as Chairman, presented the Report of the Select Committee on the subject of the Disposal of Containers Bill, reporting that the Committee had been unable to complete its inquiry.

Report, proceedings and evidence to be printed.

Mr. Speaker, in many ways this has been a most unreal session, because thé Opposition parties have been preoccupied with things outside of this House and because the Government has been occupied with things outside of this House, many of which it has not always been possible to debate. Nevertheless, I believe that the position is more urgent than it was when we came together here in January, and that it is deteriorating monthly. I believe it is very necessary this afternoon to focus attention on the reality of the situation so that Parliament should remain relevant. We have indeed debated the hon. the Prime Minister’s meeting with Vice-President Mondale and the visit of Andrew Young. I do not think any of us can feel that either of them offer much new hope or encouragement. We have given the State President almost unlimited powers to bring South West Africa to self-determination and independence, and we have refrained from debating the more delicate issues which the nation expects of us to do. However, I think we all realize that the intervention of the “five”, even though they are Western powers, has tended to minimize the results achieved through the Turnhalle conference, and perhaps to underestimate the work done there. There is a road ahead beset not only with natural hazards, but possibly with minefields as well.

The results of the British-American efforts towards a peaceful settlement in Rhodesia are, to put it mildly, not yet apparent. It would be a brave man indeed who would forecast their chances of success at present. As a result of this there are three stark realities which we have to face. The first is that there is going to be Black majority rule in Rhodesia within two or three years.

The second is that there is probably going to be Black majority rule in South West Africa in round about the same period. The third thing is that time is no longer on the side of South Africa. With these developments there is going to be pressure on us, and that pressure is going to increase beyond words. After Angola and all that it meant, I think that what the objects of these pressures are and the extent to which we are prepared to go along with them or the sacrifices we are prepared to make to resist them are in essence the stuff of contemporary politics in South Africa today.

There can be few doubts as to the objectives of Russian imperialism, but Russian imperialism is not acting alone. It is very often acting in concert with the OAU. At times their objectives differ, but the persuasive power of Russian strength and their willingness to take risks, even through Cuban proxies, is immense. It is bound to be immense, despite the half-interest shown by Communist China from time to time.

Then there is the West. Of what is it constituted today? It is constituted of the immense power of the U.S.A., with its totally unpredictable foreign policy which, in the last resort, despite the moralizing of Pres. Carter, is geared pretty accurately to the protection and advancement of American interests in the fields of trade, security and influence. Then there is a largely disinterested Great Britain, with a long history of failure in Ireland, taking some measure of responsibility for Rhodesia, but influenced largely by investment and trade in its former colonies. Then there is a totally disinterested Canada, heavily influenced by its economic involvement with the U.S.A. There is also entirely trade-orientated Western Germany, and there is a valiant France, battling to retain its economic interests in its former colonies, but with the courage from time to time to intervene in the confused military struggles on the African continent, as it demonstrated not so long ago in Zaïre. Then there are other less powerful States which have disproportionate influences because of the disorder and chaos in much of Africa.

What is Russian imperialism asking, what is the OAU asking and what is the West asking? I do not think we need worry about what Russian imperialism is asking. We in South Africa are not prepared to become another Poland, another Hungary, another Czechoslovakia or a slave State of Russia under any circumstances whatever.

If one inquires what the OAU are asking, there are some who will talk of the Lusaka Manifesto, and there are others who will talk of immediate Black majority rule. They ignore the economic chaos in most African States today. They ignore their instability, their inability even to feed themselves and their reliance on the West to feed their starving people. I think South Africa will treat their demands with the greatest reserve, especially because they are conscious that there are a small but growing number of developing States in Africa which appreciate the importance of economic stability and the maintenance of law and order and some semblance of democratic rule, as they do in Senegal, the Ivory Coast and Malawi.

What of the West? What does the West really want? I believe they want, obviously, an undisturbed oil route from the East. Obviously, they would like unimpeded access to the raw materials of Southern Africa. Obviously, they would like the same sort of access to the rest of Africa and, obviously, they would like opportunities to export to the whole of Africa, including Southern Africa. What else do they want? I think they would like an ally against communism in Southern Africa, but they want it at no cost to themselves in Africa or in the rest of the world. That means that they want to see political changes in Africa, and particularly in South Africa, but I do not believe they want to see economic chaos here. In fact, I am convinced they would like to see us strong economically so that we are a worthwhile ally.

With that background, what has happened since the hon. the Minister of Finance delivered his Budget speech? We have had the 1976-’81 economic development programme forecast, which has emphasized the failure of our natural resources to achieve their full potential. The programme compilers admit quite candidly that the South African economy will within the programming period not be able to make up the shortfall which has developed in comparison with the growth potential indicated in the previous economic development programme, and that it is necessary to think anew about the whole question of South Africa’s growth potential. Dwindling foreign capital inflow, in particular, has forced the planners to plump for a potential real GDP-growth rate of 5% per annum compared with the 6,4% which they had envisaged before. However, the Government has refused to accept even the 5% as a target. Actual growth for the programming period will be much lower, probably between 3% and 4%, according to Dr. Riekert, the Prime Minister’s economic adviser.

The economic development programme makes no bones at all about the tight corner into which the economy has been driven. Domestic capital creation is inadequate, foreign capital is scarce, burgeoning defence spending is here to stay and meanwhile, increasingly capital intensive techniques are contributing to soaring unemployment and excessive imports.

It gives me no pleasure to recall my contribution to the Budget debate, where I said that the removal of food subsidies would hit the poorest class of our people and push up their cost of living severely. It gives me no pleasure to recall that I made mention of the housing and education position. Since the hon. the Minister spoke the Black population has increased by some 100 000 and the housing backlog has probably increased by round about 3 250. As I forecast, unemployment is of course soaring and the strain it is going to put on race relations is quite frightening. Already there are indications that unemployment may well double during the next year.

Then there is the question of the cost of living. The hon. the Minister was confident that the cost of living would not continue to go up. The latest available figures seem to indicate that over the six months up to the end of April the cost of living has been increasing by roughly 1,1% per month. It seems that the current spate of price increases was the result of rising costs in the wake of the administered price hikes which one had in the Railways, Escom, Iscor and other places of that kind, because of the changing financing system they have had to adopt due to the lack of overseas capital, and this is going to bring about more difficulties in the future. Other speakers have laboured this point and I do not propose to labour it any further.

What is interesting to me is why South Africa is the only developing Western country, except for Italy and the United Kingdom, which in 1976 failed to bring the annual increase in consumer prices to a single-figure percentage. The USA, Canada, Belgium, the Federal Republic of Germany and Switzerland all managed it. All these countries have much lower rises in the cost of living than we have. South Africa showed the least significant decline, coming down from 13,5% to 11,1%. It is ununderstandable, particularly if one has regard to the fact that South Africa is less dependent on oil imports than any of those other countries.

We all know that the United Kingdom and Italy have had long and persistent weaknesses in their economy, which are derived from chronic causes far removed from the world recession. South Africa, by contrast, has an expanding rather than an over-burdened economy. It has a vast potential of undeveloped natural and human resources. It has comparatively low fuel oil commitments and even today by Western standards we do not spend a high percentage of our gross domestic product on defence, despite the increase. We have cut down on imports and have expanded our exports. We are no longer creating money at a rate excessively greater than our growth. We have committed ourselves to an anti-inflationary campaign with a regime of economic austerity. Why, despite all these efforts and sacrifices in the financial and economic field, do we remain unable to fight back effectively against the scourge of inflation and to restimulate our net growth? What is so unique about our situation, richly endowed by Providences as we are, that we cannot achieve what so many other countries with the burdens of dense populations and scarce natural resources have been able to do? We can no longer claim, as the Government used to claim so conveniently, that inflation is imported from overseas. That does not hold water any more. What is the cause for this? Why should we who should be in the front rank of economic resurgence, now be in the rear-guard? If we are unique in not responding to classic economic remedies, the diagnosis must surely point to a unique disease in our political, economic and social system or probably to a single flaw that flaws all three systems simultaneously. I believe there is a simple answer to this question, i.e. that it is the impractical race relations policy of the Government, whether it is called “apartheid” or any other name. That policy diverts the potential of South Africa into political and into social dead-ends of hostility and of frustration and paralyses our great productive power. The system does something more. It locks us into a misuse of the resources which could be used to make us a vigorous example of the merits of racial interdependence and mutual confidence. Instead, the Government, with its racial prejudice, has been allowed to convert what could have been the most viable new economy in the entire Western World into one that might be crippled indefinitely by these very prejudices.

What are the cardinal weaknesses which appear? I think they are threefold. The first is the Government’s habit of doing too little too late. The second is the contradictions in Government policy and the third is the lack of a blue-print for social and political change for, say, the next five years.

When I talk about doing too little too late, all the examples I can give are overshadowed by one example so striking that it dwarfs all the others, i.e. the Government’s approach to the troubles we had in the townships last year. Those troubles are now a year old and yet no one can say they are over. It is true that the dedicated action by the police—dedicated action which deserves the highest praise—and improved police methods have succeeded in keeping the peace save for sporadic outbursts of violence, but no responsible person can suggest that we have got to the root of the trouble. The Cillié Commission is still plodding along. There has been no interim report, no indication of findings and no help to this House or to the Government as yet. In Soweto the Soweto SRC seems to have taken over from the urban Bantu council and is imposing its will on large sections of the population. In the other townships there have been very few changes. We are told that there are going to be community councils which, to my mind, will give too little power to these people. There has also been the establishment of the Urban Foundation, but the tensions remain and they are probably going to get worse, unless big and meaningful changes are brought about by this Government and are seen to be brought about, and unless we have regard to that “tydrooster” which the hon. the Minister of Sport and Recreation spoke of yesterday.

If one wants examples of contradictions in Government policy, one need go no further than the recent debate on Coloured affairs. At a time when the Pik van der Merwe Report, based on the public opinion survey done for RAU, showed that the people were crying out for leadership and were ready to accept big advances in respect of the Coloured people, provided they were suggested by the Government, no lead whatever was given by the responsible Minister. No indication in respect of citizenship rights was given, nor did he clear up the confusion that exists in this field. Most people had thought that the Cabinet Committee was intended to develop into an umbrella body, and the hon. the Minister even said that it would be given legislative authority over matters of common concern. The hon. the Deputy Minister of Bantu Administration and Education has rejected joint decision-making in the Cabinet Committee. He has not been repudiated despite the verbal antics of the hon. the Minister of Sport, who was careful not to repudiate him. I do not propose to join in the argument. I only want to touch on the result. To me joint decision-making does not only include decisions made democratically by any body or committee, but also decisions reached by concensus. Are both these now ruled out? I know there is a Cabinet Committee considering change in the Westminster system.

The Coloured people waited patiently for three years for the report of the Erika Theron Commission. Now they have to wait for another committee which is, to be fair, not the type of committee recommended by the Theron Commission; nor was it appointed, so far as one knows, in consultation with the Coloured people. The trouble is that the Government keeps on unilaterally working out policies and expecting the Coloured people to accept them. The commission of experts envisaged by the Theron Commission could have included Coloureds, and they could at least have presented certain alternatives. However, the Government has gone its own way; it has chosen another course. I wonder if they do not realize that the frustration in the Coloured community is building up more than ever. I wonder if they realize how inflammable the situation is becoming. The hon. the Minister of National Education spoke about a “tydroos-ter” yesterday—a time-table. I could not agree with him more. Does he realize how short that time-table is? The only way to defuse the situation is for the Government to clearly indicate future policy and to try to clear up the confusion.

That brings me to the third point. That is the lack of a social and political blueprint for change over the next five years. It has been pleaded for before by the editors of many Nationalist-supporting newspapers, as well as by the editors of many other neutral newspapers. Slowly it is becoming more and more obvious that pragmatism without planning is a sure recipe for uncertainty and usually deteriorating race relations. It is possible to predict with reasonable accuracy what developments are going to be in South Africa over the next five years, as the hon. member for Hillbrow did so brilliantly in his speech yesterday morning. However, there are certain imponderables. The first affects the extent to which our economy is going to come under siege from outside, from forces external to it, and the extent to which we will be able to strengthen it to resist, and also the extent to which we will make the benefits of private enterprise available to all our people. We cannot expect them to fight to defend it unless those benefits are made available to them. The first of those is equality in economic opportunity.

The second matter which requires careful planning is the dismantling of what we call discrimination on the grounds of colour in South Africa. All the parties in this House are in favour of it. What is in issue is the speed with which it must be done in order to meet the aspirations of those discriminated against and to avoid the dangers of disruption. That is where consultation and co-operation are so vitally necessary. That is where the blueprint is a must.

Mr. Speaker, may I ask the hon. the Leader of the Opposition a question?

I cannot answer a question now. I am short of time. Let us first see how it goes.

Then there is the question of the development, in full consultation with other communities, of a constitutional structure for South Africa. I believe, together with the hon. member for Hillbrow, that this has to be federal or confederal, and I believe that for it to be acceptable, it will have to recognize group identitiy. It will have to recognize the plural nature of our society. It will have to provide for full participation at all levels for all communities in a federal or confederal structure, and it will have to provide for joint decision-making on matters of common interest and the prevention of political domination of one group by any other. However, we are never going to get anywhere in this field unless the machinery for consultation is drawn up and starts operating.

Lastly, there is the development of a proper respect for the freedom and dignity of the human being, regardless of race, colour or creed. Here I must say I do not begin to meet the Government. However, this is a matter which has a great effect and goes to the root of the happiness of all people everywhere. And, of course, it covers the whole area of civil rights, over which we have disagreed so deeply so often.

I believe that in all four of these matters the Government has not acted satisfactorily. These four matters go to the essence of the strength and the effectiveness of our resistance to the forces ranged against South Africa. I had not only hoped that they would be acceptable to the Government, but I had hoped that they would be acceptable to all Opposition groups, and many others as well in South Africa. I found to my surprise that there were some of my own party people who could not support me. I believe, because whatever they might have said, they were afraid I was going to co-operate with the PRP.

They had good reason, too.

