Republic, thirty-three and one-third cents;
3. (g) in respect of the taxable income of any person other than a company for the year of assessment ending on the twenty-eighth day of February, 1967, or the thirtieth day of June, 1967. whichever is applicable, a sum equal to five per cent of the amount of tax determined in accordance with subparagraph (a) after the deduction of the rebates provided for in section 6 of Act No. 58 of 1962;
4. (h) in respect of the taxable income of any company (excluding so much as is derived from gold mining operations carried on by it in the Republic and, in the case of any company referred to in subparagraph (d), so much as the Secretary for Inland Revenue determines to be attributable to the inclusion in its gross income of any amount referred to in paragraph (f) of the definition of “gross income” in section 1 of Act No. 58 of 1962) for each year of assessment of such company ending during the period of twelve months ending the thirty-first day of December, 1967, a sum equal to five per cent of the aggregate of the amounts of tax determined in respect of such year of assessment under subparagraphs (b), (e) and (f) before the addition of the sum referred to in the proviso to subparagraph (e):

Provided that the tax determined in accordance with any one of the subparagraphs (a) to (h), inclusive, shall be payable in addition to the tax determined in accordance with any other of the said subparagraphs:

Provided further that in the calculation of the taxes payable in accordance with subparagraphs (g) and (h) any fraction of a rand shall be disregarded:

Provided further that the tax calculated in terms of subparagraph (g) or (h) shall not be payable by any taxpayer whose liability under such subparagraph would, but for this proviso, be less than five rand: Provided further that the taxes calculated under subparagraphs (g) and (h), read with the preceding provisos, shall be repayable to the taxpayer concerned at such times and subject to such conditions as may be provided for in the aforesaid Acts;

1. (2) That the rates fixed by paragraph (1) shall be the rates required to be fixed in accordance with the provisions of section 5 (2) of Act No. 58 of 1962 (as amended):

Provided that, subject to the provisions of any law providing for the payment of moneys into the Transkeian Revenue Fund, fifteen per cent of any amount of tax determined in accordance with paragraph (1) (b) shall accrue for the benefit of the provincial revenue funds of the four provinces in such proportions as may be determined by the State President by proclamation in the Gazette and shall in the said proportions be paid into the said provincial revenue funds in accordance with the laws relating to the collection, banking and custody of provincial revenues as though it were a tax imposed by the provincial councils of the said provinces on the incomes of companies;

1. (3) That there shall from time to time be paid to the credit of the loan account referred to in the General Loans Act, 1961 (Act No. 16 of 1961), sums determined by the Secretary for Inland Revenue to be equal to the amounts of taxes collected in accordance with subparagraphs (g) and (h) of paragraph (1) which are in terms of the fourth proviso to that paragraph repayable to the taxpayers concerned.

The income tax proposals before us to-day under Paragraph 1 is a lengthy schedule which will be included in the Bill. It is our contention that it is time that the Minister gave consideration to the fundamental basis of taxation and that is that as far as possible taxes should be borne evenly by the various members of the community, depending on their capacity to bear the taxes. If the Minister studies this schedule he will find that the income tax rates have the effect of placing an undue burden on the middle-income groups instead of having the effect of a gradual increase. If the rates of tax were plotted on a graph, it would show an unfair load, particularly in respect of those in the income brackets from R6,000 to R8,000 or R8,500 per annum, and I would ask the Minister, in considering these rates, whether his Department has given this matter any consideration, or whether it is possible that the adjustment to renew this unfair burden will be considered in future taxation proposals.

In the present taxation proposals before us, under the heading of income tax rates, it does have the effect of inflicting a heavier burden on this particular group. There is a gradual increase in the lower income groups from those who pay nothing up to the level of R6,000 and there is this undue burden up to R8.500 and thereafter there is a gradual increase for those in the high income groups. It is my contention that consideration should be given to this matter and I should like to hear from the Minister whether he has given this matter consideration and whether there are any prospects of being able to solve the problem, because as it stands now it constitutes an undue burden on those persons.

The hon. member for Pinetown is referring to what is popularly known as the bulge in the curve, which is a direct result of the old supertax. When we changed over and abolished the supertax, this was one of the legacies. I have already on two occasions tried to flatten out that bulge, and in both cases it called for a considerable sacrifice of income. I am always seeing whether there is any opportunity of completing the process which I began in trying to flatten out that bulge, and whenever the opportunity presents itself I am sure we shall continue in our endeavour to make the bulge even instead of letting it bulge out as at present.

Please pardon me if I am wrong, Sir, but are you putting the proposals as a whole, or are you putting them page by page, chapter by chapter?

These are all the income tax proposals. The hon. member may see that there are five heads. I am now putting the first one, income tax.

Thank you.

Sir, I want to join in this Battle of the Bulge. I think this is the third occasion on which we have had from the hon. the Minister of Finance an acceptance of the fact that he would like to have this bulge ironed out but he seems to find it impossible to do so. In his reply to the Budget debate last year, the hon. the Minister told us of the differences in the rates of taxation applying to the lower income groups and the taxation applying to the higher income groups up to R6,000. He told us last year, as he has again told us to-day, that this is a legacy that we have from the old supertax. He said—

I think this matter is far too serious for the hon. the Minister to tell us each year that he is trying to iron out this bulge. Surely there must be something he can do about it because what is the factual position? On the incremental rate of tax between R3,000 and R4,000, the taxpayer pays R90 on the additional R1,000; from R4,000 to R5,000 he pays R94 on the additional R1,000 and then suddenly from R5,000 to R6,000 he pays R200 on the extra R1,000, and from R6,000 to R7,000 he pays an extra R290 on the extra R1,000. Sir, I do not think it is a question of finding the right occasion to iron out this bulge. I think that what the hon. the Minister has to do is to get down to it with his Department and find a formula whereby he can iron out the bulge. It is accepted generally that this bulge is unfair to those taxpayers who fall in the R5,000-R7,000 income bracket. I want to ask the Minister to see whether he cannot during the recess—because he obviously cannot do it now—find a formula which will get rid of this unfair imposition of a higher rate of tax on this particular group.

It is very clear that if the hon. the Minister wants to iron out this so-called bulge in a logical way, he will have to increase the taxation on the income groups below R6,000 considerably, which we certainly do not want to do, because in spite of the interjection that was made here while the hon. member for Pinetown was speaking, namely that this Government, was a Government for the rich people, we should not like to introduce a considerable increase in the taxation of the first five categories from R1,000 to R5,000, and that is in actual fact the only logical solution to the problem of ironing out that bulge, because beyond the R6,000 notch and up to the R8,000 notch one still gets the rapid increase that one gets in that bracket. The first increase from R90 to approximately R200 when one comes to the R6,000 notch, one gets as a result of the fact that we do not want to tax the lower income groups heavily.

If one looks at the percentages which the taxes represent of the taxpayers’ income, one finds that the percentages start with 1 per cent at R1,600; then they increase to 2 per cent, 3 per cent, 4 per cent, 6 per cent, 8 per cent, eleven per cent and when one gets to R6,000 there is a sudden jump to 18 per cent. Beyond that the percentage continues to increase rapidly, very rapidly in fact, but that is only because the taxation in respect of the first few categories from R1,000 to R6,000 is so particularly low. Surely the Opposition does not want us to tax the R1,000 to R6,000 income groups much more heavily?

I should like to refer to sub-paragraph (c) and especially the proviso at the top of page 290. I have referred on many previous occasions to this discriminatory taxation on gold mining companies and gold mining shareholders. Sir, in these proposals the Minister has made the position even more complicated than it already was. We know that we have this formula: y = 60;360/X we know that that is not an equitable form of taxation. It is not equitable as between a commercial company and a gold mining company. We now find that the Minister, in dealing with gold mining companies, has reached this stage: In the first place, when they have worked out their gold mining profits at the end of the financial year, they first have as a partner the hon. the Minister representing the Government, because of the lease. The Government is, of course, a big shareholder in any gold mine. That is the first; then the Government comes along with a discriminatory tax; it is discriminatory because it differs from the form of tax for any commercial company.

The second burden the company has to bear, the second tax, is this tax which is determined in accordance with the formula y =60-360/X,and then after that tax has been deducted, the shareholders receive their dividends, and then the Minister comes along and taxes the shareholders’ dividends as part of their income; that is the third tax, and now the hon. the Minister has introduced a fourth. He is not satisfied with the complications that we already have; he now says: “You will pay an extra 5 per cent, in addition to this formula.” Sir, that is quite out of touch with the formula. I think the I time has arrived when the hon. the Minister should say: “I am going to abandon this 5 per cent.” Let us try to get together with the mining industry and see if we cannot get a rational form of taxation. Of course, I know what the argument is; everybody knows that it is argued that the gold mines are mines which exploit the patrimony of South Africa; that this wealth belongs to the country. I agree with all that.

The same is true of diamond mining. That wealth belongs to the country and the mining company is given the right to work the mine, but then the Government comes in with its lease and says, “because you have that right you will have to pay for exploiting the patrimony of South Africa in accordance with this lease”. Sir, why should we have this complicated taxation? I appeal to the hon. the Minister to say: “I am not going to complicate the position further; I am not going to impose this 5 per cent.” That was his attitude last year. Why change his attitude this year when costs have increased? You cannot increase the price of your product in gold mining. The hon. the Minister raises the price of petrol; his colleague, the Minister of Transport, raises the cost of transport, and now the hon. the Minister comes along and says, “We are going to tax you further although you cannot raise the price of your product.” Sir, I think it is inequitable.

In connection with this question of the ironing out of the bulge, I want to point out that to come along with this proposal this year is in fact to do so at the most inopportune time, because if that is done, as the Opposition apparently wants it to be done, it will result in a tremendous loss of revenue from taxation. I want to point out to the Opposition that these taxation proposals flow from a Budget which forms part of a four-point plan for combating the threat of inflation in South Africa. It would certainly be very unwise on the part of the hon. the Minister to iron out this bulge this year. I am not saying that there is not sufficient merit in the suggestion that that should be done, but even if there is sufficient merit in it to justify that being done, then this year of all years will definitely be the wrong year in which to do it, because it will mean a very heavy loss of revenue. As regards the interjection that has been made, namely that the taxation proposals favour the richer people, I just want to point out that in spite of the need for financing that we have this year, the scales we have before us are exactly the same as those of last year. Under the scales we are considering now, not one single person in South Africa who did not pay income tax last year will pay income tax this year; and in terms of these clauses—look at paragraph (g) for example—not one single person will become subject to the loan levy who would not have been subject to it last year as well. I think that from the point of view of the ordinary taxpayer there is a very great deal of merit in these proposals.

Let us just consider what the position is in the case of the less well-to-do people at the bottom end of the curve. In order to make it possible to view this matter in its correct perspective, particularly in view of the interjection that came from the Opposition side, I should like to mention the income tax to be paid according to these scales by people who fall in this lowest group here. A husband and wife with a taxable income of R2,000 and with two children—incidentally, that is after deduction of the rebates, which we are not discussing to-day—will, according to this scale, as compared with last year’s scale, and with the withdrawal of the 5 per cent rebate which we had last year, pay 6c per month more in tax. It was in this connection that the hon. the Minister said that he wanted to spread the burden over as many people as possible; everybody had to make his contribution. These people with a taxable income of R2,000 and two children will pay 6c per month more.

Not less, though.

No, it is 6c, and over the year it will be 70c. People with an income of R2,000 and with three or, of course, four children will not have to pay any income tax. People with an income of R3,000 and two children will, as a result of the 5 per cent rebate falling away, pay 40c per month more this year. That is the contribution to be made by them in terms of these proposals. People with an income of R3,000 and three children will pay 23c per month more, and with four children 7c per month more. I want to deal with only one further group of people under these scales, namely those with a taxable income of R4,000. As a result of the 5 per cent rebate falling away, a person with a taxable income of R4,000 and two children will pay 75c per month more, with three children 6c per month more and with four children 4c per month more. That is the contribution they are being asked to make. I just want to place the matter in the correct perspective, and I want to say that the less well-to-do people are not prejudiced in any way by the proposals before us.

As far as the hon. member for Kensington is concerned, I do want him to be more explicit. Could it be that the hon. member wants to plead outright that gold mines should be treated like ordinary companies under our tax legislation?

Is that what you want to suggest?

The hon. member will not advocate that, because, in terms of the measures before us and other measures that we have to take into account in this regard, a gold mine is allowed to write off all the capital which it has invested in that mine before it begins to pay lc of tax.

And if the mine is a failure? What then?

If the mine is a failure, this will be of no use to it. It will not be paying any tax. Sir, I do not think the gold mines have anything to complain about. They are being treated very well. If we take the average that a gold mine pays over the years from the day it starts operating until the day it liquidates itself and realizes all its equipment, then I think that over the years it will fall far below the minimum of 30 or 33½ per cent, which is what our company tax is to-day. The hon. member now comes along and says that we are adding an extra 5 per cent this year as far as the gold mines are concerned. That is quite correct. But again I refer to what was said by the hon. the Minister, namely that he wanted to spread the burden as widely as possible. Must the individual make a larger contribution, even if it is only a small amount; must the ordinary company make a larger contribution now; must the diamond mines and the other mines make their contributions, but does the hon. member for Kensington now want the gold mines as such not to make their contribution to this Budget as it has been prepared and with the object it has in view? I think the hon. member is wrong, both in respect of the entire structure of the tax on gold mines, which in my opinion is quite fair and which I do not think even the Chamber of Mines would like to see changed, and in respect of this additional 5 per cent which the gold mines, together with the rest of our population, are being called upon to bear.

I had not intended to come into this debate, but when my hon. colleague, the member for Pinetown, spoke, I thought that we like the Government side had turned into a rich man’s party, but on giving it a little bit of thought, Sir, I realized that the hon. member for Pinetown was quite correct, as the hon. member for Queenstown has admitted. You see, we have become accustomed to deal in pounds, shillings and pence. Now we have switched and we people who have all our lives dealt in pounds, shillings and pence, we in terms of a 6,000 income are inclined to associate that with £6,000, and I thought we had become a rich man’s party too. But the hon. member for Pinetown is talking about a R6,000 income. Sir, when you adapt yourself to that thinking, that is the income of the average person to-day, because if they have less than that, they find difficulty in existing, and the man below that, the man with whom the hon. member for Queenstown has dealt, experiences trouble to-day when he has a family. He should not really pay much income tax at all. The hon. member for Queenstown said that it was just a small increase. Sir, such a man should not have his tax increased at all, because with the depreciating value of our money under this Government, the man earning less than R6,000 a year is finding the greatest difficulty, I can assure you, in keeping up the standard of living to which he has become accustomed. So I must add my plea to that of the hon. member for Pinetown and ask the hon. the Minister to look seriously into this bulge. This is the person, the middle income person, call him the white collar worker, call him what you like, but I would say to-day that it includes many pensioners too who have spread their investment wisely, who have worked hard and saved hard—this R6,000 a year income includes many of those people. The hon. Minister is now spreading his net and is depending upon those middle income people, the salt of South Africa, to meet his increased tax demands, to meet his increased expenditure demands. Sir, this is a matter of extreme urgency; it is not a matter for the hon. the Minister to stand up and say: “Over the course of some time”. He hopes to straighten out the bulge; but he naturally accepts first of all that he is over-taxing that group, that there is a bulge, and that he has got to straighten it out. But he is not prepared to straighten it out as quickly as he should. I think this hon. Minister should take steps immediately to do away with this problem so that taxation can be spread fairly and evenly.

It is a known fact and I think it is accepted throughout South Africa that during the term of office of this Government the richer people have become richer, and the poorer people have become poorer, and I believe that this hon. Minister must spread his net in the richer group and not in the poorer group so that the increased tax demands on Defence because of the inefficiency of this Government, because it fails to come to peace with the rest of the world …

Oh!

This is the greatest demand, this is why the hon. the Minister has to raise taxes, because the Defence Budget is so high.

Order! I want to point out to the hon. member that the Rule says that only the details of the proposed method of raising funds are open to discussion now. The principle was approved when the House decided to go into Committee of Ways and Means. So I am not going to allow a wide discussion on principles.

Yes, Sir, I wandered a bit far from the details, but I want to appeal to the hon. the Minister to spread the net in the right direction and not to cast it indiscriminately over those people who can least afford to pay.

Mr. Chairman, the hon. member who has just resumed his seat made certain statements here. As a matter of fact, he suggested that that income tax bulge should be ironed out. Why did the hon. member not tell us how it should be ironed out? He made a plea in respect of the notches from R6,000. The curve must necessarily rise at some stage or other. I shall tell you why, Sir. This Government looks after the poor man. but that Party does not do so.

Order! I wish to point out to the hon. member that only a moment ago I asked another hon. member not to go into the principle.

Sir, the point I am dealing with is this. This income scale is drawn up in such a way that the poor man will not be taxed. Every one of us must have a certain income to pay one’s house rent and to provide for one’s daily needs. Surely it is quite obvious that up to R5,000 one cannot require such a person to pay too large an amount in taxation, and beyond that the curve can go very high. If we look at the table, we find that a man who has four children pays R210 on R5,000. If he has an income of R6,000, he pays R420, and if he has an income of R10,000, he pays R1,816. It goes much higher than that still. If a man earns R20,000, he has to pay R6,436 in tax.

What about the rate of increase?

The scale of taxation rises at an even rate, and that is quite correct. We now come back to the hon. member for Kensington, who made an appeal last year that the loan levy of 5 per cent should not be made applicable to companies. This year the hon. member comes along and makes an appeal on behalf of the gold mines. It is the same idea that the other people have, namely that he does not want the rich to be taxed.

Order! The hon. member is conducting a general discussion now. He is not dealing with details. The hon. member may only speak on the specific proposal which is at the moment before the Committee. He may only discuss details, and not the principles on which they are based.

Mr. Chairman, as regards the tax paid by the gold mines today, I want to say that in my opinion the Minister was very lenient towards the gold mines in not making the levy applicable to them. I think it might even have been necessary to have made the levy applicable to them. It would not have been unfair to have done so. If all the other companies can be assessed for that levy …

Order! The hon. member may not discuss increased taxation at all.

I am not discussing that, Sir.

Yes, the hon. member is suggesting it.

If the other companies have to pay the levy and we are satisfied with that, we also have to be satisfied with the gold mines having to pay it. We should not demand less of them. I just want to point out to the hon. member that, according to the White Paper that was issued along with the Budget Speech, the tax paid by the gold mines for the year 1965 amounted to R72,589,000. That represented 37 per cent of the net profit they had made. I think that if those gold mines can pay an amount such as that, they are certainly not starving. Just compare this position with that of the manufacturing industry and of other companies. They only paid R46,000,000, in spite of the fact that manufacturing industry makes a much larger contribution to the national product than the gold mines do. We may therefore see that this tax paid by the gold mines is a very fair one. The other companies are not being over-taxed; the taxation is fair and they are able to bear it.

Mr. Chairman, I think we want to get this question of the bulge very clear. All we are asking for—and this is something with which the hon. the Minister agrees —is that this bulge should be ironed out. The hon. member for Paarl is quite wrong when he says that the only way in which you can do it is by adding tax to the lower income groups below the bulge. There are dozens of ways it can be done. You can give up the tax which the Government is taking. This we will support. If the Minister says he is going to reduce the tax we will support him. He can increase the lower income groups’ tax and we will probably oppose it. He can increase the higher income groups’ tax—we will probably oppose that too. There are a hundred different computations and permutations whereby this bulge can be removed.

The Government should be removed.

All we are saying to the Minister is please do not delay any longer. Work out a formula of how to remove the bulge. When you bring it to the House we will vote for it if we agree with your method, and we will vote against it if we disagree with your method. That is all we are saying.

Hon. members on the other side talked about the spread of the increased taxation this year, and amongst other sections mentioned has been that of the company. You will remember, Mr. Chairman, that last year our company tax was increased by 5 per cent of the tax paid. We objected to it last year. This year it has been increased by 3-j per cent—that is, the actual tax, not of the tax paid—so that the tax is now 33¾ per cent and not 30 per cent.

Now, I find it difficult to understand why the Minister—like unfortunately so many other Ministers of Finance throughout the world—singles out the company as an entity for increased taxation. There can only be one reason that I can see, and that is that it is the easiest unit to tax more heavily, because they are limited in number and they are not the broad bulk of the population. So you do limit the area of protest. I said in this House before, and I repeat again, that a company is merely a group of persons. It is true that it has an identity and an entity in law. But in practice and in effect it consists of its shareholders. So that when you increase the taxation of a company you automatically increase the taxation of that company’s shareholders. Why is this group of persons being singled out? If tax has to be imposed to a greater extent than in any previous year, why is it that time and time again the company is singled out for increased taxation? In other words, through the company a limited number of taxpayers is singled out. I believe it to be unfair. I know that in many countries when they are short of funds or they have to balance their budget, the first thing they do is to increase the tax on companies. The Minister has told us that many companies in many parts of the world pay higher rates of company tax. In most countries there are, of course, different facets to the picture. Some of the taxes are grossed up in the hands of the recipient on a sort of apportionment basis. There are different methods. But the basic principle of increasing taxes of companies and leaving all other taxpayers alone I believe to be wrong. I do not believe that the incidence is fairly spread. I should like the Minister to tell us what is the basic principle behind the increase in taxes for companies.

Order! Principles are not now under discussion.

Mr. Chairman, I wish to raise under Head 1 of the taxation proposals the question of the whole basis of the P.A.Y.E. tables for working married women. I have them with me here on my desk—they are extremely relevant to this discussion. May I say that thousands of women in the middle-income and lower-income groups are very much affected by these tables in South Africa to-day. I wish to make it clear from the start that I consider it extraordinarily shortsighted of this Minister that he should choose to overtax these working married women as he does at the present time. I am quite aware that the final income-tax position is adjusted. We know that. It is adjusted in terms of rebates or further payment when the joint income of a married couple is finally assessed. But the absurdity of the whole situation is that although married working women are taxed at source— and here are the tables to prove it—it is done at double the rate of anybody else. They are taxed at twice the rate, Sir. In fact the ridiculous part is that although we are taxed at twice the rate, we have no status in law as taxpayers at all. So work that one out, Mr. Chairman.

You do not pay double income-tax.

Of course we do. We are taxed at source before the income-tax authorities have any idea whatsoever what one’s husband’s income is. These tables have been completely arbitrarily drawn up. I have had discussions with the Department on this particular subject. They are arbitrary, and I maintain, with respect to the hon. the Minister, that they are discriminatory as well. He may dislike my getting up and saying this. It is the second time I have said it, but I intend to say it every session until something is done.

Mr. Chairman, the point of the matter is simply this. These P.A.Y.E. tables for working married women are drawn up before the Income-Tax Department knows whether your husband is a ganger on the railways or a millionaire; it makes no difference. And having taxed us at source—and this happens in many cases in the world to-day—if a married woman goes out to work because her husband is, for example, a pensioner, an invalid or retired, and the income she earns is greater than his, if there is any rebate on her earnings, it is paid to her husband and not to her. [Interjections.] I cannot see why that should be the position.

Order! I wonder whether I should allow the hon. member to oppose the principle. It is the principle which she is discussing now.

The men in South Africa cannot have it all their own way. Because of these tables I took the precaution, after the 1965 session, to go and see the income-tax authorities here in Cape Town. They issued a directive on my behalf so that I am now taxed here as a Member of Parliament as a working married man. [Interjections.] I did it as a matter of principle. I know that my husband has to pay.

Order! No principles may be discussed now.

If it is not a matter of principle, I should like to know how many principles the Minister has got if he thinks he has the right to tax me at source and yet I cannot come back as a taxpayer and reply to these proposals. The thing does not add up. It is all nonsense.

This Minister does not add up.

I have here a letter from the private secretary of the hon. the Minister on the very question of the basis of the P.A.Y.E. tables for working married women in 1965. This is what is contained in the letter (Hansard, Vol. 15, Col. 8163)—

There is no question of probable liability. The taxes are deducted at source, so what does he mean by “probable liability”? They are deducted before any probable liability is involved—and the Minister’s officials only know what that probable liability is if your husband is a ganger or a millionaire.

I know what your probable liability is.

You are not a probable liability—you are just a liability.

Let me remind the hon. the Minister that the hon. member for Pinetown, who is an expert on this matter, something which I do not pretend to be—I am only talking on behalf of the women of this country—in 1965 agreed with me entirely. He supported me and said the following (Hansard Vol. 15, Col. 8164)—

So now the cat is out of the bag. That is how they do it. It is not fair, it is discriminatory, as I have said, and it is also arbitrary—because the Minister and his officials do not know how much money your husband is earning in the first place. So this basis for these tables is completely arbitrary and that fact is borne out by what the hon. member for Pine-town said.

The reply is also in Hansard.

The Minister’s reply was totally inadequate … [Interjections.] Mr. Chairman, my last point is simply this—and maybe you will rule me out of order on this point. There are complaints from one end of the country to the other about the need for all of us to help the country’s development by coming back into the labour market part-time or full-time. We hear this from almost every Government Department, from all over the place, as the Minister knows perfectly well. And yet a woman has to resign from the public service on marriage. She has to resign as a teacher on marriage, and so this ridiculous situation goes on. I suggested to the hon. the Minister in 1965 that he might do well to go and have a talk to the economic adviser to the late Prime Minister, Dr. Riekert, who I think will probably put him rather more effectively into the picture …

Order! I think that the hon. member is going altogether too far. I have allowed her too much latitude as it is.

This statement by Dr. Riekert concerns directly the question of taxation.

That is a matter of principle; it is not a matter of detail.

He talks about the present tax structure, if I may read this quotation.

Mr. Chairman, on a point of order, the taxation proposals before us provide for certain rates of tax and the methods relating thereto.

Yes, but the question of married women going to work and the way they are taxed is a separate principle altogether.

Mr. Chairman, the rates are provided here and it is laid down how they affect married women. They are on pages 287, 288 and 289.

In a different sense altogether.

Married women are dealt with under these proposals, Mr. Chairman.

I accept your ruling, Sir, but I do think, with respect, that I might be allowed to quote this one quotation on tax structure, which is strictly relevant to these proposals, namely the statement made by Dr. Riekert, who was economic adviser to the late Prime Minister. He was making a speech to the Institute of Professional Management in Pretoria in March, 1965, and this is what he said (Hansard Vol. 15, Col. 8167)—

On that note I end, Sir, and I advise the hon. the Minister to have a chat with Dr. Riekert as soon as he can.

Mr. Chairman, hon. members on the Government side have come to the defence of the hon. the Minister and tried to suggest that the problem does not exist. The Minister has, however, conceded that this problem does exist and that there are difficulties in removing it. Let me give an illustration from the tax tables. A married person with an income of R5,000 per annum pays a tax of R408. If he moves to the next group, namely R6,000, his tax goes up from R408 to R608, plus 29 per cent of any amount in excess of R6,000. In the bracket immediately below that, the additional percentage is 20 per cent. Starting at the lowest rung, it is 7 per cent from R600 to R1,000, 8 per cent from R1.000 to R1,200, again 8 per cent from R1,200 to R2,400, 9 per cent on anything over R3,000, 10 per cent on anything over R4,600, 20 per cent in excess of R5,000, and 29 per cent on anything in excess of R6,000. That is a big jump. You can understand the position of a man such as a builder’s foreman having an income of R5,000 per annum, and whose wife goes out to work and earns R1,000 per annum. Instead of paying R408 he now moves on to the next bracket, namely R608. So of his wife’s additional R1,000 R200 goes in additional taxation. The jump from R5,000 to R6.000 is the big jump. It continues right through the brackets until between R8,000 and R9,000. The Minister has conceded that that bulge is there. He has said that he cannot remove the bulge because it would mean a surrender of too much revenue. But I suggest that it is time the hon. the Minister reviewed the whole matter. It is a legacy from the days of super-tax. But I suggest that as the Minister admits the bulge exists he should realize that a bulge is not healthy—the Minister ought to know that—and he should do what he can to remove the bulge.