There are others who are uncertain about co-operating because they fear that I may not co-operate with the PRP. However, there were and have been others outside my own party, among them Mr. Gerdener, with whom it has been possible to co-operate on this sort of basis. When I listened yesterday to a speech by the leader of the SAP, the hon. member for Newton Park, it sounded to me like good, solid UP federal policy. I fail to understand why he cannot co-operate on the basis of the four principles I have outlined. [Interjections.]

You kicked him out!

I also listened to a speech made by the hon. member for Sandton, of the PRP, who said two things about negotiation with the Blacks. He said the first prerequisite should be that the future society of South Africa will be free of racial discrimination and secondly, that the Whites must be offered a political framework in which their collective existence, their culture and their values are secure. This morning’s Cape Times contains a letter from the hon. member for Yeoville, setting out the same prerequisites. Those prerequisites are acceptable to me.

But you threw me out! [Interjections.]

Nobody knows better than that hon. gentleman that he was thrown out for disloyalty to his fellows, not for difference on policy.

Nonsense! [Interjections.]

Order!

Nevertheless, I want to say to those hon. gentlemen and the hon. gentlemen of the SAP, and I want to say to the public generally, that it is not too late for those who feel like them to participate in assisting to broaden the base of opposition in South Africa. Our conference on 29 June in Johannesburg is open to everyone. It is not limited. They do not commit themselves by coming. We shall welcome the hon. the Minister of Sport and Recreation if he speaks of cantons and grey areas, but not if he speaks as he did in the House yesterday. There are members on that side of the House who will be welcome on that day. Let me say very firmly, however, that I want nothing of those people who want to narrow the base of opposition by ideas so impractical and unreal that they will place an uncompromisingly limited ceiling on the future of the new party which we hope to form. I believe in that new party, and if a great party with a fine history and proud record of patriotism like the UP is prepared to seek its identity in a party of that kind, it must not be a new party whose scope is going to be limited by stilted ideas whether they are liberal on the one side or too conservative on the other.

Mr. Speaker, it has been interesting to listen to the hon. the Leader of the Opposition, but one must bear in mind that his speech was made a day or two before the dissolution of his party. One would have expected the hon. the Leader of the Opposition to say something about the way in which it is going to be dissolved, what is going to become of the party, how the new party is going to be formed and who is going to be the leader of the party. [Interjections.]

Order!

However, the hon. the Leader of the Opposition was absolutely silent on what I would have considered to be very essential aspects of the future of his party and the Opposition. I shall come back later to some statements by the hon. the Leader of the Opposition.

Right at the beginning of my speech I want to refer very briefly to the inquiry which was instituted into certain allegations made against me by the hon. member for Johannesburg North. I want to say in the first place that that inquiry took place because I had requested it. I requested it because I was absolutely convinced of the fact that what I had said had been correct. The members of the Select Committee who signed the majority report are honourable people, and the report has been tabled for everyone to read. I think the House and the public will have seen quite clearly that the hon. member for Johannesburg North himself admitted that there was no question of my having misled anyone in this House when I spoke here. If I did not mislead anyone in this House, how on earth could I have misled anyone outside the House? This is the question I ask.

I ask it not only of the hon. member for Johannesburg North and the hon. member for Yeoville, who made such a fuss and who made such a fool of himself in the process. I also ask it of two other hon. members of the official Opposition, for I think that the speech made by one of them, the hon. member for East London City, was not only ridiculous, but also the most cynical speech I have ever heard in this House. I want to point out that every factual statement made by me was confirmed and unconditionally supported by the Reserve Bank. I am quite prepared to accept the standpoint of that authoritative body in this connection. However, I shall leave the matter at that, but it is quite certain that I have been completely exonerated. The only thing I am very sorry about is that time does not allow us to introduce a substantive motion here so that someone in this House can be taught a lesson.

We may still do that.

The hon. the Leader of the House says that if there is time, we may still do that. [Interjections.]

Order!

I am perfectly prepared to leave the matter there. I stand by everything I said on that occasion and on any other occasion in this House.

*Sir, we are witnessing a very strange moment in our history. The official Opposition is collapsing. What is to become of them, heaven knows. It seems to me that the PRP is sitting there like a hungry jackal, hoping to become the official Opposition sooner or later. If that were to happen, however, it would be an evil day for this beautiful country. It is sometimes said that there will be a split in the PRP ranks as well, and that may be so. However, I think we must be careful and refrain from thinking that the hon. member for Yeoville no longer supports those hon. members. After all, he is still a member of that party. He has had plenty of time to withdraw if he wanted to. However, he is still sitting there, but we must watch him very carefully. This is what my experience of that hon. member has shown me. [Interjections.] I think it has been a characteristic of this debate … [Interjections.]

Order!

A characteristic of this debate has been the anxiety which has been expressed by various hon. members of this House about the doings of members of the PRP. How many times have the most serious misgivings been expressed—during the last few days again—about the doings of some of those hon. members? This is something they will have to explain in the days that lie ahead, because we want to know what they are doing. This situation cannot continue like this. We expect responsible behaviour from every hon. member of this House, and we are not getting it from that party.

It is just a smear campaign.

The debate on the budget is, of course, characteristically a debate that covers a great deal of ground as traditionally members are at liberty to talk on virtually any subject of their choice. It will be expected of me to deal with some of the economic and financial issues which have been raised and perhaps also with some that have not been raised. I say this because interestingly enough one or two of the most important developments in the economy of late have simply been ignored entirely by members of the Opposition. I want to say, as background, that we must remeer that in this country today we are the butt of a sustained onslaught and of sustained criticism by a whole series of countries throughout the world, an onslaught that is unprecedented and, in my opinion, completely unjustified. There is no justification given for the attitudes of the large number of countries that criticize everything we do. They criticize not only the Government, but virtually everything that is done in this country and ignore every favourable development in this country along the lines of race relations and other important aspects of policy. They completely ignore those things and simply seize upon what are often contrived, artificial and mischievous issues in order to beat us as heavily as they can. It is in this respect that I fault the hon. Opposition most strongly of all. When does the Opposition ever look at those issues? When does it ever condemn anyone outside who criticizes us in this shameless fashion? I am not talking about criticism which is justified, because we are, in fact, fallible and do make mistakes and we do expect criticism when we do make mistakes. I am talking about these other issues which amount to a national scandal when one has regard to the facts. I said it earlier in the session and I want to say it again, that it is a characteristic of the debate in this House these days that the hon. Opposition parties, and I exclude the hon. members of the SAP … [Interjections.] Of course I do, because we have heard their speeches! We have those speeches on record in Hansard. That is why I exclude them. I believe that they have been most responsible in this House. They can vote, against the budget; that does not concern me at all. It is the manner in which they debate these issues that has impressed me. What do the other Opposition parties do? They single out every unfavourable issue they can possibly lay their hands on, in the process concoct a large number of their own and use these against us the whole time. [Interjections.]

Order!

Let there be any favourable development, whether constitutional or social, along the lines of race relations, economic or financial matters and they will be as silent as the grave. I shall now proceed to give an illustration. When this Third Reading debate began it was made known in the Press and over the radio and on television—in fact, it was given great publicity—that there had, in fact, been a dramatic improvement in the balance of payments on the current account of our country. What is the position? For the first five months of this year, as a result of the very big improvement in May, we actually have a surplus on the current account of R107 million. These are the figures submitted by Customs and Excise. In the comparable period last year, for the first five months, there was a deficit on current accounts of something like R770 million. Therefore there was a turn around for the better of something like R880 million. Not a single member of the Opposition, unless I nodded in this desk, and I was present throughout the whole debate, ever mentioned this. They had 48 hours in which to do it. What do they do? They get up one after the other and say that capital has dried up. They hang their heads on the ground and say that this country’s economy is slowing down and that we are in for a most desperate time as capital from overseas has dried up. This has been the refrain ever since we came here in the middle of January.

Sir, let me ‘say something in regard to inflation. The hon. Leader of the Opposition began by referring to the six months up to April. However, the figure for May—it is only one month, I admit—shows a very favourable improvement in the inflation rate from April to May, which I would have thought he might have singled out and stressed. If that continues—I say if it continues, because this is a very stubborn problem—we are going to make very substantial progress on the inflation front as well. I think on these two issues, these two essential features of our policy: the strengthening of the balance of payments and the fight against inflation, this Government may certainly take some credit for its policies. You have only got to look at our fiscal policy.

We have held down Government spending as very very few countries in the world over the last few years had been able to do. In the latest budget despite the inflation rate, even including an all-time record expenditure on defence, which is absolutely justified in my and in the Government’s opinion and the opinion of the public outside, we have kept down the increase in Government expenditure in total to something like 7% to 8% over the last year. If one rules out defence it is 5%. That is well under half the rate of increase of the general level of prices as measured by the consumer price index. But we do not get any credit for that. How did these results come about? It is because of the policy of restraint on Government spending and because of the restraint on salaries and wages on which this Government took the initiative. Eighteen months ago it took the initiative in bringing this about in close co-operation with the trade unions. I want to pay my tribute to the trade unions for the most constructive attitudes they adopted. It is not an easy matter for many of their members to subject themselves to this restraint. Our monetary policy, Mr. Speaker, is there for all to see. Last year we were criticized for an alleged too high increase in the quantity of money and in bank credit. What is the position today? The increase is down to a matter of a couple of percentage points on last year. That is the position.

I say that all these things added up, together with the import deposit scheme which we applied last year as a purely temporary measure, for six months only, and then only on a restricted scale, and together with the surcharge on imports which we introduced in April—again as a temporary measure, because our imports in relation to our gross national product were running wild—have pulled the current account right into balance. The more we can improve the current account, by stepping up exports especially, the better for us. That is what is happening, because the merchandise export figures for May—the latest figure—is R550 million. According to my calculation it will give us an annual figure of R6 600 million for exports. If continued, that will be the highest in our experience. I think this is a very positive aspect of official policy. I don’t think that the Government alone can take the credit for this very substantial increase in export, because obviously this is basically a private enterprise economy, and this can only happen if the private enterprise section of the economy is wide awake and doing its part, which they are doing. However, the facts point to it that this is a dramatic improvement. We have seen it in April and in May. If this can continue and if we can hold the line against Government spending and against increases in salaries and wages for some time ahead, we shall in a matter of four, five or six months be able to re-assess the whole situation and may indeed be able to take some action to stimulate the economy in certain important areas. Obviously I have to be very careful in what I say in this respect, because I cannot foresee the future. However, on the basis of these trends, I can say that there is a very substantial improvement taking place in these very important areas.

When the hon. member for Constantia took part in this debate, he criticized us for the very tardy growth rate of late and our performance in the important field of education. I have always said that one has to be very careful in making these international comparisons, because these calculations are not always made on a strictly comparable basis. Yet we have gone to some trouble to try to understand the basis of these calculations and I think these comparisons are roughly reliable. If one looks at the growth rate in relation to the gross national product in real terms adjusted according to the inflation rate, one will find that between roughly 1952 and 1975, a period of about 23 years—in some cases the period is 22 years and in other cases 21 years, but it is up to 1975, the year for which we have the latest figures—Canada has had an average annual growth rate in real terms of 6,2%; Britain, 2,7%; Italy, 4,9%; Switzerland, 3,7%; Australia, 4,7%; New Zealand, 4% and South Africa, 5%. In other words, of these seven countries I have taken as examples, we are in fact the second highest if one calculates it over this period. Growth is a long-term phenomenon and therefore one has to calculate it over a reasonable period to determine the reliable trends.

Although these figures are very much in our favour, I think one has to be very careful not to read too much into simply statistical growth figures. If one looks at Japan, one will see that she has a high growth rate, but one will also see that Japan has problems of other kinds, problems we should not very much like to see. Japan has a very much bigger pollution problem than we have, to take just one example. If one looks at Hong Kong, to which the hon. member for Constantia has referred, one will see that while that country has a good growth rate, it also has a tremendous congestion in housing. Hong Kong has all sorts of other problems, including pollution on a big scale and very dire poverty amongst a very large number of its people. These are things one has to take into account.

I think the broader one looks at this question, at the opulence on the one side and the poverty on the other in these countries, the more favourably we compare with them. It is perfectly correct that we also have extremes. We have what we call a dual economy, a modern exchange economy, where we have very high standards of living, use a lot of capital and are mechanized to a high extent, and so on, and then we have the much less developed sector. It is precisely this Government’s most important aim of its whole policy. What is the cardinal aim of this Government’s policy if it is not to develop in all respects those less developed sections of our population, not only politically, if one looks at the development of the homelands up to the point of independence, but also socially and economically? One has only to look at the figures in the latest budget to see the amount we are in fact diverting for the development of the homelands. If one takes the figures for housing in the latest budget, for 1977-’78, one sees that, all told, we have provided for nearly R200 million for housing. This is what the Government will provide. Three years ago the figure was R104 million. Therefore, it has very nearly doubled since 1974-’75. Although it is true that the Coloured people have benefited most of all, in fact all race groups have benefited as a result of this policy.

What is the position in respect of education? We are often accused of discrimination on the grounds of colour, but I think it is a groundless accusation. In 1974-’75 an amount of R500 million was provided for the education of Whites as against R869 million in the latest budget. In the case of the non-White groups together the percentage increase is slightly lower. Nevertheless, the amount provided in this respect has increased from roughly R250 million in 1974-’75 to approximately R400 million in this budget. I would merely remind the House that, whether one likes it or not, it happens to be a fact of life that approximately 8% of the income-tax payers pay 90% of the taxes in this country. Yet we are putting aside R400 million for non-White education, and this figure is still increasing very substantially. The figures are there for all to see in greater detail in the latest budget.

The hon. member for Constantia would have to develop his thesis that we are not doing enough in respect of education, housing and other social services. Look at the position in regard to pensions. Even under the difficult conditions which have prevailed of late we have contrived to increase social pensions with every budget for several years in succession. Usually the increase amounts to 10% per annum. Last year civil pensions were also increased by 10% with a minimum of R25 per month. The result is that, irrespective of what post-war period one takes, one will find that the increases in pension during that period far exceed the increase in the cost of living. That is another thing the Government has deliberately done in the field of social welfare, and that has to be paid for by the taxpayer.

Give us figures relating to Government expenditure.