Mr. Chairman, the hon. member for Pinetown has chosen a very unfortunate example. He said that if a building foreman earned R5,000 and his wife R1,000. he would now have to pay R608 in tax instead of R408. Has the hon. member forgotten that the hon. the Minister of Finance made a concession last year to the married woman who is in employment? In actual fact the tax of the two together is, in that case, not calculated on an income of R6,000, but only on R5,000 plus half of the wife’s income. In such a case, therefore, the tax is calculated on R5,500. The example chosen by the hon. member for Pine-town was therefore a very unfortunate one, in that it was devoid of all truth.

That concession did not amount to anything.

Mr. Chairman, I am not going to make any attempt to reply to the hon. member for Wynberg, as her entire speech was out of order.

Mr. Chairman, on a point of order, is that not a reflection on the Chair?

Order! I myself said that the hon. member was out of order.

Surely it was perfectly clear that she was all along discussing the principle of the taxation of married women. That is definitely not relevant here. Then, on top of that, her colleague the hon. member for Pinetown came along and chose a bad example to support her. I repeat that the man who has an income of R5,000 and whose wife earns R1,000 does not pay on R6,000, but only at the rate applicable to R5,500.

I should like to address myself to the hon. the Minister now. As he has told us that he wants to iron out this bulge, I want to ask that the progression from one category of “taxable income” to the next should at the same time be made uniform. According to the present table the first category starts at R600, the second at R1,000, the third at R1,200 with an increase of only R200, the fourth at R2,400 with an increase of R1.200, the fifth at R3,000 with an increase of only R600, the sixth also R600 higher, and the seventh, again, R400 higher. I want to ask very respectfully that the increases from one category to the next should be made uniform. In that case fewer anomalies will arise.

It is, of course, quite accurate to say that there is a bulge. It is also academically correct to say that it ought to be removed. But I have had precious little assistance from hon. members on the opposite side as to how it is to be done. All that I have been told is that there are numerous permutations and commutations in which it can be brought about. However, the hon. member was not so lavish in his solutions. He did not venture to mention one single solution that he would suggest for this bulge. In fact there are not so many permutations and commutations which can be applied in a case like this. I want to say that there are only a few of them. The first is that I may decide to rob Peter to pay Paul. I may decide that I will reduce the bulge by increasing the taxation of the lower income group. However, I do not want to do that. I do not know whether the hon. members opposite want to do that; therefore that is out of the question. I can also decide to reduce the bulge by increasing the taxation of the upper income group. However, I do not want to kill initiative. [Interjections.] Will any hon. member propose this? In certain respects our income tax in respect of the higher income groups is already the same and higher than in England. So what are we left with? We have to find the money to flatten out the bulge. We can only find it by taxing something else.

Now what suggestions are the Opposition making as to what we should tax to make up for this amount? I have already said that since I took over this portfolio, whenever it was possible to spare the necessary money to bring about the flattening, I have done so. The last occasion was in 1964 or 1965 and I did it at a cost of R2,000,000. Is this now the time when we are taxing to come with a reduction of taxation which could only be affected in practice, if we want to be realistic, by increasing other taxation in addition to what we have already done? Hon. members will see that it is totally unrealistic, particularly at this time. I have said it time and again and I have acted up to it too. When I became Minister of Finance this bulge was much more prominent than it is to-day. I have done something to flatten it out. I will continue flattening it out, but I am not going to do it at the expense of the lower-income groups and I am not going to kill initiative in the higher-income groups, by making them pay for this. Therefore, I have sympathy with what the hon. members say; it is an eyesore. I have always said that my five-year plan for taxation provides that ultimately—as soon as the opportunity arises —we must try and flatten out the bulge. It is therefore not a question of the intent not being there; the fact is that the means are not there.

The hon. member for Kensington has brought up the question of the gold-mining taxation. This year it is in particular directed to the 5 per cent surcharge which the gold mines have to pay. This was the first increase in very many years. It has already been remarked that in preparing this Budget—and I made it very plain in my Budget speech— the idea as far as taxation was concerned was to spread the burden over as wide a field as possible so that no individual or single group will have to pay too much. That is one of the reasons why this time I have roped in, in a very modest way, the gold-mining industry. I will show the House how modest it is. As far as the gold-mining companies in the higher brackets are concerned, it means an extra 2.8 cents per rand. That is all that it means in the higher groups. It is not something that is going to break them and it is only on their profits. It is not part of their working costs; it is a tax on their profits. Hon. members should remember that if there is one sector of our economy which should be particularly interested in combating inflation, it is the gold-mining industry. All we are doing, and we have had no objections from them, is to ask them to make a modest contribution in the battle against inflation which is also to a large extent their battle.

Then there is the hon. member for Wynberg, who has made an appeal to me. I do not know whether it is ad hominem, or whether it is ex femina, but she has pleaded for the working married women. The late Senator Langenhoven once said, when somebody was very nasty to him, “I do not know why this man is nasty to me, because after all, I’ve never done him a favour.” I broke new ground and I brought relief to the working married women. That was the first time it was done in this country, and all the thanks I get is what the hon. member for Wynberg has given me. That is why I spoke about potential liability and said that the potential liability of the hon. member for Wynberg was almost incalculable. We have done something towards solving this problem. It is a matter in regard to which time will show what more we can do, or whether the money would not be better spent on better projects for the relief of taxation. I am thinking here particularly of whether the money should not be spent on pensioners. It is a question of priority. But they have taken their place in the queue and they must await their turn.

We have listened to the Minister with interest and it became obvious that his five-year plan would not be taken a stage further during the 1966-7 financial year, and there seems to be no effort to iron out the bulge, and it appears that the major burden will still be carried by the middle-income groups. There are certain aspects regarding the income-tax tables which I would like to bring to the notice of the Minister and on which I want to ask for further information. The first is the question of the application of these tables and the relationship with the schedules for the collection of this taxation. We believe that the administrative side for the collection of taxation has been to the mutual benefit of both the taxpayer and the discus. However, the administrative difficulty in applying these tables and these schedules in the collection of this taxation is an important matter. Therefore we would like to know about the adjustment of the schedules to ensure that at the end of the financial year the taxpayer will not be called upon to pay one large lump sum after receiving his assessment. In other words, the relationship between the provisions of these tables and the collection of the taxation in terms of the schedules by means of P.A.Y.E. is important. I want to mention this point and the effects of these provisions, because it appears that there is the administrative difficulty where a person who is receiving income from two sources, and P.A.Y.E. deductions are made separately from both those sources, that when the final assessment is made some of these people, due to the combination of these two sources of income, are placed in a higher bracket.

Order! That is definitely a point of principle, because you cannot have a table covering people with different types of income at the same time. If you want that, then a new principle must be introduced in the system of income tax.

I was illustrating the point …

I think everybody knows what that point is.

Sir, if you do not wish me to discuss the administrative effect of these tables and its adverse effect on these people, I should like to refer to another point. That is in connection with the taxable income shown in the schedules and to show that there are certain groups of persons who, due to the interpretation of the Minister, will move into the next bracket of taxable income. I want to refer to a particular case to illustrate this point. It is the case of a person receiving a pension of R1,013 per annum as a civil pension and is also receiving what was previously a war veteran’s pension of R38 a month which was non-taxable. In terms of the ruling by the Department, it has now become taxable, and it means that that R38 a month or R456 per annum—it means that that person, instead of falling under the rate applicable to the people earning R1,000 to R1,200, who in terms of the table have to pay R64 plus 8 per cent, will now move into the next bracket of R1,200 to R2,400 due to the fact that this additional amount of R456 is now taken into account and tax has to be paid on it. I hope the Minister will give some indication as to how these people can be assisted who in the past received that amount of money on a non-taxable basis but who now are being called upon to pay a considerable amount of extra taxation because that R456 now becomes taxable and brings them into a higher rate of taxation.

I do not think it is part of my function to suggest ways of evading taxation. I think I can leave that to the ingenuity of the taxpayers, and I sometimes find that ingenuity is fairly profound.

Motion put and agreed to.

Proposal on non-resident shareholders’ tax:

I move—

1. (a)any dividend (excluding such portion there of as consists of an interim dividend) declared by any company on or after the seventeenth day of August, 1966; and
2. (b)any interim dividend the payment of which has been approved on or after that date by the directors of any company or by some other person under authority conferred by the memorandum and articles of association of that company.

Agreed to.

Proposal on transfer duty:

I move—

Agreed to.

Proposal on diamond export duty:

I move—

The hon. the Minister explained in his speech that the object of this increase from 10 per cent to 15 per cent in respect of the export of diamonds was to afford the domestic diamond cutting works an opportunity of making some progress. But until one makes it at least 50 per cent it cannot be effective and it cannot achieve that object, because for that purpose 15 per cent means nothing. Let me explain what I mean. If you export a rough diamond, an uncut diamond, and you yourself buy it on the other side, as happens on a large scale, the seller will in the first place try to keep the price of the diamond as low as possible because he himself will be buying it on the other side. In the second place he will try to keep the price of the diamond as low as possible because then he will pay less tax. The figures indicate that in 1964 uncut diamonds to the value of R74,000,000 and cut diamonds to the value of R20,900,000 were exported.

It is generally known—one need not be an expert to know it—that an uncut diamond to the value of, say, R1,000 is worth R3,000 after it has been cut. In other words, it is worth three times as much. I therefore feel that the Treasury is being cheated very badly here; I think that the Treasury loses at least R168,000,000 per year as a result of this ineffective tax. Accordingly I want to suggest that the question of the taxation on the export of uncut diamonds should be reviewed with a view to introducing a more effective tax so that one may in the first place assist the domestic diamond cutting industry and in the second place prevent the man who exports the diamond at the lowest price that he possibly can—and he may be the largest producer— from buying it at the lowest price overseas and then reaping all the benefits, and robbing the Treasury in that way. Mr. Chairman, this is not something new; it is something which has been going on for years. I raised this very matter here in 1937, when it was still in its initial stages. Instead of the interests of the Treasury being better protected as far as this source of revenue is concerned, the position is deteriorating from year to year. In my mind a tremendous future awaits our diamond cutting industry, but as long as this state of affairs prevails this tax will, in my opinion, not be effective, and therefore I want to make representations for this tax to be reviewed as soon as possible for the reasons I have just mentioned here.

I just want to ask the hon. member for Krugersdorp why he is picking a quarrel with me. I have increased the tax. If he wants me to increase it still further, then I just want to tell him that I have never yet had a request from anybody for taxation to be increased even more. To a large extent this tax is one for which I am responsible, and its object is this: Just as one protects one’s industries by means of customs tariffs, so this was an attempt to protect our domestic cutting industry. Our domestic cutting industry had a 10 per cent protection and it has now been increased to 15 per cent. But this tax, like all other forms of taxation, is not necessarily the final one. We may perhaps decrease it or we may perhaps increase it, but I can give the hon. member the assurance that we shall give attention to all these problems from time to time.

Motion put and agreed to.

Proposals on customs and excise duties:

I move—

1. (1) the ordinary customs duties in Part I of Schedule No. 1 to the Customs and Excise Act, 1964, on the goods described hereunder and classified in the tariff headings or sub-headings set forth hereunder, be amended to the extent shown:

1. (2) the excise and customs duties in Part 2 of Schedule No. 1 to the Customs and Excise Act, 1964, on the goods described hereunder and classified under the tariff items or sub-items set forth hereunder, be amended to the extent shown:

1. (3) excise duties to the extent shown be imposed on the under-mentioned goods manufactured in the Republic and customs duties be increased to the extent shown on similar goods imported into the Republic:

1. (4) in terms of the provisions of Section 58 (2) of the Customs and Excise Act, 1964, excisable and imported beer made from malt, specified against tariff items 104.10.10, 104.10.20 and 104.10.30 and excisable and imported spirits (including spirits in spirituous beverages) specified against tariff items 104.20.10, 104.20.20, 104.20.30 and 104.20.40 of paragraph (2) of this Notice which, at the time this Notice is tabled, are still in possession or under the control of or in transit to or have not been delivered from the stocks of importers, manufacturers, distributors, wholesale dealers and retail dealers, as defined in Section 58 (6) of the Act, as well as all subsequent additions to such stocks, be liable to the increased customs and excise duties specified in this Notice in respect of such goods.

The Customs and Excise taxation proposals embody a variety of items. The notice of taxation proposals tabled on the 17th August contained proposals in respect of increased and new duties on the so-called conventional necessities and on non-essential or luxury imported goods. The majority of these goods are obtained locally in adequate supply and satisfactory standard. The increased duties which are imposed for fiscal reasons and for the purpose of curbing the inflationary tendency are spread over a wide field so as not to place too heavy a burden on any particular section of the buying public.

I am sorry to say that I cannot agree in the slightest with the effects which the hon. the Minister suggests will flow from these duties. He maintains that they apply to conventional necessities and luxury imported goods and that they are spread over a wide field. I submit that in point of fact the Minister has selected as his victims two particular fields of our society. He has selected the young family man setting up a home and the working man as his victims for the carrying of this burden of additional taxation. No one objects to the principle, which has been accepted throughout the ages, of using customs and excise duties to raise revenue; that is accepted. I do not intend to deal with the first group at this stage, although I hope that I will be able to come back to it later, and that is the increased duties on the basic essentials of the young family man. Even the duties on the components which make up these basic essentials in the setting up of a home are being increased. What about the policy of the hon. the Minister of Bantu Administration who has pleaded for more babies? Here we find that the duties are being increased on perambulators, toys, refrigerators and all the labour-saving devices, all the things which are needed to reduce labour and to enable the housewife to do her job so that she can have a family. Sir, I want to deal rather with the burden which is being placed on the poor man and on his pleasures. In particular I want to deal with what is accepted throughout the civilized world as the basic pleasure of the poor man and that is his beer. I want to say here categorically that the Minister is flying in the face of the declared policy of his Government and of the new Prime Minister. He is proposing taxation here which is designed and deliberately designed to upset a pattern for which his own Prime Minister pleaded so earnestly and so seriously in this House a year or two ago.

To which item is the hon. member referring?