Another criticism I want to level at the Opposition is that they simply single out a few aspects of the conditions prevailing in the domestic economy and do not look beyond our borders to see what the external conditions are that directly affect us. There is no mention of the first-class depression in the outside world over the last two years or more and no mention of the fact that the terms of trade moved against us in two years by 22%. What control did we have over that? The hon. the Leader of the Opposition said we were not so vulnerable in respect of oil and that we did not have to carry the same burden as a result of the increases in oil prices as is the case with other countries. I do not know about that, but what I do know is that if the oil prices did not rise as they have done since late 1973, we would be better off in our balance of payments by approximately R1 000 million to R1 100 million per year. In other words, compared with just over three years ago, we have to find something like R1 100 million extra per year just to pay our oil import bill. I think the hon. the Leader of the Opposition will be fair enough to concede that we have been trying to conserve oil in the process.

Gold is another matter. Gold is by far our biggest export item. What control did we have over the big fall in the gold price? The price dropped in the latter half of 1975, and again last year. In August last year it fell to $103 per ounce. In July of the year before it was approximately $165. That is what we have had to contend with. That makes a difference of hundreds of millions of rand, probably R500 to R600 million in our balance of payments in one year. Yet, despite those things, we have maintained our gold and foreign exchange reserves. They are still in the vicinity of R750 to R800 million, and that on the basis of gold valued at $42,2 per fine ounce.

That is gross.

Of course that is gross.

But you have to look at gross and net.

The hon. member is quite correct. One has to look at gross and net. When one looks at the net figure, the question is: Why is that figure as low as it is? It is low substantially because of the amount we have been paying off, both from the private sector and the Government sector in short-term indebtedness. However, that is not the only reason. Some capital has gone out, but we have been paying back capital overseas frequently and on a substantial scale. One only has to look at the Reserve Bank’s returns to see that. So, if one looks at the net reserves, one must take that into account. I think that has been a very sound move on our part, at least to reduce our short-term debt as much as we can afford.

We are now in the position that once the IMF has amended its articles of association and has abolished the old so-called official price of gold, we in terms of the Reserve Bank Amendment Act, which we passed a week or two ago, will wish to revalue our gold reserves. This will bring about a much more realistic reserves figure. But I immediately want to say that we do not intend taking that money and throwing it around the economy. We have taken very specific measures in that amending legislation in order to safeguard that book profit and to sterilize it in the Reserve Bank. It will not be easy to lay hands on it. I think that is another very sound financial measure.

One can list these external factors which have had an extremely far-reaching effect on our economy and without which one cannot apprise our present position, nor the prospects for the immediate future.

If one takes the budgetary position, one will notice that this fall in the gold price over the last year to 18 months, despite up-and-down swings, has probably meant that we are worse off as far as the revenue side of our budget is concerned, via the gold mining taxation, to the extent of more than R300 million a year. That is the average figure. We have to find that money because our budget, despite the hold we exercise on Government spending, is nevertheless increasing. That amount has to be made good.

That brings me to a point I would like to stress about the criticism of the Opposition of our move to put a temporary surcharge on only those imports which are not bound under the GATT agreement. We are not touching the items which are bound under GATT, but only the unbound items. The hon. member for Gardens has a rather interesting amendment on one of the financial measures still to be introduced, an amendment which will tend to wipe out that surcharge. That will mean a loss of R400 million per year. The hon. member for Constantia says I should not put up the prescribed asset requirements of the big savings institutions—a temporary measure to give the Government a little more of what are very large and growing funds. I want R760 million from that source and R400 million from the surcharge on imports, an amount of R1 160 million in the next year. The only other way I can hope to raise that money is by raising direct taxation.

I am reminding the hon. member for Cape Town Gardens in advance that he will have to do a little bit of explaining when he moves his amendment, because the implication of it is very far-reaching. It would not be an increase in direct taxes, in income tax, of 1%, 2% or 5%, but a punitive increase to make good that amount. The Opposition simply say that we must abandon those measures. I want to know, as I wanted to know during the debate: What is the alternative? I have not yet had an answer. It is easy to criticize.

The hon. the Minister will remember that in his budget speech he said he hoped to reduce Government expenditure by a further R200 million. Can he tell us whether that has been achieved to any extent or not?

Yes, we are very serious about that further pruning at the last minute, and together with my colleagues, the Cabinet, I have taken steps since the budget speech to implement that cut. The hon. member for Johannesburg North, having put the question, reminds me of the fact that he spoke about the Nationalist connection yesterday. He ascribed all our ills to this Nationalist connection. In broad terms that is not an unfair statement, of what he said. The hon. the Leader of the Opposition said much the same today. He held the Government responsible for all sorts of things, things unfavourable to …

They are not responsible for it: they are not doing their job.

I wish I had the time to develop that issue. Perhaps one day we shall have the time. As a matter of fact, I think we must make the time. I believe this so-called Nationalist connection—to borrow that phrase for a moment—has been the salvation of this country. [Interjections.] What Government in this country could have had a finer record in maintaining law and order than this Government, a Government which is slated by many countries in the world today, not only for things it has done, but also for things it has never even dreamt of doing? Law and order is absolutely essential to good government and to the welfare of all the people of any country.

We have always had it in South Africa.

Let us look at the position in Southern Africa. Had the West not let us down scandalously, we would have been responsible together with some Western countries on which we had every right to depend on, for a very different set-up in Angola today. I say that now, and I shall say it anywhere because I know what I am talking about. We were scandalously let down at the last minute.

Why did you not listen to Gen. Van den Bergh?

You see, Sir, that hon. member immediately starts querying things.

But Gen. Van den Berg said that you should not have gone. [Interjections.]

You are talking absolute nonsense. He did not say that.

It was in Die Vaderland.

You believe every untruth about South Africa.

But it was in Die Vaderland.

I used that as one instance. Let us take the field of constitutional development in Southern Africa, the field which receives so much attention in the world, which has, in fact, become an obsession with many countries in the world. It is not what happens in Uganda, or West Africa, or the Middle East or the Far East, but what happens in Southern Africa that is under the magnifying glass. I want to ask hon. members today whether what has happened in South West Africa at the Turnhalle consultations is not a lesson to the whole world in statesmanship very largely emanating from South Africa. I have had leading visitors here from Western countries, including leading financiers, and they say that they are astonished at what has happened there. But they also say that what their news media say is happening there differs like chalk from cheese. [Interjections.] When we list these basically important matters in our favour, the hon. the Opposition get on their hind legs because they do not like it; they object to it. That is the position.

May I ask the hon. the Minister a question?

I am trying to complete my speech. However, I shall answer one more question.

Is the hon. the Minister going to give the same favourable consideration to a Natal Turnhalle as he has given to the one in South West Africa? [Interjections.]

I am very glad that question came up. I do not know whether the hon. member for Umhlatuzana sees himself as the leader of the new party to be formed; maybe he does and maybe he does not. The fact is, what has Natal to do with the Turnhalle in South West Africa? Natal is a province of the Republic of South Africa, a Republic with a unitary constitution and, Natal forms an integral and basic part of the country. What has Natal got to do with the Turnhalle in South West Africa, unless the hon. member is asking me whether Natal should not be allowed to secede from South Africa? Furthermore, particularly in the light of the policy of the PRP, the idea might be that Natal should have Black majority rule. I have an awfully uncomfortable feeling that that is what is lying at the root of the whole matter. [Interjections.]

Answer the question!

I have answered it. I am on record that I have said it in Natal, and I will say it again. As far as I am concerned, South West Africa has nothing to do with a Turnhalle in Natal. Nothing whatsoever. As far as I am concerned, I will oppose it because it is absolute nonsense. It is sterile. [Interjections.] It is absolutely sterile.

Why?

Because Natal is a province falling under our constitution. Natal is an integral part of the Republic of South Africa, which is a unity. [Interjections.] South West Africa never has been. Has South West Africa been a province of South Africa? [Interjections.] I do not know on what basis the hon. member asks this question. [Interjections.]

On the P. W. Botha basis!

That hon. member needs a dry nappy?

If we look at the constitutional political position in Southern Africa today, we cannot but be impressed by the improvement in stability and the improvement in the actual constitutional development that has taken place. The situation in Southern Africa today is immensely more stable than it was 18 months ago, and the prospects for finding solutions for South West Africa are out of all proportions better because of what has been achieved during the last 18 months. The prospects for Rhodesia, although difficult, cannot but be regarded as much more promising today than they were 12 months ago. It must be viewed like that. If that is so, and with the stability we have in this country—political and economic—what on earth can be the grounds for this continuing non-stop pessimism that we are getting from hon. members of the Opposition? Every time they …

Mr. Speaker, may I ask the hon. the Minister a question? [Interjections.]

No. You must first apologize!

No, Mr. Speaker, I am not going to answer any questions now. I come back to that point, because it is a point that has been imprinted on me more than any other point during this session. I refer to the pessimism of those hon. members about the future of their country. We should sit down and draw up a balance sheet of the assets and the liabilities of this country. I believe hon. members will be astonished where they end up. [Interjections.]

Order!

Mr. Speaker, that is the note on which I would like to end this debate, and I thank you for your indulgence. As I have said before on many occasions, I say again that we have a number of problems. Some of them are problems that would daunt people who perhaps did not have the character, the capability or the preparedness to grapple with them. However, if we can keep our sense of perspective, if we can keep our heads and appreciate what we have, then we must see this country’s future as absolutely sound and assured, not only financially and economically, but in all respects.

Whatever a small group of Opposition members say, we know what is being said outside this House. We know what is being said increasingly by the public at large. We have the support of the public. Why do we have the support of the public? Because basically there must be a good deal of merit in our policies. Yet the hon. Leader of the Opposition lists all the things that to him are wrong. The question I would like to put to him is: If that is so, and if it is as hon. members have said, that that has been going on for 29 years, how in heaven is it that those hon. members are not sitting on the Government side, in control of the country’s affairs, and not where they are sitting now? How is it that they do not only sit there, but are in fact breaking up and disintegrating before our eyes? How does that happen? I think they should subject their whole approach to this country, to its future and its present, to a fresh assessment.

Furthermore, I want to say that I hope very much that the PRP will realize the responsibility on them as an Opposition party of this country, because in all fairness, I sit here session after session, and I look for that confidence and loyalty in this country as well as the patriotism which I think behoves every hon. member of this House and I do not see it session after session. That worries me very much indeed. No matter what our differences are, it is that basic approach which worries me.

[Inaudible.]

Go back to your paradise.

I believe we are in a position now where, by our financial and economic policies, we have set the groundwork for this recovery which will surely come. I see signs of the onset of an improvement in these basic issues such as the balance of payments and, shortly, in the growth rate and in foreign investments. Even if the foreign capital position is against us for some time we shall mobilize our own resources and we shall keep on with our large projects, public and private. We shall continue developing this country to the benefit of all the peoples of this country.

Question agreed to.

Bill read a Third Time.

Mr. Speaker, I move—

As usual, this Bill deals with a variety of matters affecting the State Revenue Fund and the Railway and Harbour Fund.

Since the various clauses are explained in the explanatory memorandum which hon. members already have in front of them, I consider it unnecessary to explain all the clauses in detail.

However, in respect of clause 3, I just want to draw hon. member’s attention to the fact that the envisaged legislation mentioned in the explanatory memorandum, comprises amendments to the Provincial Finance and Audit Act, No. 18 of 1972, and the Financial Relations Act, No. 65 of 1976. The aim of the amendments will be inter alia to simplify the financial administration of the provinces as a result of new developments such as the unit budgeting principle, and to rationalize budgeting procedures. It is intended to submit the legislation to Parliament early next year.

If hon. members desire more information about any clause, I or the Minister concerned will be pleased to furnish further details.

Mr. Speaker, first of all I should like to thank the hon. the Minister and his department for the explanatory memorandum which we have had on this measure. This is an omnibus measure, as the hon. the Minister has said. It covers 12 different subjects, the only relation between these 12 different subjects being that they all have some financial implication. This is essentially a Committee Stage Bill, but there are two clauses which deal with a matter of principle. They both deal with the question of the State guaranteeing contingent liabilities which are ultimately due by institutions in the private sector of the economy.

The first of these clauses is clause 2, which deals with one of the unfortunate instances we have had in the last few months, of a bank getting into difficulty and being put under curatorship. It is very unusual for a central bank to guarantee the foreign assets of an institution in the private sector. If it were not for the fact that I believe—and I sincerely hope that this will be the case—that the occurrence of banks getting into financial difficulties and being put under curatorship is likely to be a very rare one, this step by the Reserve Bank might constitute a difficult precedent. If one takes into account the difficult situation in which we as a country are going through on the economic front and, moreover, the fact that the confidence of overseas investors, to put it mildly, is not strong at present, the step taken by the Reserve Bank to give this guarantee to the Rand Bank has, in principle, been a wise one as it has prevented what might otherwise have been a shock to overseas confidence. We are now being asked to approve in this Bill that the State guarantees the Reserve Bank against any losses which it may incur under its guarantee to the Rand Bank.

In reply to a question put on the Order Paper by the hon. member for Yeoville, the hon. the Minister indicated yesterday that the size of this contingent liability was approximately R41 million and that it was unlikely to exceed that sum. I think that this is a significant amount that is involved here, and I would like to know from the hon. the Minister whether he is in a position to tell us what the prospects are of the Rand Bank being restored to full health by the curator which is looking after its affairs, to enable us to judge what the chances are of incurring losses against this guarantee. I appreciate very keenly that it may not be in the interests of the bank or of its creditors to give this information. However, if it is possible for the hon. the Minister to give us this information, it will be of great help to us in considering the measure that we are being asked to consider.

The second clause I would like to refer to is clause 8, where we are being asked to approve a Government guarantee of a loan to be extended by a banking institution to the Canned Fruit Export Marketing Board. Here again no mention has been made in the Bill or in the explanatory memorandum of what the amount of this loan is or what the limit of the guarantee of the loan is likely to be. I hope the hon. the Minister is listening, because I am asking him for information in regard to the guarantee under clause 8. I would like to know what the liability under this guarantee is going to be. The board in question is a board which finances canned fruit exports by making loans to individual canning companies so that the ultimate liability for the loan which is being guaranteed rests with those companies. According to the latest figures available, the Canned Fruit Export Marketing Board had an amount of R10 million available to it from the Reserve Bank plus a further amount of R1,5 million from the Canning Fruit Board. This was the total of the funds available to it. Now that more money is required to finance canning exports, we would like to have a clearer picture not only as to how much more finance is involved but also why the additional money is required and for what purpose it is going to be used.