I am referring to item 104 (10). I am objecting to two things in regard to this item; one is the excessive increase in excise on beer—I am not going to argue about the customs duty—and the second, perhaps the more dangerous one from the long-term point of view of industry generally, is the discriminatory and punitive nature of this particular excise duty. Never in the history of South Africa have we had a Minister of Finance who has selected a single firm for punitive taxation. Here we have an item upon which a discriminatory and punitive tax, based on the volume of production, is being imposed, and the result of this is that one individual company in the whole of South Africa is being made to pay a tax which no other like firm producing a like product is required to pay.

I want to put it to the hon. the Minister that he owes industry in South Africa a clear and unequivocal statement to-day. He must either say, Mr. Chairman, that this discriminatory tax, based on volume of production, is a policy which he intends to apply to other items of taxation, such as, say, cigarettes, or that it is not a general policy but an isolated individual case where he is imposing a discriminatory tax in an isolated individual instance. If it is the first, then he must tell us whether he intends in fact to apply it to cigarettes, and whether a company like Rembrandt or U.T.C. is going to be selected and taxed differently from other tobacco companies. If it is the second, i.e. that this is an isolated case, then he must tell us what court of justice has sat over an individual company and selected it to be punished by the Minister of Finance with a punishment imposed on no other person who has perpetrated the crime of making beer.

The best beer.

I am not going to advertise any brand. That is a matter of opinion. But it is a fact that it is the most popular and that indicates what is thought of the beer. The Minister is now punishing firstly the beer drinker and secondly an individual company, and in order to record our complete disagreement with this policy of discrimination, I move—

I move this in order to pinpoint our opposition to the discrimination in the first instance. The fact that I have accepted as the figure the proposed excise and customs duty on the minimum produced quantity which the Minister has laid down does not indicate that we accept that taxation. I believe that that duty in itself is too high, and if time permits I shall show why. But in order not to cloud the issue between the general increase and this fundamental question of punitive taxation, I move this particular amendment to highlight the punitive aspect of these proposed provisions so that we can get down to the details of that one particular item.

But over and above the punitive aspects against one company look what it means to our industry. Let me put it to the Minister: What firm is now going to aim for efficiency and bulk production in the face of this sort of taxation? The whole object of this tax system is to say to the manufacturer: Produce small, because as soon as you get big I am going to punish you. I have taken the trouble to check certain figures and the company which is going to be affected by this has only increased its price at source of beer over the last 40 years by 16 per cent. Now what company, what manufacturer of what single item in South Africa, can claim to have only raised the price at source by 16 per cent over the last 40 years? And the reason that it was possible was that this particular industry went in for mechanization, went in for modern methods, went in for bulk production, and by efficiency and streamlining was able to maintain the price of the poor man’s champagne, the poor man’s drink, at a level which he could afford, and it did it by bulk production and by efficient production. But this sort of tax forces any industrialist now to fear bulk production and efficiency. If he is going to face the prospect of a punitive tax if he brings his production above a certain level, then it is far better for him to be inefficient and to produce a lower volume to avoid that punitive taxation. [Time limit.]

The hon. member for Durban (Point) really tried to drag in the young family man by the head and shoulders here this afternoon. I do not think the hon. member could have been very serious. The hon. member mentioned the average increase of 10 per cent in the duty on imported goods, and those goods include only two items which he was able to use in support of his argument, namely, in the first place, dolls, and, in the second place, perambulators. The hon. member must really have had a very poor case if he had to drag in the young married man with a family in order to throw suspicion on this measure by mentioning dolls and perambulators, which he may just as well buy in South Africa.

I said that I would come back to that.

I should be glad if the hon. member would come back to that, so that he can give us the entire long list of commodities in respect of which the young family man is affected to such an extent that his standard of living will suffer. On the contrary, as far as this increase in the import duties on foreign goods is concerned, I want to express the hope that South African industry will derive the fullest benefit from it.

I now come to the second point raised by the hon. member, namely the matter of beer, and I feel that we must discuss this matter of beer this afternoon, because I think the Opposition have helped, and have also helped the Press, to give the country a completely distorted impression of what was being proposed here and of what the Minister was doing. Sources of additional taxation were sought. Very well. An attempt was made to spread the taxation as much as possible. Very well. The duty on spirits has been increased. That will mean an increase of 1c per tot over the bar-counter. Do hon. members now want to suggest that beer should not make its contribution too? Do hon. members now want to suggest that beer should make no contribution at all?

No one has said that.

I am rather pleased to hear that from the hon. member. Up to that point we are therefore in agreement. Beer should also make its contribution. Now the hon. the Minister comes along and imposes an increased excise duty of 23c a gallon on beer …

On a sliding scale.

Let us keep to the point now: 23c a gallon on beer. And now the country is being given to understand that one particular company in South Africa is being taxed to such an extent. It was said here again this afternoon. The hon. member’s words were, “One single firm has been selected”. Mr. Chairman, not one single firm has been selected. This is not a tax on companies …

You don’t say!

Hon. members may laugh, but this is a tax on breweries and not a tax on companies. Surely we agree about that as well. We are still coming to the effect, but surely we agree as far as this is concerned? The tax must be 23c, because hon. members over there said so themselves. We agree that it is a tax on breweries. But the country has been given to understand that it is aimed at one company specifically.

Thirdly, it has been stated here this afternoon, and it has also been stated very emphatically in the country, that this is a penalty that has been imposed on “efficiency and bulk production”. It has been suggested that it is a tax on efficiency. Mr. Chairman, since when is volume of production synonymous with efficiency? I want to say to you, Sir, that a small undertaking can be as efficient as a large one. One cannot deny that. The economists are sitting over there. A small undertaking can be as efficient within its framework as a large one within its framework. But now I want to take the hon. members further. If the small undertaking and the large undertaking are equally efficient, then the position as far as the large undertaking is concerned is that, as a result of the fact that it produces an enormous quantity, its unit costs are lower than those of the small undertaking. We are still in agreement up to that point. And now we come to the rising scale—not the sliding scale, but the rising scale. Sir, if a large undertaking which produces 12,500,000 gallons, that is to say, five times as much as the one on the bottom scale which produces 2,500,000, is not so efficient that it can bear the extra 6 cents on account of the reduction of its unit costs, then it is not efficient. [Laughter.] The hon. the Minister calculated that that would mean an increase of 1.91 cents on a pint of beer. In other words, there would still be a margin of .1 cent on 2 cents, because the intention was that the price of beer could be increased by 2 cents per pint. Sir, all the breweries producing up to 5.000,000 gallons (if one looks at the table) could have managed on an increase of 2 cents. The smallest ones would have made an extra profit, and the others could have managed on an increase of 2 cents a pint, and from there upwards, with the increased turnover and the same efficiency, they could have taken it from their profits as requested by the Minister in his Budget speech. But what did they do then? This is the third point in regard to which they have brought the country under a completely false impression, and the Opposition is aiding and abetting them. Sir, if one takes the maximum excise duty, what is the position? I am told that there are 12 beer pints to a gallon. That is to say, there is an increase of 6 cents. If that is imposed throughout on everything, it means a half cent on a pint. And if one adds the half cent on a pint to 1.91 cents, one arrives at 2.41 cents, and if the price of beer had been increased by 24½ cents a pint in South Africa, these people, whoever they may be—both large and small undertakings—would have recovered the extra amount in excise duty from the man drinking the beer, this “working man” about whom the hon. member feels so concerned. But what do they do now? They go along and they increase the price of a pint of beer in South Africa by 3 cents, and they say, “The Government is to blame for it.” I say that is a disgrace, and I say that the Press of South Africa should tell the working man that it is not this Government that is to blame for that, and that the Opposition should stop bringing the working man under the impression that this Government is to blame for the fact that he now has to pay 3 cents more for a pint of beer.

What percentage increase is that?

Yes, he would have been required to pay the excise duty in any case, because it is the intention of this Budget to spread the burden proportionately. We discussed that in the Budget debate, and concluded the discussion on it. We are now dealing with the details and the effect, and now the Opposition have to get up and say exactly where they stand in regard to this matter, so that we may settle this issue in this House today.

Mr. Chairman, I am extremely sorry for the hon. member for Queenstown. I have always enjoyed listening to his speeches in this House, but when he has a hopeless cause I am afraid it makes him talk nonsense, because what he said this afternoon was nonsense. He said this was a tax on breweries. Well, it is not a tax on breweries. A tax means something out of profits. This is a penalty on breweries, or a brewery. In terms of the legislation we have before us it only applies to breweries, but it establishes a precedent from which it can flow from breweries to all sorts of other activities. The hon. member then says that size of production is no criterion of efficiency. I agree with him. Very often it is not. But the hon. member will also agree, I am sure, that you do not penalize efficiency through size, which is what this is doing. You may have a small company that is efficient. That is fine. But because it grows through efficiency, are you going to penalize that company? Because that is what the hon. members are asking us to do.

Mr. Chairman, I had hoped that before this debate commenced, the hon. the Minister would intervene and tell us that he had decided to scrap this particular proposal in regard to beer. Because no proposal for as long as I can remember has had so much criticism as this proposal of the hon. the Minister. Every businessman, every columnist, every organization, every newspaper has condemned this proposal from beginning to end. I only want to quote one, Mr. Chairman, and that is the opinion of a financial paper which is well known as a supporter of the Government, the Financial Gazette. It is probably the first time in months that it has criticized the Government. This is what they say—

What is the Minister trying to do? What is the purpose behind it? He has asked us in this House now to vote for or against these measures, and before we do so, I want the hon. the Minister to tell us what is the purpose of this particular proposal. Is it as the hon. member for Queenstown says merely a method of getting additional income? Is it a method of trying to stop a monopoly? What is the hon. the Minister trying to do? We asked him during the Budget debate, but he did not reply to us. We told him in the Budget debate that he was denying an organization the benefits of efficiency and productivity and putting a premium on inefficiency and stagnation. We told him that what he was trying to do was intolerable in a free country with free private enterprise. What is the hon. the Minister trying to achieve? I hope he will tell us so that we will know how to deal with this matter. Because, Mr. Chairman, growth in our economy is to a large extent dependent on rationalization through growth, through mergers, or through acquisitions, and if the hon. the Minister is going to persist with this measure he is going to do dreadful harm to the future economy of this country, because no industrialist, no investor, will dare in future to try and build a strong, efficient structure because he will have over his head the precedent that the hon. the Minister is setting to-day by the introduction of this penalty on large-scale beer production. He is denying everything we are trying to do in this country as a result of this type of legislation. He is going to discourage investment, he is spreading apprehension amongst business people and he is removing from business the essential that we require in this country and that is incentive to produce more economically and in greater quantities. I have said in this House before, and I say it again, it is time the Minister of Finance and the Minister of Economic Affairs got together to decide what they want this country to do, because each time one gets up he contradicts the other. Now it is the Minister of Finance contradicting the Minister of Economic Affairs. Last month it was just vice versa.

Order! I want to remind the hon. member that we are in Committee now.

I leave it at that, Mr. Chairman, but I do think this Committee is entitled to know from the hon. the Minister what is the reason for this measure before he asks us to support it or vote against it.

The hon. member for Queenstown talked about the attitude of this party since the Budget debate as being a scandal. But if there ever was a scandal in regard to taxation in this country then it is this discrimination between beer and beer. And what is more, there is a double discrimination here because it is not only a discrimination between beer and beer but also between beer and wine. That does not come very well from a Minister of Finance coming from the Western Province. That is what is happening. We have over the years been asked in this House to encourage consumption of light liquor, beer and wine, and not to drink spirits. We heard the Minister of Justice telling us that but now we get this excessive taxation on beer. And what is the taxation on wine which is much more potent and contains far more alcohol than beer? Beer contains only 4.3 per cent alcohol whereas an ordinary natural wine contains alcohol to the extent of from 10 to 12 per cent. We do not want young people to drink wine if they can drink beer. I think it is scandalous that we should have this discrimination. This is what has happened over the last ten years: Taxation on beer per bottle has gone up from 5.2c to 13.3c, i.e. by 8c, while the taxation on a bottle of wine has gone up from nothing ten years ago to 1c to-day. I think it is scandalous. Talking about scandals, as the hon. member for Queenstown did, this is a scandal. But what is even more serious to-day is this discrimination between one company and another—because this comes down to taxation of one company, having several breweries. I can praise the hon. member for Queenstown for trying to be loyal to the Minister of Finance now that he is in a jam, because the whole country realizes this is an injustice. Are we now going to say to a company, a company which has built up its industry, that it is now going to be taxed differently per bottle of beer than the other company? He has to compete in the market and he has to sell his bottle of beer against the bottle of beer from the other brewery. He cannot pass on this taxation. If we tax cigarettes or liquor we know that the vendor will pass that taxation on to the consumer. But this particular company cannot pass it on. They cannot do it because they have to compete in the market with the other man. We know that the S.A. Breweries has been taxed differently from the other breweries. I may say that there probably are many hon. members here who have an interest in S.A.Breweries. The ordinary investor in South Africa has an interest in S.A. Breweries. It is a blue chip. Any man who has an interest in a pension fund has an interest in S.A.Breweries. Practically every pension fund and every trust investment has a parcel of S.A. Breweries shares. They take it as a blue chip; they take it as sound as a Government investment. The whole country is now being told that if you invest in that company you are going to be taxed differently. I certainly hope that even at this late hour the hon. the Minister of Finance will realize that this is an injustice. It is a rank injustice to one company and people are asking whether this is going to be extended. Is this going to be extended now to cigarette companies as well? Are we now also going to say to large cigarette companies that they are going to be taxed differently from the small company? Are we going to do that? Are we going to extend it to other producers? If a man produces more than his competitor should he be subjected to a higher scale of taxation? Mr. Chairman, I think this is a rank injustice and I hope the hon. the Minister is going to put it right.