Is it only because prices and costs of raw materials and finished products in the canning industry have gone up, or is it also because stocks of finished canned products are building up, both here and overseas, and are difficult to sell? Do canners, who receive these loans from this board, provide any security for the loans made to them and, if so, in what form is this security provided? If we are to use public funds for guarantees of this nature, I think this House should be in possession of the information for which I have asked.

Apart from the two points I have raised on the two relevant causes, both dealing with guarantees by the State, we have no further trouble with this Bill and shall support it at Second Reading.

Mr. Speaker, we are now sailing in much more tranquil waters than we were in the preceding debate. These are, of course, financial matters that can be debated in such a tranquil atmosphere. I only propose to deal with the matters in the Bill which we should like some further information on, or on which we should specifically like to comment because I, too, appreciate the detail of the explanatory memorandum which has been furnished to us. I think that this type of memorandum is tremendously useful and does, in fact, save a lot of time, as I think can be demonstrated here.

Firstly there is the question of the Rand Bank, referred to in clause 2. We support this provision. I do not quite agree with the hon. member for Constantia, because to me the importance of this guarantee lies in the importance to South Africa of the credit-worthiness of the banks overseas. I want to compliment whoever was responsible for deciding upon this guarantee, I believe at very short notice, because to my mind that was an act that is very important for South Africa’s creditworthiness overseas. If it had not been done, there might have been all sorts of repercussions, particularly in regard to banking institutions overseas calling up credit that has been granted to some of the smaller institutions in South Africa. I for one have no difficulty with this provision, because I believe it to have been a decision which was quite clearly necessary in the circumstances. If it had not been made, I would certainly have advocated that it be made. I therefore have no difficulty about this at all.

I should, however, like to make a few other comments. As I understand the position, in accordance with figures that have been published—I understand also for the first time—by the Bank for International Settlements, the total indebtedness of South African banks exceeds $7½ billion. The amount due at the end of the current year is almost $3½ billion. That is a tremendous amount of money.

In consequence I should like to direct a question at the hon. the Minister. To what extent does he approve of the exposure of the banking institutions of South Africa to foreign exchange, when such exposure does not relate to the movement of goods but does, in fact, relate to loan facilities? The movement of goods is one thing, because cover is afforded by the Reserve Bank, but to what extent does he agree with the exposure in relation to loan facilities, particularly bearing in mind the effect this has had on the banking institutions overseas which have very heavily exposed themselves to foreign exchange risks, in some cases with disastrous consequences?

I now come to the second point. Bearing in mind that in the present case a series of overseas liabilities has been guaranteed to the extent of R41 million, will a greater degree of control and decision-making be exercised in future by the Reserve Bank with regard to the incurring of foreign liabilities? I say this because if there has been a precedent in the sense that we guarantee in certain appropriate circumstances, i.e. when something goes wrong, will some greater degree of control therefore be exercised in these particular circumstances or not? I wonder whether the hon. the Minister would not find it appropriate to make some statement in respect of this matter, because I think that some people may well be concerned, having read this morning the figures which have been published by the Bank for International Settlements in respect of the very heavy exposure of South African banks to foreign loans and foreign indebtedness.

The next matter that I would like to touch on and which is related to this, is the whole issue of the Government’s role in respect of banking and other institutions in South Africa. That becomes relevant both in respect of Rand Bank and also in respect of the provisions in terms of clause 8 of the Bill where we are dealing with the canning industry. How does the hon. the Minister see the Government’s role in respect of the furnishing of financial facilities and in respect of the guaranteeing of some of these facilities when granted by other institutions, bearing in mind the criticism that is made of the Government in respect of the interference in the private sector? It is quite remarkable that when the Government guarantees the foreign liabilities of a bank like Rand Bank all the critics of State interference are remarkably silent, because that kind of thing is obviously approved all round. When it comes to the guaranteeing of the financial facilities for the fruit canners, I have not heard anybody criticize that by saying that this is a case of State interference and that it must not be done. The hon. the Minister knows my views on State interference. I am not one of those who cry that the State must never interfere, but how does he see the Government’s role? We have now had a number of examples. For instance, we had the interference in the Glen Anil situation. A guarantee was given which cost the taxpayer money, and the Government then pulled out of it.

How does the Minister see the Government’s role? How does he see that the Government should intervene, should give or withhold facilities or should give or withhold guarantees? I believe that some clarity on the policy which is adopted in respect of this matter is important. I want to give an example to the hon. the Minister. In some cases in the United Kingdom where the State has guaranteed private enterprise institutions in respect of their debts, what has happened is that those industries have gone from bad to worse in some cases. They have in fact deteriorated because the ordinary economic forces have not been allowed to operate. The result is therefore that in the United Kingdom, for example, one has had wage demands completely out of proportion to what should have been demanded in enterprises which would have gone broke had the State in fact not given guarantees. In many cases the State has had to guarantee more and more because there have been more and more wage demands which have occurred. This, to my mind, is very delicate ground upon which the hon. the Minister is treading when he gives guarantees for particular institutions which are selected. I believe that there needs to be a policy statement in regard to this. I think the public needs to know where in fact the hon. the Minister is going to intervene and give assistance and where guarantees are to be given or otherwise.

I would like to touch on another matter, and that is the provisions of clause 6 of the Bill. Those are the provisions which relate to the authority to pay a further instalment towards the International Development Association. I asked the hon. the Minister a question here as to whether South Africa could be one of the people who could draw on this fund, and he answered quite correctly that in so far as this was concerned, it was a fund which was particularly designed for the less developed countries and that we did not fall into the category of “less developed countries”. The point that I want to put to the hon. the Minister is: We are here giving money to a fund which in turn hands it out on very advantageous terms to less developed countries which include in their number some of the strongest enemies of South Africa. Some of these people in fact use their countries for all sorts of purposes against us. I want to ask the hon. the Minister whether we can in these circumstances contribute to the International Development Association which, I think, in itself is a sound concept and which is one which has been internationally accepted, when we know that some of our own money is going to go to countries which in some cases are training terrorists in order to act against South Africa? I think the hon. the Minister must give us some explanation in this regard. We might have a legal or a moral commitment and it might be advantageous to remain in this international institution, but I think there must be many of us who must be asking where this money really goes. We do not have such a lot of money to spare at the moment that we can afford to throw it around and to let it go to countries which are in fact hostile to South Africa.

I want briefly to deal with just two other matters. The first concerns the provisions of clause 7, which relate to the Local Loans Fund. I want to ask whether the time has not arrived when, in respect of the smaller local authority, which should not in fact be entering the capital market, there should not be a larger form of fund through which money can be raised from the public on more advantageous terms than the smaller local authorities are able to obtain. One can then have what can be regarded as a proper Local Loans Fund, which can raise money from the public to lend it out to the smaller local authorities, rather than that they should have to go to the public themselves. This is not the present intention of the Local Loans Fund. Its present intention is to deal with certain particular situations. However, I think the situation exists in South Africa where it is wrong that there should be this multiplicity of small local authorities which have to pay the higher rates in order to obtain money and which in many cases confuse the capital market. I think that if we had a larger borrower, presenting all of these bodies and administered by the Government, we would be able to solve quite a problem.

Finally, I want to deal with the provisions of section 11, which relate to the transfer of four FM radio transmitters to the Transkeian Government. We support this. We also support the concept that when we give aid, we do not attach strings to it, because I believe we are a country which does not believe in attaching strings to aid. However, if I may, I just want to say one word in regard to this. I hope that these radio transmitters will be received by Transkei, will be put to good use for their citizens, and will not be used for some broadcast relating, for example, to demands for land and for some of the threats which have been made in that regard against ourselves, because when people receive gifts they have to use them well, particularly in respect of the people from whom they get them. I express the wish that Transkei will use these radio transmitters as a symbol of friendship and will broadcast matters which are in accord with the friendship that exists between us and Transkei. I hope they will not on any occasion use it in the future to broadcast matters which could lead to bad feelings between our two respective States.

Mr. Speaker, the hon. members for Constantia and Yeoville both referred to clause 8 of the Bill which amends section 2 of the principal Act. I do not think it is appropriate at this stage to become involved in a debate about Government intervention. I just want to say that it is often true—I am happy to furnish the hon. member for Yeoville with a reply in this regard—that when the private sector experiences problems, it asks the Government to step in on its behalf whereas when things are going well, it says that one should not interfere.

†To them there is a subtle difference between intervention and interference. When it suits them it is intervention, and when it does not suit them it is interference. I think it is appropriate that I should explain the purpose of this particular clause.

*In this particular regard, I should like very much to explain that we have to draw a distinction between what is happening here and what will be general policy in relation to intervention by the State in the private sector in respect of financing or guaranteeing of financing. The addition to section 2 of the principal Act, Act No. 100 of 1967, first of all authorizes the Minister of Economic Affairs to guarantee, with the approval and consent of the Minister of Finance, the repayment of a loan and the payment of interest on such loan negotiated at a banking institution, to the Canned Fruit Export Board.

Allow me just to explain the ratio as to why in this particular case the State is of the opinion that there are reasons why it should take action to help this industry in this particular way. Every year, during the canning season the fruit canners must spend considerable sums of money on the fruit that is to be canned, on sugar, metal containers, labour, etc., whilst they only get their money back in the course of the year as the canned fruit is exported. Heavy expenditure therefore has to be incurred in respect of the agricultural products and its containers, packaging and transport before there is a flow of capital back to the canners. The private canners cannot obtain money from the Land Bank for the financing of these expenditures. As hon. members will realize, the private canners are at a disadvantage in this particular regard when compared, for example, with canners who are in fact able to obtain finance from the Land Bank.

In the second place—this is important—the Export Board which deals with the marketing of agricultural products, is the only such board which cannot obtain money from any institution—the Land Bank or the State, for example—for that particular purpose, whilst others can in fact obtain it. That is why the interpretation we must attach to the circumstances under which the State may take action, is of a restrictive nature and not one which may be applied liberally. Basically, the principle is that we are dealing with agricultural products in this regard, but because the instrument which does the marketing cannot obtain money from Government institutions as other marketing boards can, we had to find some way to help this agricultural product and the board which handles its marketing.

Mr. Speaker, may I ask the hon. the Minister a question?

Just a moment. Just allow me to complete the principle. In order to accommodate them, arrangements were made with the Reserve Bank to make overdraft facilities up to an amount of R10 million per annum at favourable interest rates—the interest rates of the Land Bank are also favourable when compared to the market rates—available to the fruit canning industry for the financing of these supplies of canned fruit until they have been marketed and the money flows back. Now the hon. member may ask his question.

I wonder whether the hon. the Minister can explain why it is that this sector of the agricultural industry cannot get funds from the Land Bank.

It is a statutory board and in terms of its constitution, it cannot obtain them.

But other boards obtain money from the Land Bank.

Yes, but those are marketing boards in a totally different sense. This specific board has a limited function, viz. simply the marketing of export products. That is the reason. However, I do not believe we ought to enter into debate about that.

We are merely requesting information. The hon. the Minister need not become angry for no reason.

Well, I am giving the hon. member information as to why we are dealing with this matter in this way. We are discussing the financing of the Canned Fruit Export Board. In response to a question asked by the hon. member for Yeoville, I explained that the reason we were intervening in this case to assist in financing, was that the marketing boards for other agricultural products boards which are constituted differently whilst they still deal with the marketing of products, do in fact have access to Government agencies or financing institutions. Because that is the case, and in order to introduce an element of equalization, it was previously decided that we had to help this industry by permitting the Export Board to borrow a maximum amount of R10 million per annum at favourable interest rates from the Reserve Bank. That was because they could not borrow that money anywhere else. Due to the increase in prices over the years and the increase in costs, the amount of R10 million which they could borrow from the Reserve Bank and which the Reserve Bank could lend them, became inadequate for the industry and therefore they could not finance all those expenditures. On the other hand the Reserve Bank quite rightly adopted the standpoint that they were not able to increase this amount, even though the need for an increase existed. The Reserve Bank has to finance and therefore has many obligations of its own. The important point is that through the agency of certain local banking institutions, the industry may borrow funds abroad at favourable interest rates. However, the banking institutions wanted the State to guarantee the funds which had been borrowed abroad in this way for the industry through the agency of these institutions. Therefore, there is no fundamental difference between a loan granted to the industry by the Reserve Bank—because after all, it is a Government institution and in any event is guaranteed—and the position that they are able to negotiate loans abroad through the agency of banking institutions, whilst the loans are still guaranteed by the State. However, it has additional advantages with which the hon. members will agree, viz. that if we can borrow the money abroad, then we have the advantage of the flow of overseas capital to South Africa. All we are doing, therefore, is merely extending the existing arrangement in respect of the authorization of the Reserve Bank to grant loans to an amount of R10 million so that the industry itself, through the board, may negotiate loans at banking institutions and so that I, as Minister of Economic Affairs, may do so with the consent of the Minister of Finance.

Mr. Speaker, the hon. the Minister of Economic Affairs has explained clause 8 to us. We on these benches have no problems with this clause. The hon. member for King William’s Town is an expert in this field and he said that I should accept clause 8 without any argument, and therefore I do that.

†We would like to thank the officials of the department for the very detailed explanatory memorandum which makes this legislation far easier for all of us to consume. This Bill is certainly a very mixed bag of tricks. My constituency does very well out of this Bill, as I shall show later on.

It is correct that the S.A. Reserve Bank guarantees foreign liabilities of Rand Bank. We in the SAP approve of that and as far as we are concerned the remarks made by the hon. member for Yeoville in that regard are quite correct. It is vital that South African banks at all times enjoy the reputation of being as solid as the Rock of Gibraltar in the eyes of the overseas world and all countries that we deal with. This sort of action by the Reserve Bank enhances the reputation of South Africa overseas and locally.