There is so much misunderstanding and there are so many misrepresentations in regard to this particular duty that it is about time that I tried to point out to people who get so hot under the collar that it is not the idea here at all to impose a penalty on some company or other. That is not the intention at all. When I began with the duty on beer, I had the position in the two main beer-drinking countries investigated. I went to investigate the position in Germany and in Austria as far as duty was concerned. Let me tell hon. members what I found. In Germany they make four different kinds of beer of varying strengths. The basic duties differ, but thereafter they follow the same pattern. Up to a certain production of one of these kinds of beer for instance a basic duty is paid—in this case 6 D.M. per hectolitre. As the production increases, the duty increases to a maximum of 7.5 D.M. per hectolitre. In other words, there is a difference of 25 per cent between the producer who comes in at the bottom of the sliding scale and the one who is above the maximum. In this country the difference is only 8¾ per cent, as compared with 25 per cent in Germany. In Austria the same principle applies, although it is applied in a different way. There they have a fixed duty, while the smallest producer gets a rebate of 40 per cent as compared with the large producer. I am introducing only 81 per cent here. Now I have to hear what a criminal I am, that it is a scandal, and so forth. Hon. members do not have the faintest idea what they are talking about. What is so strange about my accepting and applying this principle in South Africa as well, and what is more, in such a lenient way? But even in this country this is not an entirely unknown principle. I want to remind the hon. member for Kensington of the fact that the tax paid by the smaller gold mines is quite different from the one paid by the large ones. The formula is different, not the total tax. If a gold mine has an income of R40,000, the formula is y =20 × 1—6/X if it is R50,000, the formula is y = 24; and if it is R140,000, the formula is y = 60. To have a sliding scale on the basis of size is therefore not an unknown principle. Now, hon. members will be right in saying that the one is on taxable income and the other on production. But do hon. members realize that if I had made this scale applicable to taxable income, it would have been much more disadvantageous to any large company than it is in the case of the basis which I have adopted here now?

Let us consider the other aspect now. Hon. members allege that this is aimed against S.A. Breweries. According to my information this company in 1965 had seven factories, seven breweries which fell under it. This company to-day produces 90 per cent of the total quantity of beer produced in the country. But that is not my fault.

It is their efficiency.

Two of these factories are at the lowest point on this scale, namely on the 74 cent scale, and four are on the 75 cent scale, while only one is on the 80 cent scale. Mention has been made of efficiency. It is true that you can produce at a lower-price the larger your production is, but if you produce a commodity such as beer and you want to distribute it throughout South Africa, you cannot have one central factory for the purpose. Then you must do what has been done by S.A. Breweries, that is to say, you must have a distribution of factories. And they receive the benefit of that. Then they receive the benefit of the duty. If one effects all the economies one can by means of efficiency at a large central brewery such as at Isando and one has to pay the transportation costs to Cape Town, one will not have a great deal left on one’s proportionally greater profits as compared with a smaller brewery. That is why these people decided to have several breweries. That is why they have breweries in Pietermaritzburg, in Port Elizabeth, in Durban, in Cape Town, and in Braamfontein, and then there is the large one at Isando. All that we have done here is to say that this is a basis that we can apply here. It is simply because of the size of that company that one of its seven breweries falls in the maximum scale. If any other company passes the 2,500,000-gallon mark, it will also go to the second rung of the scale, and so forth. If you control 90 per cent of the production, it is inevitable that you will be liable to more tax than is the case with a smaller company.

May I ask you a question?

No, the hon. member will also get an opportunity to speak. Any other company will be in precisely the same position if it has the same production. This is not a case of one particular company being selected to be penalized in a particular way. It is not a question of our trying to combat a monopoly in this way. There are other ways of doing that. Another large company is coming into being, but it will also be liable to this duty if its production merits it. It will not be able to avoid it. What we actually want to do, and that is also what is being done in Germany and Austria, is to give the smaller breweries some encouragement so that they may continue. That is the explanation of what has been presented here as being a sinister plot against one particular company.

The hon. the Minister has brought forward an argument which, I am sure, he knows is fallacious. Surely he is aware that what is behind the Germans’ system is not a discriminatory taxation system but a protection of the traditional small town brewer. There you have hundreds upon hundreds of these small brewers—traditional family occupations which have gone on for generation after generation. Have we such a situation in South Africa? The Minister cannot pretend that we have that sort of situation here. The two systems are completely different and the circumstances are different. Firstly, you do not have one standard price, one standard selling price. There a brewer if his costs are more can charge more. Here in South Africa we have a standard selling price. The Minister knows as well as anybody else that the object of an excise duty is twofold: To raise revenue and also to influence the habits of those people using that particular item. Here the hon. the Minister is attacking a product and the maker of that product and secondly the habit, whilst trying to hide behind the fallacious argument that it is done in Germany and in Austria. But is it done in America? Is it done in Great Britain? Is it being done in any other country? It is only being done in the two countries where you have the traditional family brewer, where you have the small town brewer and where you also have your large regional industrial firms. But in every other country of the world each firm is treated on its merits.

The Minister has avoided replying to the simple question which we put to him. We asked him whether this was an isolated instance affecting beer only or did he intend applying it also to other products? I challenge the hon. the Minister to answer this question with a direct reply. Is this an isolated instance, is it only one tax of its kind or does the Minister intend applying this principle of taxation to other industries? I hope the hon. the Minister will give us a clear answer to this specific and unequivocal question so that industrialists shall know. There is a great difference between protecting an existing industry and trying to encourage an industry. What encouragement does the hon. the Minister imagine this tax is going to be for the new Whitbread Brewery which is now going to look at the position and say that they must make sure that they do not produce more than 2,500,000 gallons? The moment they get to that peak of efficiency in one factory they are going to be punished. Therefore they will have to scatter their efforts. But the hon. the Deputy Minister for Bantu Development is shouting for mechanization and improvement of efficiency in order to avoid having to use large labour units. Surely, the bigger your industry is, the more you can mechanize and the more you can do away with labour?

Here then is another aspect which is in direct conflict with Government policy. Encouragement of bulk beer production with the resultant efficiency caused by automation and mechanization is being condemned by the hon. the Ministe". He wants to say to the breweries: Go back to the ox-wagon days; go and get a lot of Bantu labour; do not think in terms of mechanization; mill the hops with your feet, otherwise you might produce too much; wash the bottles with a brush; do not get a machine. No, let us not have this sort of nonsense. The hon. the Minister’s discriminatory tax is not going to encourage a single brewer to come out here. And it is certainly not going to create the sort of position you have in Germany or Austria.

But the other aspect is an even more serious one. And that is what this is going to do to the drinking pattern of South Africa, a drinking pattern which this House debated at length when the hon. the Prime Minister and the vast majority of Government members accented that South Africa should change its pattern of drinking from hard tack to soft tack, namely to lower-alcohol-content drinks. The hon. the Minister has accepted the principle in this very tax. He has three grades according to the strength of malt liquor. The stronger it is, the higher the tax. He accepts that principle. But when it comes to the real issue of low-alcohol-content beer versus high-alcohol-content spirits, then he abandons the principle.

I have never adopted that principle.

What is this tax differentiation in the strength …

Not on the proportion of alcohol.

It is on the strength. It is on the specific gravity, a specific gravity variation. It is tied up with the strength. The principle is also accepted with natural and fortified wines. There is a higher taxation on the fortified wines with a higher alcohol content than on the natural wines. And what does it boil down to if you work it out in drinks as opposed to gallons? In the case of beer you drink a reputed pint whereas in the case of spirits you have a tot—20 to the bottle. Working it on 12 beers—reputed pints—per gallon and 20 tots per bottle of spirits, six bottles per gallon, that is 120 tots per gallon, you find then that beer has been taxed as follows:1956, 2.6 cents, 1958, 3.3 cents, 1962, 4.3 cents and now 6.7 cents, whereas spirits are taxed to-day at 5 cents per drink. In other words beer is actually taxed higher than spirits per drink. Already the trend is immediately turning back from beer drinking to hard liquor.

I have here the report of the Department of Justice for 1965. It devotes pages and pages to the progress made in regard to Bantu liquor consumption in South Africa. It points out how beer drinking has increased during the first half of 1965—the last statistics—over 1964, namely by 134 per cent. In other words the pattern desired by the Government is coming about. Drinking is switching from hard tack to the lower-alcohol-content drinks— namely beer and natural wines. Now the Minister by this punitive tax on beer is going to force the whole trend back again. Spirit consumption amongst the Bantu increased by 29 per cent. What is this going to do to it? And I am not now dealing with Bantu beer—the traditional Kaffir beer. That is another matter we will deal with. [Time limit.]

Mr. Chairman, this tirade by the hon. Opposition is going rather too far now. Before I deal with the hon. member for Durban, I should like to refer to a most execrable statement made here by my good friend, the hon. member for Kensington. I have great regard for the hon. member for Kensington, but to lay it at the door of the hon. the Minister of Finance that he is discriminating in favour of wine because he is a Minister with a constituency in the Western Province, is going just too far. [Interjections.] Surely the hon. the Minister of Finance stated explicitly that he expected R10.500.000 from his increased excise duty on beer over a full year, but that at the same time he was taxing the product of his constituency to an amount of R10,000.000 per year. And then the hon. member for Kensington alleges that he is discriminating against beer because he represents a Western Province constituency.

It is brandy!

But surely it is a product of the Western Province, of the constituency of the hon. the Minister. And I want to emphasize that very strongly. It is an insinuation against the hon. the Minister of Finance that his high integrity certainly does not warrant. Another thing bothering me this afternoon in the arguments of the hon. Opposition is that they launched a campaign against the big man, the rich man, under the previous Vote debated here. It was said repeatedly that this Government was a rich man’s Government. The hon. member for Umlazi said:“This hon. Minister must spread his net to the richer groups.” And where we are now dealing with the bigger man who is taxed slightly more, on the other hand, they are greatly concerned about the bigger man.

It is the consumer who pays.

No, it is not really the consumer who pays. One of the hon. members on this side said explicitly that it could not be alleged that the consumer was paying. That big company will have to bear it itself. That is just the point. It is the big man who is taxed somewhat more heavily in this regard. And what has become of all the wailings about the small man that we heard a moment ago? Now, all of a sudden, it is the big man who is being dealt with unfairly.

Did the price of beer not rise over and above the excise duty? Was there no increase by the breweries?

You involve yourself in all kinds of ridiculous situations if you are not consistent. Here we have one of the typical examples of inconsistency on the part of the opposition, and that is why it is involving itself in this kind of ridiculous situation.

Mr. Chairman, the hon. member for Paarl. who has just sat down, claims that we had been pleading for the small man, the ordinary man, and here we are, he says, talking about the big man who is made to pay a little more on big beer production. I would point out to the hon. member for Paarl that the increase in excise duties on beer amounted to some 50 per cent, which is substantially higher than increases imposed on other alcoholic drinks. Surely the hon. member for Paarl will concede that beer and not spirits is the normal drink of the ordinary man. And it should remain so. In fact, under this Budget the taxation is putting up the price to such an extent that it is in some instances more expensive than certain other alcoholic drinks.

But I want to come back to this taxation on production. The hon. member for Paarl suggested that the big breweries just have to pay a little more. He is quite wrong in suggesting that it is just a little more. The amount involved in duty based on production will come to R1,500,000 a year from the S.A. Breweries alone, that one company alone. There is another aspect of this which is of course far more important, and that is the principle of the whole thing. It is on the basis of the principle that we are very concerned, because it affects industrialists generally. It is generally accepted that taxation should be based on valid economic principles, but up to now the hon. the Minister of Finance has failed to tell this House what the underlying principle of this form of taxation is. In trying to justify it, all he has said is that it is applied in two countries, West Germany and Austria. That is the only way in which he has tried to justify it, but that is no justification at all. He must tell the House and the country what the underlying principle of this form of taxation is. He must also tell the House and the country whether the Government is now accepting as a principle of taxation …

The principle was of course disposed of during the Budget debate.

May I, with respect, address you on this point, Sir? We are now dealing with this taxation which we allege to be discriminatory on production. We accept the principle that there should be a tax on beer. That has been accepted all along. What we are discussing is this new form of taxation on beer.

[Inaudible.]

Sir, perhaps the Minister will allow me to address you on this point. He refused to allow me to put a question to him a moment ago, but perhaps he will let me talk now that I am on my feet. [Interjection.] The matter becomes one of considerable importance because in the speech of the hon. member for Queenstown he said that if a business with higher production cannot bear higher taxation, then it is not efficient. That is what the hon. member said, and he now shakes his head. This is the acceptance of the principle that the Government will tax higher production in order to obtain its taxes, and this is something which industrialists want to know unequivocally. It is something which affects them very seriously, and up to now we have not had an unequivocal statement in this regard from the Minister. We have now had the statement from the hon. member for Queenstown, who holds an important position on the Government side as chairman of the Public Accounts Committee, and one must therefore take very seriously what he says in this regard. If this is in fact the Government’s policy, the Minister should say so. If not, he should say that the hon. member for Queenstown is incorrect, because this goes very deep. We in this country are anxious to encourage outside capital to invest here. We have not got to the stage yet where we do not want this capital; we still encourage it and outside investors also will be perturbed if it is accepted as a principle that when their production gets to a certain stage they make themselves liable for an added tax. It has been pointed out by certain members on this side of the House, and particularly by the hon. member for Point, that this goes against Government policy as elaborated by the Deputy Minister of Bantu Administration, because it undoubtedly affects the promotion of labour-intensive operations.

Order! We are not dealing with the principle of the taxation now. We dealt with that on the motion to go into Committee of Supply and Committee of Ways and Means. All we are dealing with now are the particulars.

Then I will not elaborate on it, but will go on to another point. In view of what has been said by the Minister and by the hon. member for Queenstown, it now appears to us that this tax on production is regarded as a method of getting further revenue, which is to say, as a new form of taxation. What effect has this had on the particular brewery which is affected? The only one affected at this stage is the S.A. Breweries. It has resulted in a drop in the shares of that company from 800 cents to 700 cents, which is a capital loss to a South African-based company, and that is the alarming part of it. There was a capital loss of some R10,000,000 on the 11,000,000 shares in the hands of shareholders, and 70 per cent of the equity capital and 100 per cent of the loan capital in this company are held by South Africans. As the hon. member for Point mentioned. most pension funds and most financial institutions are affected. [Time limit.]

I will not keep the Committee long, but I have to refer to two matters. The first relates to what was said by the hon. member for Kensington. I used the word “disgrace” but what did I say? I said that if all the beer produced in South Africa were produced at the very highest scale, with the premium of 6 cents a gallon, then the breweries or the beer companies of South Africa could sell the beer to the consumers at 2.41 cents a pint. But they have gone and increased the price throughout South Africa by 3 cents a pint, and then they claim that the Government is to blame for the fact that the price has increased by 3 cents. I said it was disgraceful that they should blame the Government for that. And then I said that the Opposition should guard against confirming that impression in the country. Those were my words and I repeat them. What the hon. member for Durban (Musgrave) has now said, was to attach a significance to my words that I really do not deserve, and that I did not intend either. I shall tell you what I said. The Minister has a Budget which he has to finance in a non-inflationary way, and he considered where he could get the money and how he could distribute the burden most evenly over the population, and he decided that beer should make its contribution.

He then said that of the nine breweries in South Africa there were eight who could bear this basic increase of 23 cents, and who could then raise the price of their beer by 2 cents a pint. That was the Minister’s sole intention. Now there is one brewery that handles this enormous volume, and because it handles such a large volume its unit cost should be so low— if its efficiency is on a par with that of the smaller breweries, and I presume it is—that it should be able to absorb from its profits this additional levy imposed for fiscal purposes, and not for economic purposes. That was all I said, and that it can do that, is borne out by the fact that the hon. member for Kensington told us what a “blue chip” it actually was. But it is going to become even bluer, because it is now going to take more than a half-cent a pint from the public which it does not deserve and which it does not hand over to the Government. I still maintain that this fiscal measure is correct, and that this rising scale is quite correct from a fiscal point of view.

My reference to the hon. the Minister of Finance and to the Western Province was this: He knows that in this appeal which was made that we should encourage people to drink light liquor, the tax on wine in the Western Province was reduced during his régime from 2½ cents to 1 cent. We all supported that. That was the appeal which was made to us. I want to make it perfectly clear that there was no unfavourable personal suggestion which concerned the hon. the Minister. If the Minister feels it does I want to say right away that that never occurred to me. But he is familiar with the wine industry in the Western Province. I should like to ask the Minister of Finance and the hon. member for Paarl whether they would be in favour of taxing the K.W.V. at a different rate from the small producer of wine, because that is the same thing. Should the small producer of wine have to pay a lower tax on wine or brandy per bottle because one producer is bigger than another? That is all I wanted to say on this.

I want to refer to another item. I want to move the following amendment—

That is the item dealing with the tax on petrol, the 1-cent tax. The Minister, in introducing this tax, justified it in this way. He said—

The Minister’s justification for imposing this tax was that the Minister of Transport had raised not only passenger fares but freight as well, with the result that the man living in the interior had to pay a cent more for petrol because of the increased rail tariff. Then the Minister of Finance came along and used that increase to justify another increase. That is what I felt was unfair, and therefore I wish to move this amendment.

There is one point which has arisen from the speech of the hon. member for Queenstown which I think must be dealt with very clearly. The hon. member said that the increase in the tax was in fact only 1 cent a bottle. Is that correct?

1.99 cents a pint.

That is right; it is almost 2 cents. But of course he is taking it on the minimum quantity. The duty was 51 cents and it is now 80 cents in the maximum bracket per gallon, which is certainly more than 1.9, because 1.9 cents is the lowest. But what the hon. member did not tell the House is that the price of beer from the breweries is 5.41 cents per reputed pint bottle. This Minister takes 6.67 cents duty on a bottle of beer. In other words, more than 100 per cent on the basic cost of a beer is added by the Minister. The brewery charges 5.41 cents, and the Minister takes 6.67 cents on a bottle. That means that out of every bottle of beer that every South African drinks, the Minister takes 35 per cent. Over one-third of every 19 cents that every South African pays for his beer goes to the Minister in tax. Surely that is an unwarranted burden on a group which can least afford to buy the other luxury drinks. I do not think any Government member will argue with me when I say that beer is the working man’s drink. This is the working man’s drink which he enjoys when he comes home to relax.

And the young man.

Yes. Any one of us who has young sons would surely prefer to see them having a glass of beer than a couple of brandies. This criminal taxation on the lowest alcoholic-content drink is going to drive them to take the drink which gives them more kick per cent which they pay. That is the ultimate thing. It will force them away from beer, and I have seen it with the young people already. Youngsters who used to take a beer now take a Vodka or something else. That is happening; it is not driving them to wine; it is driving them to spirits. This hon. member says we are trying to tell the people that it is the Government’s fault but that it is not the Government’s fault that beer has gone up so much. He says it is the grabbing breweries and those who sell the stuff. He knows perfectly well however, that in every industry profit is calculated on a percentage basis so that when you put a cent or 2 cents on to the original cost the wholesaler takes his profit as a percentage on the increased cost which he pays to the wholesaler. That is standard trade practice. If the Minister puts 2 cents on to the price of a bottle of beer, he knows the minute he does it that the consumer will have to pay at least 3 cents more. The Minister knows that immediately he puts a cent on to the price of something on which there is a 50 per cent profit margin it will cost H cents more to the user. If he puts on 2 cents there will be a 3 cent increase, because every business works that way. Thus out of the 19 cents that a person pays for his beer, the breweries are getting 29 per cent, the Minister is getting 35 per cent, and the trade gets just over 35 per cent. So the Minister and the seller are taking over two-thirds, and the brewer the smallest portion of the cost.

Yet the one who gets the least out of that bottle of beer, the one who gets least of the three people who profit from it, is the one who is now being discriminated against by way of taxation. It is not even as though the Minister has justified it. I pointed out that the increase in the price of beer has been 16 per cent over 40 years. Is that a reason for saying that they must now be penalized? The argument of the hon. member for Queenstown is that because he has a higher production the big man or the big brewery will have a lower unit cost. Is that a new principle in economics? Must we tell industry in South Africa that they must not increase their volume because if they do their unit cost will be less and therefore their taxation will be higher? That is the simple issue which the Government now has to clarify. Is the hon. member for Queenstown’s interpretation the one which industry must now place on this taxation? Will this now be the approach towards the taxation of all companies in South Africa?

I said that if I had time I would deal with the other group of the victims of these proposals, namely the small family man, on which I was challenged. I did not say it was a major issue, but I said it was significant that items affecting the home of the young family man had been selected for increased taxation. Let us take a refrigerator. Refrigerators are made in South Africa, but the Minister has now put a tax on the components and the spare parts which make up that refrigerator, so that the price of the local refrigerator must go up as well. Whilst we are dealing with this I want to ask the Minister whether he is now going to put a discriminatory tax on Fuchsware if they should produce more than a certain number of stoves, or on any other producer of electrical appliances? According to the hon. member for Queenstown, this is not going to affect the cost of living of the family man. The family man does not matter. As long as the Minister can get his money he does not care whom he gets it from, and because the working man is the easiest target he is the man who is being hit. Take a little piffling thing like toys. Is it that the Minister has forgotten what childhood is like? What difference does the tax on toys make to the economy of the country? But it makes a big difference to the little kids, with money becoming worth less and less. These are the things I pointed to as being an indication of the lack of thought the Minister has given to the people who are going to be the victims of this taxation. [Time limit.]

I wish to deal with a few new points that have been raised here, but before doing so, I want to reply to the hon. member for Durban (Point), who has just resumed his seat. He challenged me to say whether this form of taxation was going to be an isolated occurrence or whether I was going to apply it in other respects as well. I cannot imagine that anyone who has any knowledge of parliamentary procedure— perhaps the hon. member does not know much about it—and of the functions and responsibilities of a Minister of Finance would ask him whether or not he was going to apply a certain taxation principle in the future. There have been Ministers who have lost their position as Minister of Finance for less than that, and however much I may appreciate the curiosity of the hon. member for Durban (Point) and however strong the temptation may be to satisfy his curiosity, I am afraid that my position does not allow me to do so. In any case, it is a principle that is not contained in this proposal. We are concerned with a specific proposal here and that is what we have to deal with.

Do you realize the implications of your answer?

Then there is another point that I have not yet dealt with. Remarks have been made here about the increase in the duty on various groups of liquor, such as on spirits, on brandy, on beer, and on fortified wines. Hon. members of the Opposition have suggested that the increase in the duty on beer is proportionately much larger than in the case of other kinds of liquor. But I have had a list drawn up, and if one looks at the position since 1948, one finds that the percentage increases in the duty in respect of all these groups is very much the same; there is not much difference, but what may in fact give a wrong impression is the fact that in 1958 the duty on spirits, brandy, was doubled. The duty was doubled from 32 to 64 cents per quart, per one-sixth of a gallon, while in the case of fortified wine we had a similar double increase in 1962, but in the case of beer we have never had a double increase, and consequently hon. members do not get the true picture if they compare the increases in duty as from a certain date. As I have said, the percentage increases in the duty on all three groups are very much the same. Hon. members may also work it out for themselves, but I assure them that the percentage increases from 1948 up to and including this increase are very much the same. In fact, that is also the reply to the argument that, through the increased duty on beer, we are encouraging people to go back to hard liquor. If the percentage increase is not higher, then that argument is unfounded.

Nonsense.

Order! The hon. member for Durban (Point) has already had his three turns to speak.

The argument has also been used that the value of the shares of S.A. Breweries has greatly depreciated and that that is attributable to this duty. I am absolutely certain, also as a result of what was said by the hon. member for Durban (Point), that this duty will be recovered in full from the consumer and that S.A. Breweries is not going to lose anything, even if one takes into account the extra six cents a gallon which they have to pay in the case of one of their factories. They only have to pay an average of 77½ cents. They have increased the price to the consumer more than is justified by the increases in duty, and therefore I say that S.A. Breweries is not going to lose anything on this. I am aware of the fact that the prices of the shares of S.A. Breweries dropped appreciably at a certain stage, but I think that happened because there had been a misrepresentation. The general impression was that this highest duty would be applicable to all the breweries of S.A. Breweries. I do not know whether they then realized that the average in the case of all seven breweries of S.A. Breweries was not 80 cents, but 77½ cents.

Those were the two new points raised by hon. members.

Then the hon. member switched over to petrol and other oils. I do not really know what case he wanted to make out in that regard. and perhaps I should first give the Opposition an opportunity of explaining to me what case they want to make out in this regard. I said that this was a duty that one did not like to impose, but that this duty formed an integral part of the general picture which I painted in my Budget speech. If the request is therefore merely that I should abandon this duty, then I cannot accede to it.

I do not intend at this stage to reply to the hon. the Minister I am sure that other members on this side will be able to do that without my help. I do, however, want to refer particularly to item 11.07. “Malt, Roasted or not: Kaffircorn malt; proposed new excise duty 1c per 1b.” on page 301. Sir, when the hon. the Minister of Finance announced the introduction of this tax in his Budget speech he said—

The hon. the Minister prefaced his remarks by saying:“I think it is fair”. Sir, I think it is most unfair; I think it is not fair at all.T say this is most unfair and can be classified as discriminatory. It is discriminatory because this is aimed at one group of people in this country and that is the lowest income group that we have, the Bantu people. They are the only ones who use kaffircorn in this form, as malt.

You could drink it as well.

I agree. This is a direct tax on the Bantu people. They are the only ones who are going to be affected by this iniquitous tax, and, in fact, that is also the hon. the Minister’s intention. I say further that it is unfair because this is a tax on what the Bantu people consider to be a food. They do not drink Bantu beer as we would drink a bottle of beer in a pub or in our lounges at home, as an intoxicating beverage. This is part of their subsistence; to them it is a food. Sir, it is common knowledge among nutritionists that kaffircorn malt has a very high nutritional value; it has a high percentage of Vitamin B.l. A shortage of this vitamin causes pellagra which is a deficiency disease, and at his time when the fight against malnutrition, and particularly, the fight against deficiency diseases, is one of the foremost fights that we have, not only in this country, but throughout the world, this hon. Minister introduces this iniquitous tax to tax the food of the Bantu people. The primary way in which the Bantu peoples consume this very nutritious product, this very necessary vitamin, is in the form of Bantu beer, and let me say here and now that those who believe that it is only the husband who gets this Bantu beer are wrong. Ban u beer is sha ed by all the members of the family. Even the children get their share.

They get more than their share.

Why? Because it is regarded as a food. Do we hand our children toxicating liquors? No, we do not and nor do the Bantu people. This is a food and that is why even the children get their share. On numerous occasions in my store when times have been hard and the Bantu have been short of money, they have still bought kaffircorn malt (which, I must admit, the hon. the Deputy Minister did not seem to know much about when we were having the Budget debate …)

And the Minister?

Yes, and the Minister. When I asked these Bantu, “Why are you still wasting money on this intoxicating beverage?” they said: “Oh no, Sir, this is food.” That is how they look upon it. Sir, how can the hon. the Minister justify his asking the Bantu people to contribute in this way towards the Government’s enormous expenditure on defence and the implementation of its ideological policies? This expenditure is occasioned mainly by the Government’s apartheid policies in which the Bantu have no say whatsoever. I repeat that this is, not fair. It is bad enough that the Bantu should be compelled to contribute, through indirect taxation in this inflationary Budget, but to put a direct extra charge on the cost of living of the Bantu people is to my mind most unfair and discriminatory. In the circumstances I wish to move—

The amendment of the hon. member for Pietermaritzburg (District) covers not only kaffircorn malt but “lemonade, flavoured spa waters and flavoured aerated waters” (item 22.02). We feel that this tax should go as well. Either this item is a luxury or a necessity and if it is a luxury I fail to see the necessity for price control, and if it is not a luxury, if it is a necessity, and there has to be price control, then there is no justification for the tax. What I am very concerned about is the manner in which the Minister is going to administer this tax. This item refers to “lemonade, flavoured spa waters and flavoured aerated waters, other non-alcoholic beverages (excluding fruit and vegetable juices falling within heading No. 20.07)”. I want to know how the Minister’s Department is going to ascertain the proportion of fruit and vegetable juices in the bottle. I submit that it is impossible by chemical analysis to determine that more than 5 per cent or 5 per cent has been added to the bottle. The Minister is going to find it impossible to administer this tax. He is going to have great difficulty in administering it. It is going to involve a large inspectorate, which he does not employ at present, and I submit that for all practical purposes the Minister will have to remove this tax, just as he had to remove a similar tax in previous years. This tax is not warranted and it places an undue hardship on the lower income groups. It has already led to a considerable amount of controversy. Both the retail trade, the manufacturers and the wholesalers are at odds as to the profit margin and as to how the price is to be determined, and while this Minister is not concerned with price control he is concerned with the administration of this tax. It is his duty to collect it and to collect it efficiently. I submit that the Minister has not got an earthly hope of determining the amount of fruit juices in a bottle of aerated water, and I challenge him to produce anyone in his Department or in the C.S.I.R. who can actually say that a bottle contains a certain proportion of fruit juices. For that reason I regard this tax as wholly impracticable and therefore it should be scrapped.