This Bill has many important clauses, but the clause which is of particular importance to me is clause 5, as it enhances the status of the College for Advanced Technical Education in Port Elizabeth by establishing it as a college with autonomous status from 1 April 1977. I am pleased to see that the hon. the Minister of National Education is here and is listening to this. The Port Elizabeth college has now got the same status as the colleges in Johannesburg, Cape Town, Durban, Pretoria and the Vaal Triangle. This step has been taken because of the very high standard that has been set by the Port Elizabeth college. This college falls in my constituency and I would like to take this opportunity of congratulating the rector, the council, staff and students on their magnificent achievement over the last few years on their campus at Summerstrand and also in the few years before that.

However, I would like to ask the hon. the Minister of Finance for a little bit of assistance. I want to motivate it very briefly, because I do not intend speaking during the Committee Stage. This college is getting free of charge 28 ha of prime ground. The municipal valuation of the property is just over R143 000. The market value would be in the vicinity of R1 million. It also has R4,9 million’s worth of buildings, and fixtures and fittings worth more than R600 000. This is where my problem lies. There are about 2 000 students attending this particular college, students who come from inside and outside the Republic of South Africa. This is a very popular college. But there is a hostel which can accommodate only 120 students on the campus of the college. The hostel accommodation is totally inadequate, and this particular year they had a waiting list of 98 students. Furthermore, many students did not even put their names down on the waiting list, because they saw that it was an impossible situation. From next year the college is going to hire two buildings. These buildings are far away from the campus, but these will be used to bridge the situation. I know we are living in tight financial times, but my appeal to the hon. the Minister is that it is absolutely essential that the hon. the Minister asks the Treasury to look at the situation in depth and sympathetically. I appreciate that the hon. the Minister cannot give me an answer in this debate, but all I would like from him is the assurance that he will ask the Treasury to give this matter serious and sympathetic consideration. That is all I am asking of him.

Lastly I would like to join the hon. member for Yeoville in regard to clause 6, by also asking the hon. the Minister of Finance for some information about the International Development Association. We are contributing many millions of rands in this way to less developed countries and we would like to know from the hon. the Minister which countries they are and in what respect they are using the funds. I would also like to know from the hon. the Minister: Can we not rather use those funds in South Africa for our less privileged people? Unless, of course there is a commitment we have to honour, but I am not aware of such a commitment.

Sir, we shall support this legislation.

Mr. Speaker, the hon. member for Constantia asks, in relation to clause 2—that is the guarantee given by the Reserve Bank in respect of Rand Bank—what the position is and what the chances are of incurring losses against this guarantee. My information is that most of the liabilities take the form of guarantees where the primary debtor is sound, and therefore no loss is expected there. There are, however, foreign deposits to the amount of approximately R15 million, and it will depend on the ultimate success of the curator whether any loss is incurred in this respect. It is very difficult to take the matter further, because the curator—as the hon. member will know—is doing this job very thoroughly. I think he is reasonably happy with the position as it is at the moment. I shall have to ask the hon. member to give me a little more time so that I can inform him later when I have something more definite, but that is the position as we see it at the moment.

The hon. member for Yeoville also addressed himself to this particular clause. He referred to the Bank for International Settlements’ figure of $7½ billion, being the alleged total indebtedness of South African banks. The hon. member asked me for my view on that. The hon. member also raised the question of the Government’s role in respect of banks in South Africa and the question of the granting of guarantees, i.e. when to give guarantees and when to withhold giving guarantees. The hon. member will appreciate that he has raised an extremely wide subject. Generally speaking, of course, the official role the Government plays in our whole banking system is according to the provisions of the Reserve Bank Act and the Banks Act. Of course one would have to look very thoroughly at those legal instruments in order to see precisely how far discretion on the side of the Government goes. At the moment I would not like to comment now on this question of the indebtedness of South African banks. I would like to have more information in this respect. I would suggest to the hon. member that we refer the matter to the Reserve Bank and to the Registrar of Banks so as to obtain a considered view on that, together with any other relevant information that might apply. I shall be happy to pass the information on to the hon. member as soon as I receive it.

In regard to the question of guarantees and the granting of guarantees, it is very difficult to generalize on a matter like this. I think the hon. member will appreciate that this is something which is done merely on an ad hoc basis, on the merits of the case that comes before one. Take Glen Anil, for example. There we had a consortium of banks. Those banks wanted a very substantial guarantee. It might in fact have run up to an amount of perhaps R100 million, or near it. The Government felt that it could not grant that type of guarantee, having regard to all the facts and in the light of a very thorough investigation which the Reserve Bank made. What we did, as the hon. member knows, was to give a very limited guarantee. I think it was R5 million. I cannot remember the precise figure, but much less than the R5 million was in fact involved. We did that in order to give more time for the whole position of Glen Anil and of the consortium of banks to be thoroughly investigated by the Reserve Bank. We felt that an investigation might take up to two months to complete. In order to avoid the chance of Glen Anil collapsing in the meantime, we felt that we had no option. I think it was less than R2 million that was in fact involved in the end. However, that is an instance where we had to do the thing on the basis of an ad hoc inquiry arising from an ad hoc problem.

The case of Rand Bank, I think, is another instance of a bank which suddenly experienced difficulties. It was felt that in respect of its foreign liabilities, the Reserve Bank ought to grant this type of guarantee for reasons which I think are generally supported in this House. However, here again we might possibly benefit by looking at the issues, particularly in relation to the amended legislation we had during the last year or two. The Registrar of Banks, in particular, has been paying very close attention to the whole question of our banking business and of the Government’s particular role in it. We will keep that under close supervision. I will refer this particular issue to the Registrar of Financial Institutions and indeed to the Governor of the Reserve Bank.

Mr. Speaker, may I ask the hon. the Minister—before he leaves this particular topic—whether or not he is in a position to say at the moment to what extent the banks themselves are exposed to the exchange risk in respect of this amount of $7,62 billion? In other words, how much is the Reserve Bank covering and how much are they perhaps covering elsewhere, and how much are they themselves exposing themselves to a foreign currency risk?

Mr. Speaker, I shall make a note of that. I simply could not answer that on the facts I have now, but I will certainly obtain that information.

Then I think the hon. member also raised clause 6, in relation to the question of the International Development Association. I have taken note of his remarks about what some of the recipient countries might or might not be doing with some of the funds. I can only say that we are committed. I am afraid we are committed. We are in fact committed to this payment and to three more ahead. That goes back to an earlier date. We cannot really get out of that commitment, but I can assure the hon. member, in the light of the way things have been developing more recently, that we are taking a very critical view, not only of this sort of assistance, but of certain others as well. That is very definite. However, on this particular point we will have to meet this commitment. There is no way out there.

In connection with clause 11 I took note of the hon. member’s reference to the Transkei and to the matter affecting radio transmitters. With regard to clause 7 I think I skipped the question of the local loan fund for small local authorities. This is a very useful instrument, and the local authorities make very good use of it through the Public Debt Commissioners. However, with regard to the problem which the hon. member has raised, the possible problem that some of these local authorities tend to go on the capital market while it may not always be quite convenient, or the timing might not be correct, etc., I can inform him that this matter is being looked into carefully, amongst other things, by the committee under the Secretary for Finance which is investigating the finances of municipalities and local authorities. Therefore this matter is under close examination, and we hope to be able to report on that in the not too distant future.

The hon. member for Walmer raised the question under clause 5 of the College for Advanced Technical Education in Port Elizabeth. His specific request to me was in regard to the lack of hostel accommodation, whether we could do anything about it. The hon. member did, of course, refer to the rather tight financial situation in general and our budgetary problems, but in the light of his request I shall certainly discuss this matter with the Treasury officials and I shall get in touch with him. He will appreciate that I cannot commit myself now, but we shall certainly do that exercise and I shall follow it up with him.

I believe that I have now replied to all the specific points which have been raised.

Question agreed to.

Bill read a Second Time.

Committee Stage

Clause 8:

Mr. Chairman, at Second Reading I asked the hon. the Minister why additional loan money was required by the Canning Export Board, how much was involved in the loan and how much was involved in the Government’s guarantee. I particularly wanted to know—and it is a pity the hon. the Minister of Economic Affairs is not here—whether this additional loan money for the board is required to finance finished stocks which may be building up in the industry and are difficult to dispose of. Is the fruit canning industry in a completely healthy state in this regard? Is this money required for a viable industry or is it required to help it out from what may be a difficult position, even though it may be a temporary difficult over-stocked position?

Mr. Chairman, I have no doubt that the industry is in a viable position, although it has this temporary problem. On the specific issue of stocks, the hon. member will have to give me the opportunity to obtain the specific figure in that connection. I shall pass it on to him. I do not have that particular figure in front of me now and I had rather hoped that the hon. the Minister of Economic Affairs might have had it with him. His difficulty is that he is required in the Other Place. If the hon. member will allow me, I shall obtain the information and let him have it as soon as possible.

Clause agreed to.

House Resumed:

Bill reported without amendment.

Bill read a Third Time.

Mr. Speaker, I move—

Copies of the draft Bill and the explanatory notes were made available to certain hon. members on both sides of the House before the Bill was read a First Time, to enable them to study these.

In addition to the customary clauses concerning the commencement of certain provisions contained in the schedules to the Bill, the proposed amendments embodied in the text of the Bill mainly provide for the implementation of surcharges; the acceptance of the principles of the Brussels definition of value for imported goods; the acceptance of the principles of article V1 of the General Agreement on Tariffs and Trade, 1948, in respect of the imposition of anti-dumping duties and countervailing duties; the conversion of certain annual licences issued once only; as well as provisions which have become necessary as a result of the substitution of ordinary customs or excise duty for the stamp duty on cigarettes and cigarette tobacco. In addition, the Bill contains a few minor amendments to the text of the principle Act.

The list of goods subject to a surcharge is being incorporated into the principal Act as part 4 of schedule No. 1.

During the Second Reading debate on the Appropriation Bill, I said in my reply that certain anomalies and problems had arisen with the introduction of the surcharge because it had not been possible to negotiate with commerse, industry and members of the public before the duty was introduced.

One of the more serious problems which I mentioned was the fact that the surcharge was also payable on imported goods which were to be exported again in some way or which formed a component of an article meant for exportation. This affected the competitive position of exporters in foreign markets. Since the Republic’s export trade would be prejudiced by this, I undertook to provide for a refund of the surcharge in respect of the imported components of articles meant for exportation.

Provision is being made in schedule No. 5 to this Bill for a refund of surcharge, subject to certain conditions, to exporters registered with the Secretary for Trade as approved exporters.

A further problem which was experienced by industry was the fact that certain raw materials which were imported were subject to a surcharge, while the final products for which the raw materials were used, if such final products were also imported, were not subject to the surcharge. In some cases this phenomenon had a prejudicial effect on the competitive position of local industries. Under the present financial circumstances it would be unwise to ignore this situation completely. Provision is therefore being made, in the notes to part 4 of schedule No. 1 to this Bill, for exemption of payment of surcharge on goods imported subject to certain conditions which the Secretary for Industries may allow by specific permit.

I want to emphasize once again that we must not lose sight of the fact that the base for the surcharge should be as wide as possible in order to obtain the necessary revenue. Applications for exemptions have been and further applications will be carefully screened and will only be granted in those cases where it is quite clear that the industry concerned would be seriously prejudiced if such exemption were not granted.

†In terms of Government Notice No. R.969 of 3 June 1977, the stamp duty on cigarettes and cigarette tobacco was replaced by an ordinary excise or customs duty, as the case may be. It has long been evident that the use of stamp labels was proving to be very costly, not only to the State but also to cigarette manufacturers. Printing costs for the Department of Customs and Excise amounted to approximately R230 000 for the financial year 1976-’77. More than 100 million stamps were printed annually and the control of these stamps caused considerable administrative costs to the Government Printer and to the Department of Posts and Telecommunications. Certain problems were also being experienced by cigarette manufacturers.

Instead of stamp labels, the packets of cigarettes will in future be embossed, during the manufacturing process, with a diamond-shaped impression embodying the letters SA. Packets of cigarette tobacco will, however, not be embossed.

It is anticipated that the first packets of cigarettes and cigarette tobacco without stamp labels will be available for sale by about mid-July. It will nevertheless be some months before all packets offered for sale are without stamp labels since it is not possible to withdraw all packets with stamps from the market.

I should like to stress that the abolishing of the stamp labels does not affect the existing rates of customs or excise duty payable on cigarettes or cigarette tobacco and that the effective duty has not been changed in any way.

Clauses 5 and 13 of the Bill give effect to the use of a stamp impression in lieu of stamp labels.

A very important matter which is being dealt with in the Amendment Bill is that of customs valuation. In view of its importance, I should like to deal with this at some length.

Originally the purpose of imposing customs duties was usually to raise revenue. For ease of collection, customs duties were mainly specific duties, i.e. they were levied at a fixed rate per unit of quantity.

After the First World War customs tariffs were recognized as useful instruments in the hands of governments, firstly for the protection of home industries and, secondly, for the conclusion of trade agreements. For these purposes specific rates of duty were less suitable than duties based on a percentage of the value of the goods, i.e. ad valorem duties, which therefore became more important.

The application of ad valorem duties is a more involved customs procedure than the application of specific duties and often results in disputes with importers and delays in the finalization of import transactions.

Owing to the difficulties experienced in international trade as a result of the application of ad valorem duties, the question was discussed at international conferences held in Geneva in 1927 and 1930 under the auspices of the League of Nations where international commercial circles pressed for action on the lack of equity of certain valuation procedures.

At a United Nations Conference on Trade and Employment, held in Geneva in 1947, agreement was reached on an international code of customs valuation which was embodied in Article VII of the General Agreement on Tariffs and Trade, signed in Geneva on 30 October 1947.

The Customs Co-operation Council was established in 1950 with its headquarters at Brussels. One of the functions of the council is the supervision of the operation of the Convention on the Valuation of Goods for Customs Purposes, 1950. The value definition subscribed to by the Customs Co-operation Council was drawn up under the principles of GATT and is commonly known as the Brussels definition of value.