I want to support strongly the plea of the hon. member for Pietermaritzburg (District) with reference to kaffircorn. I think the imposition of this duty will have a serious effect on the health of that large number of people who rely almost entirely for their vitamins upon malted kaffircorn in particular. In the long run the Minister will find, if he could analyse it, although that would be difficult, that the amount of money that has to be spent in dealing with tuberculosis amongst the Bantu, one of the few groups of our population where tuberculosis is uncontrolled and is actually spreading, exceeds the amount that he collects by way of this tax. I have not looked at the figures recently but I think there are perhaps more than 10,000,000 Bantu who are hospitalized and supported by the State, and if the Minister takes away from the Bantu the main source of vitamin B.1, not only will the disease spread more widely than it is doing at the moment, but we will arrive at the point where the Minister, through the Department of Health, will be paying out money to supply these ill people with pills made from kaffircorn or some other source of vitamin B, which is so important. Not only will the deficiency disease of beriberi make its appearance again but, as I say, the other serious diseases will be deleteriously affected, and he will be collecting with the one hand and spending with the other. He will find that he is spending more than he is getting back and that his physically weakened labour force is no longer of the value that it used to be.

I want to refer also to item 98.15, “Vacuum flasks and other vacuum vessels, complete with cases; parts thereof (excluding glass inners)”, where the present duty of 20 per cent is to be increased to 30 per cent. I think the Minister is under the impression that vacuum flasks are used for picnicking or by the working man taking his hot or his cold drink to work. One of the biggest users of vacuum flasks is the medical profession. I understand that surgical instruments are exempt from taxation; that has been so for a long time. Vacuum flasks and cold and/or hot vessels are used to a great extent in the transportation of blood. If the Minister persists in imposing this tax he will be partly responsible if there is a shortage of blood or if blood goes bad. These utensils are used largely for carrying vaccines and sera and blood about the country. It is a stand-by, for instance, in the Government’s policy of treating poliomyelitis. I feel that the hon. the Minister should reclassify vacuum flasks or he should make some exception in order to save the country from these two disasters which he is helping to produce.

The Opposition’s inability to understand the taxation proposals we are dealing with here, remains as incomprehensible as their ability to give people outside an incorrect and distorted version of facts. I am saying that with reference to item 22.02 and with reference to certain suggestions made earlier on in this House by hon. members on that side of the House to the effect that the profitability of the products concerned would be considerably affected by these new taxation proposals. To be specific, it has been suggested that the profit on a particular container of cool drinks has decreased to 11.6 per cent. That was said on the assumption that both, the container and the bottle Were included in the purchase price of the product. Mr. Chairman, that is an untruth. One does not buy a container and a bottle and then sell only the contents of the bottle. One returns the container and the bottle to the manufacturer and sells the contents of the bottle, and the profit on that is 25 per cent. The profit in the case of other types of containers amounts to 60 per cent to 85 per cent. That is a fact that was not mentioned by hon. members on that side of the House, but in this regard it was spread abroad from this House that these taxation proposals would impose a glaring injustice on certain sections of the public, namely the trade. In order to put the record straight, I want to say that those profit margins vary between 25 per cent and 85 per cent gross, and I am certain that many hon. members of this House would be very grateful if they could trade at that percentage of profit. I am sure that if hon. members of the Opposition cannot trade at that percentage, they should not be in trade.

Mention was made here of the necessity of cool drinks and it was implied that cool drinks were only mineral water products that were being sold in glass bottles, ready for use. Mr. Chairman, that is not the case either. Fruit juices and fruit-based cool drinks as well as cool drink extracts are excluded; that is to say, all products which are capable of dilution. It has already been said that the hon. the Minister had a definite object with this Budget, and that was to Budget on a non-inflationary basis and to combat inflation, and he said—and he was quite right, and no one can deny that— that in order to be able to combat inflation successfully it had to be attacked on a broad front. That is what the hon. the Minister has done, and that is what hon. members on that side of the House refuse to accept. Therefore I must accept that they want inflation to be encouraged. [Laughter.] That hon. member is laughing now, but his laughter will die away soon. The fact of the matter is that the hon. the Minister made appeals to the entire nation from time to time that they should save, as spending would have an adverse effect in this case, but the people did not do that; consequently the hon. the Minister had to announce these measures.

To come back to cool drinks: If by way of comparison one considers the price of cool drink extracts, if hon. members of the Opposition want to accept that cool drinks are not a luxury item, but one of the necessaries of life, then hon. members can buy cool drink extracts and prepare cool drinks there from, and then the cost per cool drink will work out at 1 cent to 1 cent, as compared with the price of 6 cents per cool drink if the price of the bottle is not taken into account. Here we therefore have an excellent example of how savings can be effected if the people of South Africa, particularly the young people, really mean to save. The hon. member for Durban (Point), who dragged in the young family man and the working man by the head and shoulders here this afternoon, is unfortunately not present at the moment, but hon. members on that side submitted pleas here this afternoon on behalf of the working man, who, according to them, earns R6,000 a year. But if that is the case, if the working man earns between R4,000 and R6,000 a year, as was stated here this afternoon by hon. members on that side of the House, and if the young family man and the working man find it difficult to pay ½ cent a bottle more for their cool drinks, then they should save, and if they have to drink cool drinks, if cold water cannot serve the same purpose, they should buy cool drink extract or fruit juices in respect of which there is no increase in duty.

I wish to conclude by saying that the arguments advanced by hon. members on that side in my opinion did not deal with the merits of the taxation proposals. It seems to me as though they conjure up these arguments in the hope that the Press will spread them abroad, with the emphasis on the notion that hon. members on that side of the House are the people who have to watch over the interests of the poor man, the worker and the young married man.

But that is true.

That, as the past has shown, is absolutely untrue, and I want to make an appeal to those hon. members to stop arguing about this type of thing, because it is not worthy of them.

We have had a very interesting afternoon here. We have listened here to the contradictory remarks made by the hon. the Minister. He said that he did not want to kill initiative at the top level, but he promptly does that by imposing this discriminatory tax on beer. I think the case made on this side of the House in respect of both Bantu beer and ordinary beer, is a sound case and I do not think that the Government side has been able to put up a very satisfactory answer. As a matter of fact it has been rather amusing to hear hon. members opposite defending the Minister’s proposals to increase taxation. This would have been very interesting before the election. However, their stories are on record and they can be used.

Sir, I would like to refer to item 84.11.15 and the other items down to item 84.15.50, dealing with refrigerators. The hon. member for Durban (Point) did say that this was a taxation on the average working man, the family man. For the information of the hon. member for Wonderboom I should like to point out that we on this side are interested’ in the working man, in the family man, and we should like him to know through the Press what we are doing for him in this House. I think it is well that he should know. We have not had one speech from the opposite side defending the working man.

I should like to know from the hon. Minister whether in putting this extra 10 per cent taxation on refrigerators, he does it to gain revenue or to protect an industry. Industries are to-day being protected by import control but here, too, we seek protection for them by levying an extra 10 per cen on excise duty. We on this side feel that if the manufacturer who is going to get the benefit of the 10 per cent from the Minister should pass it on to the buyer, we would be very happy, but I am sure hon. members will find, if they go out to buy a refrigerator to-morrow, that they have to pay as much for it as before. We must be very careful in this country. Let us protect our industries but do not let us wrap them up in cotton wool. This looks like what the Minister is doing here. It is a discriminatory tax against the imported article. I notice that a levy of 25 per cent is also going to be levied on sealed units for refrigerators, and further on that not only is the sealed unit taxed but also the parts. This to me is being done not so much to obtain revenue as to protect an industry.

Then we come to electric light bulbs. The Minister may say that the amount of extra taxation he is levying on electric light bulbs for motor-cars is small. On certain bulbs which we obtain from the United Kingdom free, we now have to pay a levy of from 5 to 10 per cent. No doubt the hon. member for Queenstown will get up and work it out to see what it amounts to. It may work out at i cent a bulb, but nevertheless it is extra taxation and as such adds to the cost of living. Hon. members were rather amused by our attitude to the taxation on toys. But are these duties which are going to be levied on toys being levied for the purpose of protecting an industry or for the purpose of curbing inflation? Or is the Minister trying to do both these things? I do not know why this matter is not left to the hon. Minister of Economic Affairs, who will protect industries in South Africa against unfair competition from overseas. Why does the hon. the Minister of Finance now have to assist him? If you look at the new taxes it looks very much as if the hon. the Minister is now trying to protect industry in South Africa. I am all for having industries in this country but do not let us have an industry which is completely uneconomic. It must be able to stand on its own feet. These extra taxes on toys and other items all add to the cost of living. While the Minister on the one hand is trying to get the public to save, on the other hand throughout these taxation proposals he is killing initiative at the top. He is killing the goose that lays the golden eggs. That is what he is doing. We must be very careful how we proceed in regard to taxation measures.

I should like to support other hon. members here in their objection to the taxation on mineral waters. Taxation on mineral waters is an unheard-of thing. Whoever thought of taxing mineral waters? This is a tax which I think the hon. the Minister should eliminate. He should accept the motion which we proposed here this afternoon. The revenue which will be derived from such a tax will be insufficient to meet administrative costs. That is how ridiculous it is. If you work out the salaries of the inspectors who have to walk around and check, upon the various mineral water factories, you will find that it is more than what is derived from the taxation. The Minister cannot tell us to-day what it is going to cost him to supervise the collection of this tax. And who is it affecting? The children and the parents who have to pay. If the hon. the Minister wants to curb inflation by means of taxation, he should look very hard at these items he proposes to tax. It is a ridiculous thing to tax a refrigerator. It is not a luxury. What is he going to get from the tax on electric light bulbs? Admittedly we have factories here in the country but let us make these factories competitive. Do not let the public, who have to buy these items, have to pay extra in order to maintain these factories. We have heard that when these items of taxation were worked out, it was done on a haphazard basis, but I do not think so. Industries and others make approaches to the Minister and we have what we see here to-day. We have been told that we must curb spending. I can tell the hon. the Minister that the working man has no money to save. The hon. the Minister would be shocked at the amount of debt that is being created to-day by buy-aid and other societies. He will be shocked to find out how the working man of to-day lives. If the hon. the Minister thinks that the working man can still save, he is mistaken. These levies are only going to add to the hardships of the average man.

I think at this stage I should give an impression of what the hon. Opposition is asking for here. They are arguing for the taxation to be reduced to an amount of R8,700,000 for the remaining part of the year, that is to say, from now to the end of February, 1967. In my Budget speech I made it very clear that when we originally announced the four-point plan against inflation, the fourth part of the plan would include measures of a fiscal nature. Naturally a Minister does not like to increase taxation, and therefore I fought it out with my financial experts that they should see to it that additional taxation was restricted to the absolutely essential minimum. After we had seen to it that that was done, hon. members now come along here and try to reduce the additional taxation further by approximately 14 per cent. That would of course create an impossible situation, and hon. members’ attitude in this regard can only spring from their inability to appreciate the seriousness of the effort we are making.

What is your surplus going to be?

In most cases these attacks were directed against indirect taxation. In this connection I should like to point out to hon. members that in actual fact our indirect taxation is lower than our direct taxation. In some other countries of the world the reverse is the case. At any rate, there are few other countries whose indirect taxation is lower than their direct taxation. In Canada, in any case, it is certainly more. In most cases it is half of it approximately. In this country, however, our indirect taxation is less than half of our total taxation. Our indirect taxation, expressed as a percentage of our national product, is only 8.9 per cent. In the United Kingdom the percentage is 16.8, in Canada 19.3, in the U.S.A. 11.5 and in France 23.5. It is therefore not true that we are imposing a heavy burden on the taxpayers of South Africa by way of indirect taxation. Here we have endeavoured to propose increases as far as both direct and indirect taxation are concerned with the object of strengthening us in our struggle against inflation. If hon. members now want to reduce these additional taxes by R8,700,000, they will be weakening the effectiveness of the effort we are making in this regard.

I now come to a few of the individual items which have been attacked here. In the first place there is the duty on petrol. I said at the time that the duty on petrol was one that I did not like imposing. I felt, however, that it would be perfectly fair, if the railway user had to pay more for his transport, that the motorcar user should also be asked to contribute his share. We know that millions of gallons are used up for mere pleasure trips every year. If this consumption can be reduced in some way or other, it will serve a very useful purpose. But let me give hon. members some idea of how modest the increase in the duty on petrol is in actual fact. I pointed out on a previous occasion that in a case where a person used 30 gallons a month he could use 29 gallons in future in order to have the same total expenditure. That is therefore a reduction of only one-thirtieth. I therefore do not think that this is a serious matter. Hon. members may say that it is going to affect all forms of production, and so forth. But here too I think there is a misunderstanding. A large quantity of the diesel oil and kerosene consumed is consumed on farms and in industry. This consumption has been exempted from the increased duty, i.e. the consumption in the very industries that are very sensitive to an increased cost structure. Those are the reasons why we have said that we should in this way obtain a certain amount by way of duty on petrol.