After the Kennedy Round of Trade Negotiations during 1964-’67 a special working group drew up several principles and interpretative notes in order to give greater precision to Article VII.

In view of these developments the Minister of Finance agreed, during 1972, to the appointment of an Interdepartmental Committee on Customs Valuation whose members were drawn from the Board of Trade and Industries, the Department of Commerce, the Department of Industries and the Department of Customs and Excise.

The Committee had to inquire into and report on the current customs valuation provisions and practices with special reference to the Republic’s contractual obligations under GATT, the simplification of customs administration and the economic interests of the Republic and it had to make recommendations with regard to customs valuation.

The Committee recommended that the Brussels definition of value, which at that time was based on the price of the goods including cost, insurance and freight be implemented in the Republic.

After the Committee had submitted its report the Customs Co-operation Council amended the Brussels value definition to the effect that it could now be applied on either the “free-on-board” or the “cost, insurance and freight” basis. Organized commerce and industry objected to the Committee’s recommendation that customs valuation be applied on a “cost, insurance and freight” basis. After careful consideration, I have decided to accept the Brussels value definition on a “free-on-board” basis. All the other recommendations by the Committee, namely, that the valuation principles as applied by the Customs Co-operation Council be also applied in the Republic, are acceptable and are embodied in the Amending Bill as clauses 6, 20, 21, 22, 24 and 25.

*Mr. Speaker, the amendment to the value for customs duty purposes has forced us to take a new look at the statutory provision relating to anti-dumping duties as well, especially because the existing legislation is obsolete and its implementation has given rise to a great deal of criticism against the Republic.

During the Kennedy Round of Trade Negotiations from 1964 to 1967, the participating countries negotiated several agreements, including the Agreement on the Implementation of Article VI of GATT, better known as the Anti-dumping Code. The purpose of the code is to interpret the provisions of article VI of GATT, which sets out procedures relating to the levying of anti-dumping duties and countervailing duties.

During June 1967, the agreement was thrown open to contracting parties for signing. All the developed countries, except Australia, New Zealand and the Republic, accepted the agreement within the first year of its being thrown open for signing.

Since then, the industrial countries which have already accepted the Anti-dumping Code have tried to bring pressure to bear on the Republic to accept the code. In November 1971, South Africa was formally requested by the Director-General of GATT to explain why it had not yet accepted the Anti-dumping Code. In explanation it was indicated, amongst other things, that an interdepartmental committee was investigating South Africa’s valuation for customs purposes and that attention would also be given to the Republic’s antidumping procedures.

The committee recommended that the legal provisions regarding anti-dumping measures and countervailing duties be amended in the light of the provisions of section VI of GATT.

The recommendations of the committee were circulated among all commercial and industrial organizations in the Republic for their comment. No objection was received from these organizations. The Departments of Industries and of Customs and Excise, as well as the Board of Trade and Industries, also accept the necessity for implementing the recommendations.

Clauses 15 to 18 of the Bill give effect to the recommendations made by the interdepartmental committee. In this connection I should like to draw hon. members’ attention to clause 18, in terms of which I may, on the recommendation of the Board of Trade and Industries, by notice in the Gazette impose a provisional charge to anti-dumping duty for a period not exceeding three months. The period may be extended for a further three months if this is requested by the importer or exporter concerned. The investigation of complaints concerning dumping is time-consuming, and if an anti-dumping duty is only levied after a period of months, the importer who has lodged the complaint may have been seriously prejudiced in the meantime. This provision removes that possibility.

As regards the imposition of countervailing duties as contained in clause 17, I should like to mention that the word “countervailing duty” may be unknown, but that this is by no means an unknown concept. The countervailing duties are presently described in section 55 of the Customs and Excise Act, 1964, as, for example, “bounty anti-dumping duty” and “freight anti-dumping duty”. The statutory provisions relating to anti-dumping and countervailing duties are being revised to bring them into line with the principles of GATT. These provisions will come into operation on 1 January 1978, as will the new provisions relating to valuation.

As far as clause 19 is concerned, I just want to point out to hon. members that this provision, in terms of which any person who, for reward, makes entry of any goods on behalf of an importer or exporter, must be licensed, is being introduced at the request of the clearing agents.

Clause 23 relates to the value for sales duty purposes. In section 70(1) of the principal Act, the sales duty value in respect of imported goods is linked to the value for customs purposes. This section must be amended as a result of the amendment to the basis of valuation for customs purposes which has already been mentioned, and this will also come into operation on 1 January 1978.

Since the introduction of sales duty in 1969, the Department of Customs and Excise has, in terms of section 70(2) and (3) of the principal Act, determined values for sales duty purposes for the various categories of industries involved. Where necessary, valuations were formulated in accordance with the circumstances of an industry. Such an adjustment was also made in respect of imported and locally manufactured precious and semi-precious stones and jewellery. Because of the special circumstances of this industry, it is desirable that separate statutory provision be made for a sales duty valuation which will apply only in respect of this industry. This has been provided for in clause 23(1)(b), and it will come into operation on 1 October 1977.

In view of representations which have been received during the past 24 hours in connection with clauses 23(1)(c) and (2)(b), in so far as they relate to the proposed section 70(3)(b), and the retrospective effect that is being given to it, I shall move in the Committee Stage that clause 23(2) be amended to provide for the whole proposed section 70(3) to come into operation on 1 October 1977. Clause 23(2)(b) will be deleted.

†Section 114 of the principal Act provides for a lien on certain goods if the duty and other charges are not paid on or before the prescribed date. In order to ensure the effective application of this provision it is proposed in clause 36 that section 114 of the principal Act be extended to provide that any plant or stills subject to a lien may not be removed from the premises where they have been found or from the place of security to which they have been removed in terms of the existing provisions.

In terms of the provisions of the principal Act all customs and excise warehouses must be licensed. The licences are renewable annually and the licence fees payable are prescribed in schedule No. 8 to that Act. The annual renewal of these licences at present causes a considerable amount of work to the Department of Customs and Excise, especially as far as the licensing of manufacturers of sales duty goods is concerned. It is proposed that the licences for customs and excise warehouses be issued once only, in other words, they need not be renewed annually. Although this proposal will result in a loss of a small amount of revenue, the saving in administrative costs is of greater importance.

It is proposed that schedule No. 8 to the Bill come into operation on 1 January, 1978.

Mr. Speaker, once again I should like to thank the hon. the Minister and the officials of his department for the explanatory memorandum that has been in our possession for the last week or two in regard to this Bill. I appreciate that this explanatory memorandum must have caused a lot of additional work to his department and I should like him to know that it is very helpful to us members of the Opposition and probably to all members of the House.

On this occasion the Customs and Excise Bill is a rather longer document than usual and I regard it as probably a more important Bill than we usually get each year. This year it contains provisions dealing with containerization. It introduces the new international basis for valuations for duty purposes. It amends the provisions that previously existed as far as countervailing and anti-dumping duties are concerned. It introduces a system of licensing for clearing agents. It introduces the customs duty surcharge. There are also other provisions which, while not being as important, are still noteworthy. Besides this, there are attached to the Bill voluminous schedules of amendments which contain, inter alia, the budget’s customs duty, excise duty and sales duty taxation proposals.

As I have said, this is an important measure and I regard it as rather unfortunate, first of all, that it is being rushed through at the end of the session. Although there has been discussion on certain aspects of this Bill with organized commerce, certainly not all aspects of the Bill have been discussed with chambers of commerce and the Sakekamer. In fact, the Bill itself was issued only two days ago and many chambers of commerce and others have not yet had an opportunity of studying it. Secondly, I should like to say that, seeing that the time for this debate is so limited while it is a measure containing a lot of important provisions, we shall obviously not be able to deal with every provision in the Bill and I shall have to confine myself to those with which we find ourselves not in agreement. I shall have to leave out any discussion of those with which we do agree.

First, I should like to deal with clause 11 which empowers the hon. the Minister to amend between sessions the customs duties contained in Part 1 of Schedule 1 and the surcharge on customs duties contained in Part 4 of the same Schedule when—and I quote—

Up to now the Minister’s powers to amend customs duties contained in Part 1 have been circumscribed by certain conditions in the Act, the most important one being that a board of trade’s recommendation is required before an amendment to the customs tariffs could be effected. In other words, Sir, up to now this power has been exercised primarily to protect South African industries against competition from imports. The new power provided in clause 11 is an altogether different kettle of fish. This new power is extremely wide. Its purpose can be interpreted either that it is a deliberate taxation measure which is being placed in the hands of the Minister or that it is a measure to enable the Minister to regulate the economy something along the lines which was recommended by the Franzsen Commission some years ago, in the sense that the hon. the Minister is empowered to raise customs duty in order to take money out of circulation when the economy needs damping and, vice versa, to put it back into circulation when the economy needs stimulation. I do not believe the purpose of this clause is the second alternative, namely an instrument to regulate the economy, because if it were such, to carry on the thinking of the Franzsen Commission and its recommendations it would be necessary to sterilize any funds taken out of the economy raised by taxation in this manner. I cannot visualize the hon. the Minister doing that in the present circumstances, when he is scratching for money to balance the budget.

This provision, therefore, must be regarded as a taxation measure. It is following on the power taken by the hon. the Minister last year when he took power to amend sales duties and excise duties between sessions. I think there was more reason last year for granting the hon. the Minister that power in respect of sales duties and excise duties, because excise duties cover those items which traditionally are changed in a budget. The fact that the hon. the Minister was given power to increase these duties between sessions gave him an instrument whereby he could anticipate and to some extent prevent speculation beating the gun in regard to purchases of items which are likely to carry higher duties in a budget.

However, I do not think that same set of circumstances applies to this year’s provision. This provision is giving the hon. the Minister the power to increase the whole spectrum of customs duties, and I think it can hardly be the case that members of the public would before a budget anticipate increased customs duties over such a wide range of goods for which power is taken in this provision.

I would like to say that we on this side of the House take the strongest exception to the hon. the Minister taking these powers which are aimed primarily at raising revenue by taxation and using Parliament merely as a rubber stamp. This is usurping a fundamental responsibility of Parliament, one that only Parliament should exercise and one that Parliament should not delegate, namely the fixing of taxation. I know there are countries in the world where power to alter taxes between sessions is given to the Government, but those countries are few in number and, furthermore, the power to change taxation is usually very strictly circumscribed.

We regard the taxing authority of Parliament as being a fundamental part of the democratic process, and for that reason, merely because of the inclusion of this power in the Bill, we would oppose the Bill. But there are other reasons as well why we will oppose the Second Reading of the Bill.

The other provision in the main body of the Bill that we consider requires amending, is the new proposed section 64B as amended by clause 19 of the Bill. This deals with the licensing of clearing agents. We have no general problem in so far as the general concept of the licensing of clearing agents is concerned. Clearing agents do fulfil responsible duties and I think it is not unreasonable that they should operate subject to conditions and, if necessary, should provide security. What we do object to, however, is the power given to the Secretary whereby he can impose separate conditions in each case before licensing or approving a licence for a clearing agent. Surely conditions under which a clearing agent qualifies for a licence, should be the same for all people and for all clearing agents. What is more, the conditions should be made public and they should not be arbitrarily used by any one person, differently in each case as he sees fit. Therefore we shall be moving an amendment in this regard during the Committee Stage.

I now come to the schedules to the Bill. We find three of the main taxation proposals contained in these schedules to be unacceptable, and we shall be opposing them during the Committee Stage. The first one refers to the increased customs and excise duties on petrol and on petroleum products. We have already stated our opposition to this duty on more than one occasion. This is the duty that is designed to raise capital to finance Sasol 2. It is a highly inflationary measure and is introduced at a time when the Government should be taking steps to keep administered prices down and not taking steps which will have the effect of putting them up. Already the increased excise duty on petrol—the duty which has been in operation since January—is having its effect on the cost of living.

The second item in the schedule to which we are opposed, is the blanket increase in sales duties. This is another wholly inflationary step, particularly because it applies to all types of merchandise—to essentials as well as to non-essentials. This increase also is already having its effect on the cost of living. In the third place we most strongly oppose the 15% surcharge on customs duties on items which are not bound by Gatt. This is an indiscriminate tax in that it applies to all types of goods. It applies to consumer goods, to semi-processed goods, to raw materials and to plant and machinery. In effect, its effect is going to permeate and ripple right throughout the economy. In fact, it is so broad in its application that one can almost describe it as a partial devaluation.

Surely, it is not quite as bad as all that!

By now I would have thought that even the Minister should be aware, even though he did not seem to be aware at the time of the last devaluation, of the fact that devaluations are highly inflationary. This surcharge must also be highly inflationary. He aims to raise no less a sum than R400 million from this customs surcharge. By the time that surcharge reaches the public, it is being paid for by the public, it will have added on to it mark-ups in the distribution field, various manufacturing on-costs and overheads, with the result that I would expect it to cost the public certainly R600 million, possibly R800 million, by the time they pay for it. That is an enormous addition to the cost of living. If it is going to cost the public in the neighbourhood of R600 million—that is, 2% of the cost of living.

This Bill therefore contains three measures, all of which are highly inflationary, and when they are put together, they are already having an appreciable impact on the cost of living and on the country’s whole cost structure. They have caused and will continue to cause more hardship to the people of South Africa.

This is happening at a time when the country is calling for measures to keep prices down. It is calling for measures to keep prices down to help our exports, to improve our balance of payments, to provide a platform from which the economy can be stimulated. Measures such as these have exactly the opposite effect. For that reason we cannot support the measures that I have previously indicated we will oppose.

Mr. Speaker, when I listen to the hon. member for Constantia, and to the reasons why he and his party are opposing this Bill, the question occurs to me as to whether or not this hon. member is really in favour of certain projects being undertaken in South Africa, projects which eventually, in the long term, will have very good results and a positive effect on the country’s economy, as well as on its balance of payments. The hon. member for Constantia is opposing this legislation primarily because he is of the opinion that it affords the hon. the Minister the opportunity of altering or increasing excise duty, customs duty or sales duty between parliamentary sessions.

After all, we know that when budget day approaches, there is speculation in the Press. The hon. member conceded that the excise duty and the sales duty or the customs duty are changed to some extent every year. As a result, speculation and hoarding takes place before budget day. I think that if one were to ask for them, the department could possibly furnish us with some very interesting figures, figures relating to the total amount of hoarding by individuals as well as commerce—people who buy in time so as to save and by so doing rob the Treasury of a considerable amount of money.

Secondly, the hon. member for Constantia says that the right the hon. the Minister is now getting, means that Parliament is being divested of its right and that Parliament is now becoming merely a rubber stamp. The hon. member alleged that Parliament’s authority was being diminished by this legislation. But we know two things. The first is that if he deems it necessary to alter or increase the excise, customs or sales duty, the hon. the Minister of Finance approaches his colleagues in the Cabinet, the executive, and discusses the matter with them. He motivates his standpoint and then obtains the necessary leave from the Cabinet to do so. After all, the hon. the Minister—or the Secretary of his department—is not going to say to his wife on an ad hoc basis this evening:“I really feel like raising the tax tomorrow.” He does not say a thing like that and then put it into effect the next day. Things do not happen that way. There is order in the method which is followed. Moreover, Parliament always has the right to discuss the matter. It is not being divested of that right. What is more, no Minister of Finance would be so irresponsible as to increase this type of tax in an uncontrolled manner and unnecessarily, simply to get some money, and no Secretary of Customs and Excise would be so irresponsible as to advise him to do so, because there is such a thing as the consumer at large who, through his organizations and public representatives, would object if this was done to him unnecessarily and unfairly.

The hon. member raised a third objection, viz. the additional two cents per litre which is now being levied on petrol to finance Sasol 2. I am amazed that the hon. member and his party really want to wreck this chance of developing Sasol 2. They are telling the motorist that this measure means that he has to pay heavily for an industry which is not really of any benefit to him. I want to ask the hon. member a question: If we do not collect the additional two cents in this way, where does he think we will get the money? Or should we abandon Sasol 2, or leave it half completed? Earlier this year the principle was laid down that more of our government corporations should generate local capital, use their own funds for development and not rely so heavily on foreign loans.

My final point of criticism of the hon. member for Constantia is that he objected to the surcharge of 15% on imported goods. Hopefully R400 million will be collected by means of that surcharge. If he were to do away with that surcharge, where would we get the R400 million? In the budget speech of the hon. the Minister of Finance which he made on 30 March he said—

The hon. the Minister still has to find R1,555 million, after he has made all his other calculations. In addition he went on to say—

That is why he has decided on, inter alia, this levy of 15% on imported goods. Apart from that, we are living in the late 20th century, if I remember correctly, and the NP said many, many years ago, “South Africa first” and “buy South African and produce as many of our own articles as possible”. I view this as yet another attempt by the Government and by the hon. the Minister to provide a stimulus in this regard as well so that local industries may develop even further.

To that I just want to add that these excise levies, customs and sales duties are often unpopular. Often the consumer, the producer or the importer is somewhat upset, perhaps because the article he manufactures, or the product he makes, or the component of an article, has become subject to an excise levy or because a duty is being placed on it. Some of those people are often dissatisfied. I shall refer later to one group of people who are in fact dissatisfied. There are also some politicians who, for the sake of a few votes, make a tremendous song and dance about, inter alia, the sales duty which the hon. member for Constantia has also mentioned once again. If my memory does not fail me, I think that in the past financial year, quite a number of sales duty taxes have been cancelled, particularly on essential goods, whilst most sales duty has been retained on more luxurious goods. There are some people, in this House as well, who would have the consumer believe that he is being treated unfairly in respect of the sales duty on the article. However, there is also often bona fide concern, particularly amongst producers, that such excise increases could have an adverse effect on their products. With your leave, Mr. Speaker, I should like to dwell on this for a moment a little later.

I want to say two things this afternoon. Firstly, I want to state that all the steps which the hon. the Minister is envisaging and taking by means of this Bill, are not being taken with the deliberate aim of dealing a blow to the manufacturer, producer, consumer or importer or to harm his business. Why should the hon. the Minister want to do that? Nor is the hon. the Minister doing so to put a damper on imports and exports. On the contrary, I infer from the hon. the Minister’s Second Reading speech that six important arrangements are being made in respect of customs duties and related matters. One of these is that by way of certain steps, the hon. the Minister is improving the South African exporters’ competitive position abroad. The hon. the Minister is undertaking now, as he promised, to make provision for a repayment of the surcharge in respect of the imported components of articles which are exported. I do not think he has any intention of putting a damper on our import and export trade and its development. Nor is it his intention in taking these steps to shirk his international agreements, but in fact to honour them. In fact we heard in his Second Reading speech about the so-called Brussels definition of value and the consequent GATT arrangements such as the anti-dumping code in clauses 5 and 18.

However, I am still concerned about excise duty and I should like to dwell on it for a moment. The hon. the Minister of Finance is not in the dark in this regard because organized agriculture and the wine industry, through the agency of the KWV, have spoken to him and explained their problem to him. That is why, just for the record, I am briefly going to outline their problem and standpoint. The wine industry realizes the necessity for the State to obtain greater revenue from internal sources because the State has had balance of payment problems—fortunately to a lesser extent at present—and also because obtaining long-term loan capital from abroad has become more difficult. However, we cannot deny the fact that excise duty has had a negative effect on the product of the vine. The hike in excise duty on natural wines—I think it is 5,68 cents per litre—is cause for concern because this product is price sensitive and the turnover will most probably be adversely affected. The producer is not directly affected by the sales of light wine, but it is feared—and it will probably happen—that the purchase of good wine, on which the producer earns at least R20,80 per hectolitre, could diminish drastically. That would entail that this wine, which is produced as good wine, would be sold as distilling wine at R12,12 per hectolitre. That would entail a consequent loss of at least 42% in revenue and it is therefore inevitable that the producers will not be able to sell wine which has been produced as good wine at the price of good wine.

In conclusion, I just want to say that the producer is also concerned about the long-term future of this industry. We know that many years ago, when our present Prime Minister was still the Minister of Justice, the Malan Commission conducted an investigation into the marketing of the product of the vine. At that time the Government accepted the policy—and expressed itself accordingly— that the drinking pattern in South Africa would have to be guided towards the consumption of natural wines. That is the idea that was conveyed by the Government a number of years ago. I believe that that is still the standpoint today. That is why we are grateful to be able to ask at this juncture—and I am doing so on behalf of all the wine farmers and the economic set-up of the entire Western Cape—that a little attention be given to this matter once again.

Mr. Speaker, I want to start off by saying that I also want to express my thanks to those responsible for having seen to it that we received a very detailed explanatory memorandum. I think that this type of legislation is so complex, at the best of times, that with the assistance of these memoranda one is much more easily able to deal with it. I therefore want to express my thanks for this. I should also like to express my thanks to the commissioner for his willingness, at all times, to receive representations. One had a further example of it in regard to this piece of legislation when the people affected—and not only they themselves—made representations about the retrospectivity provision contained in clause 23, such representations having been made in the very recent past. When I also made representations, such representations were, as usual, very courteously received, and I am indebted to him for his consistently courteous approach to the problems I put to him. I want to say here and now that being in charge of customs and excise in South Africa is no easy task. It is a most complex and involved problem, and on top of that there is no shortage of people who try to find ways of circumventing the law and escaping the payment of duties. This is therefore a very difficult task that the Commissioner discharges, and I am sure that his efforts are appreciated. I do, of course, have one difficulty with the hon. the Minister because, having made my representations requesting that this retrospectivity should be removed, and not knowing what the answer would be, I prepared an amendment to the Second Reading which stated, inter alia, that this was a piece of legislation which sought to tax retrospectively in a manner which could cause ruin to a number of traders and manufacturers and so result in further unemployment.

Quite obviously that is an amendment which, in the light of the hon. the Minister’s undertakings, I cannot move, and I want to express my thanks to him—and, in fact, the thanks of the trade involved—for having agreed to move this amendment since the existence of that provision in the Act would have caused tremendous hardship. I think that the trade must obviously be appreciative of this undertaking by the hon. the Minister to move this amendment doing away with the retrospectivity.

I do not want to deal at great length with the matter the hon. member for Constantia raised because there is very little time in this debate. I shall therefore try to be as concise as I can about the issue. The provisions that are enacted here for the increase of sales duties and the imposition of the import surcharge, as announced in the budget, have already been debated at some length. I therefore do not want to debate them at length again. In our view the provisions are inflationary and are imposed at a time when living standards have already been substantially eroded. The effect has also been to reduce consumer demand. The import surcharge, in particular, has of course had a favourable effect on the balance of payments problem, and I do think, in fairness, that one should mention that. There is, of course, as a result of the economic situation already a substantial under-utilization of local productive capacity to the extent that in fact a further reduction of demand has been brought about for locally manufactured goods. This has aggravated the unemployment situation and has therefore of course resulted in more unemployment at a time when we cannot afford it. The Government by these measures is deliberately keeping the country in a recessionary state. It is conscious of the fact that any general stimulation of the economy will in the absence of a greater foreign capital inflow create more balance of payments problems. We realize that this is what motivates the Government, but at the same time we appreciate that in existing circumstances this imposes a very heavy burden on the community. Therefore we cannot support these measures.

In regard to the more technical aspects, I should like to raise with the hon. the Minister the fact that he indicated in his speech that in regard to the change in the basis of value for duty purposes he acted, as he said, consequent upon representations made by commerce and industry. Yet I read in last night’s Argus a statement by the Cape Town Chamber of Commerce in which they expressed their fears of this legislation, having a considerable impact on prices. It will change the basis on which customs duties are charged, and they say it will be rushed through Parliament before business organizations throughout South Africa have had an opportunity to consider it and express their views. I do not want to read the rest of the article, but I should like to ask the hon. the Minister whether in respect of the provisions of this Bill there was consultation, what the extent of that consultation was and whether it is not possible to consult to a greater extent in respect of this type of legislation before we in fact debate it in the House.

This will result in this sort of last-minute representation, causing changes to be made in the Bill, falling away. One will then be able to deal with this type of legislation far more effectively.

The second point which I should like to raise is that having established a new basis of valuation and having used this concept of the normal price, one of the problems which arises is that this does not only apply to the customs duty, but applies to other duties including sales tax and the effect will be, as I understand it, that in fact a duty will be paid on a higher amount. Therefore a higher duty will in fact be paid. The Exchequer will receive more and the public will feel an even greater inflationary impact not only because of increases in duty, but because of the change in the basis on which the duty is assessed.

Then I should like to touch on a matter which I think is again of a technical nature, but which is I think important to the trade. That is clause 21 of this Bill which substitutes section 66 of the principal Act. In the new section 66 the concept of a normal price is set out. It is said there that it should be a price which is not influenced by any commercial, financial or other relationship, whether by contract or otherwise, between the seller or any person associated in business with him, and the buyer, or any person associated in business with him, other than the relationship created by the sale itself. In subsection (2) it is said that two persons shall be deemed to be associated in business with each other if, whether directly or indirectly, either of them has any interest in the business or property of the other or both of them have a common interest in any business or property or any third person has an interest in the business or property of both of them. I would ask the hon. the Minister, with respect, to pay some heed to this problem because the effect of this section is that if a buyer and a seller, for example, both have shares of a minimal amount in a public company unrelated to the trade in which they are involved, they are deemed in fact to have a business relationship and this provision then comes into being. The result of this is that you are creating relationships and you are effecting a price situation in matters which are entirely unconnected with the business which they transact.

Nobody is listening to you!

Well, Sir, it is important to the business world if not to that hon. member.

The second point which arises here is that if for example two persons have shares in another venture, even though it is unrelated to the sale and unrelated to the business which either of them is conducting, the effect is that this particular provision comes into operation. I wonder whether the hon. the Minister will not give attention to the provisions of section 66(2), as he now seeks to incorporate them, in order to remove this anomaly. I can understand the need for such provisions when there is, as there was in the American Swiss case, a situation where you have one company owned by a holding company selling to another company owned by the holding company, because this is clearly a direct business relationship and they can adjust the price as they like between them. That sort of situation I well understand. However, the provision has now been drawn up on such a broad basis that it will be casting a net to catch fish which really should not be caught in this particular set of circumstances.

I also want to deal with clause 23. I want to deal with the provisions of the new section 70(3)(b) as they are now going to be introduced. The difficulty I have with that is that this was the original concept which was introduced in 1969 by means of the letter which was written to the trade. However, the problem which arises here is that one cannot impose a duty which is to be the amount of the retail price less a third, when one has no control over that retail price when one is the manufacturer or the seller. If one does have control over it, then in fact the Monopolistic Conditions Act applies because then there will be a retail price maintenance. As a manufacturer or as a wholesaler, one cannot prescribe to a retailer what he should be charging the public. That is retail price maintenance. That is precisely the problem here, because in these circumstances one cannot say that the manufacturer must pay duty on a basis he is not connected with, because he does not know the price the retailer is eventually going to charge. In these circumstances one creates a problem. One is either going to force the manufacturer to tell the retailer what to charge, or retrospectively to find out what the price was, or in the end it is going to mean that one is going to invoke subsection (4), in terms of which the commissioner makes the final decision as to what the sale price is. Of course, that should only be brought into effect in circumstances where quite clearly it is an abnormal situation one cannot calculate. I want to ask the hon. the Minister to apply his mind and the efforts of his staff to this particular problem. I have little doubt that if the commissioner sits down with the trade and they negotiate a basis in terms of which a formula can be found, such a formula which is acceptable to everybody can be found in these particular circumstances.

I should also like to touch upon the countervailing duty and raise with the hon. the Minister the issue that we ourselves in South Africa give incentives in respect of exports. If that is done in these circumstances, are we not likely to have retaliatory action taken against our own exporters when they themselves receive incentives of a similar nature to those the hon. the Minister is concerned with?

Lastly I want to refer to the amendment to section 114. I think the hon. the Minister knows that this is a section which creates problems for the financial world. When somebody buys an article which is used for the purpose of manufacture and he has to pay sales duty on what he manufactures, very often the machine with which he manufactures is on hire purchase, on lease or is owned by somebody else. Yet that machine is in fact subject to a lien in favour of customs, while the man who owns it, who has the right to it either under the lease or under the hire purchase agreement, is in fact completely unaware of the fact that sales duty may not be paid in the circumstances. One can understand that when sales duty is evaded on certain articles, those articles should be forfeited to the State, but where the machine is the means of manufacturing those articles and it belongs to someone else, one really cannot justify that such a machine should be forfeited to the State.