Another matter that has been raised here, relates to the duty on kaffircorn malt. I have already indicated that there will be a rebate in respect of malt which is used for the manufacture of foodstuffs, such as breakfast foods. We seriously considered imposing the duty on the final product, i.e. on Bantu beer itself, but then we found that 23 per cent of the total production of malt was all that was used for the manufacture of beer by the municipalities. The remainder, except for the percentage used for the manufacture of foodstuffs, is used by private breweries. If the duty is imposed on the final product, it will not bring in anything. It will only be taken from the Bantu who buys beer at the municipal beer-house. That is why we said that we would investigate this matter. In reply to the complaint made by the hon. member for Pietermaritzburg (District) to the effect that the poor Bantu will now have to pay, I just want to tell him that, as we are spreading this tax burden, it is no more than fair that the Bantu should also pay some small portion of it. It is a very small portion. If one wants to draw a comparison, it will cost him about two-thirds of a cent per gallon. That is not much. Where it is obtained from the municipal breweries, it is probably not impossible that they will be able to bear a large part of that cost themselves. I am aware of arguments that were not used here. I have had interviews with deputations and I have told them that I could not do anything about the matter now. We shall have to see whether their fears are realized. At this stage we are not in a position to withdraw this provision. We shall of course have to take all these taxes into review when we come to my next Budget. And that time is not so far away any more. In the meantime we have to accept the present position. I shall pay attention to all the numerous arguments which they have submitted to me. Then we can see whether this particular duty on malt can assume a better form, or whether there is some alternative form which can be used to obtain the same amount from it. But we cannot do that now. One of the difficulties that every Minister of Finance is faced with is that in considering his taxes he cannot consult beforehand with the people he wants to tax. He cannot do that. But we are nevertheless aware of the fact that this is a matter which should receive our closest attention in the future, not for the reason advanced by the hon. member for Pietermaritzburg (District), but for the reason I have mentioned, namely that it may have an effect on the primary producer of kaffircorn. We shall pay attention to that.

A few small points have been raised in regard to duty, such as in connection with thermos flasks and refrigerators. As far as thermos flasks are concerned, the position is that approximately 610,000 units are imported annually. The extra duty expected to be derived there from during this financial year is R22.000. One may therefore work out that it is a ridiculously small average per unit that is being added here. 610,000 units are imported and the only additional amount we get in tax is R35.000 annually. As regards the refrigerators and many other items as well—as mentioned by the hon. member for Salt River—the fact of the matter is simply that these are articles which are produced here in South Africa. We have expressly told the Department of Commerce and Industries to see to it that the cost of the various locally manufactured articles which are now being taxed here is not pushed up as a result of these increases in the duty on imported goods. To some extent these increases are protective as well, but we do not want them to make use of this to increase the prices. We want to wean them a little from importing all these items and make them more accustomed to buying the South African product.

Then there is only one matter remaining, namely the duty on cool drinks. The main argument against it is that it will be impracticable. We shall not be able to apply it. I am afraid that I cannot agree with that argument. I have to allow myself to be led by my advisers, of course, but they have had discussions with the Association of Cool Drink Manufacturers and the latter have promised their co-operation. I therefore do not think that it is impossible to apply it. As regards the point which the hon. member raised in connection with the percentage, I just want to tell him that the excise duty is on all lemonade and mineral waters marketed in closed bottles or containers and ready for drinking without dilution. That is what we understand by that. In consultation with the Association of Cool Drink Manufacturers and the S.A.B.S. we shall now lay down a minimum percentage of fruit juice which must form the base of the mineral waters in order to exclude them from the excise duty we are now imposing. I therefore think that the argument that we are going to experience difficulties in that regard is unfounded. To a certain extent this is much easier to administer than many similar taxes, because in actual fact there are only a small number of factories outside controlled areas and it is a very well organized industry. I therefore do not think that we shall experience all those difficulties.

Mr. Chairman, I think those are the points that were raised here in regard to the taxes that were suggested should be done away with.

Mr. Chairman, I am really astonished at the replies which the hon. the Minister has now given us in this debate. He adopts the attitude that because the proposals made from this side of the House for the withdrawal of certain taxes would mean that his Budget would be reduced by R8.700,000, he cannot consider them at all.

It has nothing to do with the Budget. It is the endeavour to curb inflation that I was referring to.

If it is the endeavour to curb inflation, the reply remains the same, namely that this side of the House has provided sufficient proof that in one case it is discriminatory taxation and in the other case, even if it is only 23 per cent of the malt as stated by the hon. the Minister, it will affect the food supplies of the Bantu—I nearly said existence, because it will also affect the raising of his child, and so forth.

Since when is his child drinking beer?

The hon. the Minister made this lame reply that, because it would have an effect to the tune of R8,700,000. he could not consider it at all. The hon. the Minister went further and said that the duty on petrol was also a means or might be a means of reducing the consumption of petrol and the figure of 30 gallons might be reduced to 29 or 25 gallons. How must I understand the hon. the Minister now? If a saving is effected in the consumption of petrol, surely he will not get the duty either?

It is for the rich man and the man who cannot afford it.

Whether it be for the rich man or the poor man, the reply remains the same. If a saving is effected in the consumption of petrol, the Minister will not get the duty. That is almost as good as the argument used by the hon. member for Wonderboom, namely that if the children made their own cool drinks it would be so much cheaper. Then there would be no duty forthcoming either. Where is the duty to come from then?

That is not a matter that should cause you any concern.

It is a matter which causes me concern, Sir, because if he cannot collect the tax, he will increase it still further in the next Budget. It is a cause of concern to all of us. I just want to deal with one point, and the Minister’s remark has now brought me to it. He says he would like to spread the tax, even so as to include the Bantu with his food. Does the Minister think that the Bantu does not pay any of these increases in duty? Surely he pays many of them, almost on every item, because he is also the consumer.

In any case, I want to deal with something which has not yet been touched upon here. It appears on page 294, item 58.01 and particularly 01.10, and it relates to the duty on woollen carpets or on floor coverings of wool and of fine animal hair. I want to make a special appeal to the Minister, and I want to motivate my appeal. I want to say that the producers in a number of countries are spending millions of rands at this stage. I shall quote the figures:

More than R20,000,000 is being spent internationally to promote wool and its consumption. In spite of that the consumption is decreasing and the market is declining. I have no objection to the Minister’s collecting money on carpets other than woollen carpets, but I want to make a special appeal to him. Seeing that this country does not produce enough woollen carpets, seeing that we have no or very little carpet wool in the country and consequently have to import it, and seeing that the woollen carpet is in any case a much more expensive carpet than other kinds of carpets, but is much more durable and is something we should all like to have. I want to make a special appeal to the Minister to reconsider this particular increase of 10 per cent in the duty on woollen carpets. I do not know what amount will be involved, but it cannot be such an enormous amount that it should be necessary for the Minister, by increasing the duty on woollen carpets, to cause a drop in the sales of the commodity and further to depress both the market, which is already showing a declining tendency, and the industry, which finds itself in difficulties and is spending millions of its own funds to promote sales.

Mr. Chairman, I have been waiting for the Deputy Ministers of Bantu Affairs to take part in this debate. The thing that amazes me is that we have attacked taxation on malt used for making Bantu beer without reply. When this matter was raised in the Budget debate and the taxation was accepted we heard from both the hon. the Minister and the hon. the Deputy Minister that this tax was not going to affect the Bantu at all. I would remind you, Sir, that when I raised this question the Minister of Bantu Administration—who is not here this afternoon, so he cannot take part in the debate, though I see his Deputy is here—said, when I complained that the Bantu is going to pay more for his beer because there is a higher taxation on his beer, which is also a food, that they would not be allowed to increase the price of Bantu beer. I then said: “Why not?” and the Minister said, “I will not allow it.” I said, “The Minister talks in ignorance.” He said, “I have to fix the price of beer.” I said, “What is the Minister talking about? Who fixes the price of beer made in the kraals?” The Minister, his colleague and all the others here laughed and said that it is not made in the kraals. What is this I am holding up now, Sir? This is malt as it is sold in the trading stations for making beer. What did the Minister say? I think the Minister of Finance said 23 per cent of the beer …

Order! I asked the hon. member before to refer in speeches to “the hon. the Minister” and “hon. members”. I just want to remind him again.

The hon. kaffircorn.

The hon. the Minister said last …

Order! What was that remark?

I asked whether it was hon. kaffircorn, Mr. Chairman.

The hon. member is trying to poke fun at my ruling.

No, Mr. Chairman.

Yes, the hon. member is. I ask him to withdraw and apologize.

I withdraw, Mr. Chairman.

And apologize.

I apologize, Mr. Chairman.

The hon. member may proceed.

The hon. the Minister said just now that 23 per cent of the Bantu beer was made in the municipal beer-halls.

23 per cent of the malt is used there.

The rest is made by other brewers and in the kraals. The Deputy Minister, who is here, also had something to say in attacking me. He said—

Now I want to ask him where the profit on beer goes? The impression given by the hon. the Minister and the hon. the Deputy Minister and by all hon. members opposite to the House that night was that the Bantu were not going to pay anything more for their beer and that the profits made by the beer-halls would be less, but that would not affect the Bantu at all because in any event the profits went for the general welfare of the Bantu. Well, do they suggest that all the taxes we pay do not go for our welfare as well? Of course they must ultimately get some benefit, but the hon. the Minister of Bantu Administration and the hon. the Deputy Minister misled their own members in voting for this measure because they believed that the Bantu would not pay any more for their beer. I say that the Cabinet did not realize what was involved in this tax which was imposed, and that is why the hon. the Minister of Finance is going to do away with this tax next year. He does not want to admit now that he was wrong and withdraw the tax, so he says we must wait until next year and he will consider it then. Perhaps his successor might do it next year. It is amazing to me how much difference of opinion there is and how much confusion there is amongst the members of the Cabinet. The Minister has another tax here. The direct tax on Bantu beer affects the Bantu more than anyone else. There are some White people who drink Bantu beer, but it does not affect the White man much.

But there is another tax here which does not affect the Bantu but which affects the other groups, the Whites and the Coloureds, and that is this tax on prams. The average Bantu does not use a pram. Their babies are carried on the back. This tax is in opposition to the plea made by the hon. the Minister of Bantu Administration. He asked the whole country to celebrate the five years of the Republic by increasing the size of our families. What encouragement does this Minister give to that plea made by his colleague? It seems to me that the hon. the Minister of Bantu Administration is absent to-day on purpose because everything he stands for is going wrong here. He does not want the Bantu to pay more for their beer, but we find now that they will pay more; he encourages the White people to have more babies, but here we find that this Minister of Finance taxes prams; he says that if we want babies and want to push them in prams we must pay more, but if we carry them on our backs like the Bantu that is fine. One of the hon. members earlier said that the United Party should not attack this Budget as they do because we give the impression to the outside world that this Budget is against the interests of the poor man. But if we attack the Budget because it is against the rich man, then they will say that that will be said abroad and the world will be given the impression that this is not a country for capitalists in which to invest. Sir, they do not want us to attack the Budget at all. Now we must keep quiet, because they know that everything we say can be justified.

Order! The hon. member must stop making a second-reading speech now.

I was replying to the speeches made on that side, but I have now concluded.

That tariff item 104.10.20 stand part of paragraph (2).Upon which the Committee divided:

Ayes—89: Bekker, M. J. H.; Bodenstein, P.; Botha, H. J.; Botha, M. W.; Botha, P. W.; Botha, S. P.; Carr, D. M.; Coetzee, J. A.; Delport, W. H.; de Wet, J. M.; de Wet, M. W.; Dönges, T. E.; du Plessis, H. R. H.; du Toit, J. P.; Engelbrecht, J. J.; Erasmus, J. J. P.; Fouohé, J. J.; Frank, S.; Greyling, J. C.; Grobler, M. S. F.; Haak, J. F. W.; Heystek, J.; Janson, T. N. H.; Jurgens, J. C.; Keyter, H. C. A.; Knobel, G. J.; Koornhof, P. G. J.; Kotzé, S. F.; Kruger, J. T.; Langley, T.; le Grange, L.; le Roux, F.J.; le Roux, J. P. C.; Loots, J. J.; Malan, G. F.; Malan, W. C.; Marais, J. A.; Marais, P. S.; Marais, W. T.; Maree, G.de K.; McLachlan, R.; Morrison, G. de V.; Mulder, C. P.; Muller, S. L.; Pansegrouw, J. S.; Pelser, P. C.; Pienaar, B.; Potgieter, J. E.; Potgieter, S. P.; Rail, J. J.; Rail, J. W.; Rail, M. J.; Raubenheimer, A.J.; Raubenheimer, A. L.; Reinecke, C. J.; Reyneke, J. P. A.; Rossouw, W. J. C.; Roux, P. C.; Sadie, N. C. van R.; Schlebusch, A. L.; Schoeman, B. J.; Schoeman, H.; Smit, H. H.; Smith, J. D.; Steyn, A. N.; Swanepoel, J. W. F.; Torlage, P. H.; Treurnicht, N. F.; van Breda, A.; van den Berg, M. J.; van der Merwe, C. V.; van der Merwe, H. D. K.; van der Spuy, J. P.; van Niekerk, M. C.; van Rensburg, M. C. G. J.; van Staden, J. W.; van Tonder, J. A.; van Wyk, H. J.; van Zyl, J. J. B.; Venter, M. J. de la R.; Viljoen, M.; Volker, V. A.; Vorster, L. P. J.; Vosloo, A. H.; Vosloo, W.L.; Waring, F. W.; Wentzel, J. J.;

Tellers: P. S. van der Merwe and B. J. van der Walt.

Noes—36: Basson, J. D. du P.; Bennett, C.; Connan, J. M.; Eden, G. S.; Emdin, S.; Graaff, de V.; Hourquebie, R. G. L.; Jacobs, G. F.; Kingwill, W. G.; Lewis, H.; Lindsay, J. E.; Malan, E. G.; Marais, D. J.; Mitchell, D. E.; Mitchell, M. L.; Moolman, J. H.; Moore, P. A.; Murray, L. G.; Oldfield, G. N.; Radford, A.; Raw, W. V.; Smith, W. J. B.; Steyn, S. J. M.; Streicher, D.M.; Sutton, W. M.; Taylor, C. D.; Thompson, J. O. N.; Timoney, H. M.; Wainwright, C. J. S.; Waterson, S. F.; Webber, W. T.; Wiley, J. W. E.; Winchester, L. E. D.; Wood, L. F.

Tellers: A. Hopewell and T. G. Hughes.

Question accordingly affirmed and amendment proposed by Mr. W. V. Raw dropped.

Remaining amendments put and negatived (Official Opposition dissenting).

Motion, as printed, put and agreed to.

Resolutions on income-tax, non-resident shareholders’ tax, transfer duty, diamond export duty and customs and excise duties reported.