As I have said, I do not want to enlarge upon the other matters which have already been raised by the hon. member for Constantia. Our difficulty is that there is so much in this piece of legislation which we regrettably cannot support that in the circumstances I have to move as an amendment—

Mr. Speaker, in the course of my speech I shall refer briefly to certain points which the hon. member for Yeoville and the hon. member for Constantia raised. I just want to discuss very briefly a few aspects of the Bill. When the hon. the Minister of Finance announced on 7 March in terms of Act No. 105 of 1976 that customs and excise duties on cigarettes and liquor were to be increased as from the day in question, and also announced that the scales of sales duty were to be raised by approximately 25%, he was certainly making a wise move. The hon. the Minister exercised this right with maximal effectiveness, despite the fears of the hon. member for Constantia. It has often happened in the past—the hon. member for Worcester has already referred to this—that pre-budget expectations of increased indirect tax in the budget, often gave rise to excessive purchases and hoarding of such goods. This accordingly resulted in the Government suffering heavy losses and is a luxury we can certainly no longer afford these days. The value of such goods sold in the pre-budget period, amounted to R29 million less than in the past. This indirect tax collection is certainly a sound way of collecting money for the Treasury. It is expected that by means of the increased excise duty on cigarettes, R23 million will be collected.

I find it strange, however, that members of the Opposition asked that the customs and excise duty on petrol, for example, should not be increased. The Opposition, and particularly the hon. member for Constantia, ought to know that this additional revenue will be utilized for the construction of Sasol 2. The hon. member must spell out to us whether he and his party oppose the building of Sasol 2. What priority do they give to the construction of Sasol 2? They simply want to be popular with the electorate. They are engaging in cheap politicking whilst they know that the Government is responsible for finding the revenue for the Treasury. It is not their responsibility and that is why they can come up with such irresponsible amendments. What is more, the increase of 25% in sales duty is also being opposed. I want to repeat that it is popular to oppose increased tariffs. However, they will have to tell us how else the R67 million which may be collected in this way, could be recovered.

I just want to refer to clauses 5 and 13, clauses which are aimed at saving on costs, not only for the cigarette manufacturers, but also for the department. These clauses relate to doing away with adhesive stamps on cigarette boxes, a method which has been in use for a long time. These stickers or stamps have created many problems for the manufacturers. Stamps which are accidentally damaged must be retained so that their value may be recovered from the department. With this new method, there will definitely be a new dispensation in the collection of excise duty on cigarettes.

I also want to refer to the anti-dumping measures which are aimed at protecting our own industries more effectively against dumping premiums and subsidies. I believe they will be generally accepted. However, the Opposition is clinging desperately to the belief that the measures in the Bill are not to the benefit of the country. At a time when we have to expand and protect our own industries, it is certainly necessary that these anti-dumping measures be streamlined and implemented speedily and effectively.

The Bill is comprehensive and will certainly result in many financial adaptations having to be made. The man in the street will also have to make certain adaptations. It is a simple fact that indirect tax affects the consumer specifically. It even has an influence on existing patterns of life. The consumer of such goods has two choices: Either he can use the article less or do without it entirely, or he may carry on as before, but be prepared to pay more for the article. Less or no smoking, less or more judicious use of liquor, less and better planned use of motor vehicles, etc., are going to entail quite a large saving for the man in the street. As far as our normal consumption habits are concerned, too, self-discipline is going to be the order of the day. Let us avail ourselves of the opportunity which the measures contained in the Bill afford us. Because we need these funds and because the levying of an indirect tax is a sound way of obtaining funds for the Treasury, we support this Bill.

Mr. Speaker, in the first place I would like to express our appreciation to the officials for the explanatory memorandum. This was a mammoth task, and I can assure them that studying the Bill without the memorandum would have been impossible.

In regard to clause 23 affecting the jewellery trade, I welcome the announcement that the retrospective clause is going to be scrapped in the Committee Stage. In that respect clause 23(2)(b), the first three lines on page 28, will be scrapped. The Jewellery Council of South Africa yesterday made urgent representations to me that the nine-year retrospective provision in clause 23(2)(b) would be absolutely disastrous for the industry. They felt that it could lead to bankruptcies, ruin and unemployment for many in the jewellery industry. I arranged for a copy of their written representations to be sent to the hon. the Minister of Finance as well as to the Secretary of Customs and Excise, Mr. Odendaal. As a result of the representations I would like to pay tribute to Mr. Odendaal publicly for the in-depth manner in which he dealt with this problem. Even though I was on to him constantly, he was exceptionally kind and understanding. He was also very understanding towards the representatives of the industry who made direct contact with him. On behalf of the Jewellery Council and everybody else in the industry we would like to record our appreciation to the hon. the Minister and to Mr. Odendaal for averting a crisis in the industry and for their full co-operation. I would be wrong today if I did not thank the hon. the Minister’s private secretary, who had me on his back for the last 24 hours virtually every few minutes. I appreciate the fact that he, too, was so patient. The hon. the Minister is to be commended on the amendment that he will introduce in this regard during the Committee Stage.

I have certain reservations about the value clause, but I am not going to refer to those reservations at this stage. Despite the concessions that the hon. the Minister has made, we on this side unfortunately find ourselves unable to support this Bill. Last year in clause 8 of a similar Bill, the hon. the Minister introduced the principle of taxation without representation. The hon. the Minister on that occasion took power to increase excise and sales duty during the parliamentary recess. Any increase was thereafter to be referred to Parliament at its next session as an accomplished fact. We opposed that principle last year. This year the hon. the Minister is really going to the extreme by asking us to extend the powers of the Minister of Finance to schedule No. 1. Under part 4 to schedule 1 the hon. the Minister imposes a surcharge of 15% on imported goods, other than those bound by Gatt. After this legislation has been accepted, the hon. the Minister will have the power to increase the duty payable on items which fall under part 4, by further percentage without referring to Parliament at all. After taking this unilateral action and “nadat die koeël deur die kerk is”, then only the hon. the Minister comes to Parliament for confirmation.

The hon. the Minister is, in fact, asking us today for a blank cheque, for a general power of attorney, and making a rubber stamp of us in the end. This we cannot support under any circumstances. This instrument of varying tax between sessions is a wrong principle. Because of the Gatt restriction the tax base is far too narrow and the tax will penalize certain industries extremely. Naturally we urge all South Africans to buy South African goods at all times.

I come from a city where 50%, or perhaps more than 50%, of the industrial development is related to the motor industry. In these schedules I see that there are increases to certain component parts of motor vehicles and also an increase of the petrol price. I want to urge the hon. the Minister—whatever he does—not to make a milking cow out of the motor industry, because Port Elizabeth and its environments are dependent on the motor industry.

Well done.

I am pleased the hon. member for Umhlanga thinks that I have done well. Now I am worried that I might in fact be doing badly! [Interjections.] I know that the component industry is entitled to assistance and I know that the local content programme for the motor industry is important. However, in view of the delicate situation in the motor industry, I would like the assurance from the hon. the Minister of Finance and from his colleague, the hon. the Minister of Economic Affairs, that they will consult with the motor industry to the very closest whenever they want to impose any of these increases.

I know time is of the essence, but I wish to make two other points. I think it seems reasonable to go onto the Brussels definition of value, which is equal to the free-on-board price. In the past the department worked on the free-on-board price or on the current domestic value, whichever yielded the highest amount of duty. It will be easier to collect, because it eliminates the dual concept, but it is difficult to assess in practice whether this concept is going to yield more or less duty. Perhaps the hon. the Minister would like to hazard a guess by telling us whether it would yield more or less duty. I want to make it very clear that we of the SAP want Sasol 2 built. We believe it to be urgent that Sasol 2 should be built as fast as possible. That is our standpoint, in contradistinction with my colleagues in the official Opposition. We also believe the hon. the Minister of Finance is capable of finding the necessary finance, either in the local market or abroad. We oppose the increase in the petrol price, firstly because it is extremely inflationary and people simply cannot make ends meet. In the second place, not all of the increases will go towards the building of Sasol 2 and, thirdly, the increase in the petrol price will again cause a ripple in the motor industry, which will be most unfortunate, because the motor industry is going through a very difficult stage already.

For the reasons I have advanced and for others, we shall oppose this particular Bill during Second Reading. I must say that we find no difficulty in supporting the amendment of the hon. member for Yeoville.

Mr. Speaker, I want to deal very briefly with a very small, but, I believe, vitally important aspect of this measure. It is a matter which affects thousands and thousands of individuals as well as all universities in the country, many schools and, of course, the entire book trade. I refer to the 15% levy, duty, which is going to be imposed on imported books and periodicals. I want to appeal to the hon. the Minister very seriously to think again about this tax on knowledge. I appeal to the hon. the Minister not only as Minister of Finance, but also as a former university teacher who will know the place and the value of books in the life of universities. This is something which is worrying a lot of people very much indeed. One only has to look at the correspondence columns of the newspapers to realize this. I myself have had various representations in this regard. I have here an example of the kind of protest which has come from universities. This comes from a man called Grutter. He wrote from Cape Town in Die Burger of a week or two ago. He wrote the following—

*He continued—

Regering se bedoeling met die heffing was om die vrye verkeer van boeke en kennis op hierdie wyse te strem.

Mr. Speaker, it goes much further than this. In another letter in Die Burger Dr. Arnold Brümmer referred to two earlier letters on the subject, and said—

That is what the academics say. I think we should take note of that. I also have a number of letters here from other people, letters from businessmen, from teachers, etc. Unfortunately I do not have the time to pursue the matter any further. I only want to make one last statement.

†Mr. Speaker, this is the effect which this levy is likely to have on certain sections of the book trade. I know that the Book Trade Association has made certain representations to the hon. the Minister. However, there is another aspect which directly affects companies who are importers and stockers and wholesalers of books. One of them has written to me. I think he has also written to the hon. the Minister’s department. In this letter he writes—

And this is the significant point—

I do not know whether this is overstating the case, but he certainly goes on to make a compelling argument out of this. He says—

This seems to me to be an inordinate price to pay for what the hon. the Minister is hoping to get out of it. I cannot believe that the hon. the Minister and his advisers could have foreseen at least some of the possible consequences, and yet done nothing about it. Under these circumstances I would seriously appeal to the hon. the Minister, even at this twelfth hour, to review his decision. I would suggest to him that the game is simply not worth the candle.

Mr. Speaker, in the first place I want to refer briefly to the question raised by the hon. member for Worcester. He apologized for his absence. Unfortunately, he has an appointment. It is in fact correct that the percentual increase in the excise duty on unfortified wine which was announced in March, is higher than the increase in the excise duty on all kinds of wines, and even on spirits. The increase in this case was approximately 4c per bottle, as against approximately 2c per bottle in the case of fortified wine.

One should, however, keep in mind that the excise duty on unfortified wine has not been increased for many years, whereas the excise duty on fortified wine was increased four times in the past few years. If this increase is taken into account, it becomes clear that the excise duty on unfortified wine is still relatively low.

I also want to thank the hon. member for Gezina most sincerely for his support of this Bill. As regards the hon. Opposition, I want to refer in the first place to the hon. member for Constantia. He started at clause 11 and objected strongly to clause 11(1)(b).

†The hon. member for Constantia proposes that the proposed addition of a new paragraph (e) to section 48(1) of the Act be deleted. In terms of the proposed new paragraph (e), I may amend Part 1 of Schedule No. 1 to the Customs and Excise Act, 1964, when I deem it expedient in the public interest. I think there may be some misconception in this connection, because as hon. members are aware, section 48(2) of the Act was amended last year to enable the Minister to amend Part 2, i.e. excise duties, and Part 3, i.e. sales duty of Schedule No. 1, whenever it was deemed to be expedient in the public interest. Unfortunately we lost sight at the time of the fact that when Part 2 of the Schedule is amended to increase certain duties, it is sometimes also necessary to amend also Part 1 of the Schedule in order to ensure that the same duties are collected on like imported goods. If this is not done, it may mean that a higher duty is imposed on locally produced goods than on similar imported goods. It is this oversight at the time, which I ought to have covered at the time, which is now being corrected. It is no more than that. I do not think hon. members should see any sinister extension of power in this connection. It is merely in order to prevent what would be a distinct anomaly eventuating. That is the position, and therefore I am in a difficulty in regard to the amendment of the hon. member, because last year Parliament did accept the principle which is involved.

The hon. member for Constantia also criticized these measures because he said they would be inflationary as far as the raising of duty on fuel was concerned, also the surcharge and also sales duties in general. I am not so sure that these indirect taxes can simply be said to be inflationary. I have argued this point before. After all, the people who are hit by this form of taxation have the opportunity and the discretion to rearrange their purchasing patterns. I think one must be careful not to extend that criticism too far. I would also say that the imposition of a temporary surcharge on imports, as we have done, does offer many important branches of local industry an excellent opportunity to show their initiative and their worth. We have seen this happening in many other countries where local industry has grasped opportunities of this kind with both hands, to their great advantage. I do not want to argue that particular principle again, whether we should have financed Sasol 2 in that way. I am satisfied that it was a very sound method of doing so. I would also just like to remind the House that if we are simply going to negative these clauses by accepting the amendments moved by the hon. member and others, we are of course going to lose hundreds of millions of rands of revenue which would have to be found in some other way. If hon. members can tell me how, I am very interested to hear their views.

Send the women out to work.

I have a very important section here on the tax rate for married women, marginal rates, etc. I should like to refer to that matter, and I hope that there will be time when we come to deal with the Income Tax Act for doing so. Then the hon. member for Houghton will see how sympathetically we approach this matter.

The hon. member for Yeoville referred to normal price. With regard to normal price, I would merely like to say that the Department of Customs and Excise will draft regulations which will be submitted to trade and industry for comment before the new value concept is imposed. He also spoke about the sales between connected companies and referred to section 66(2). In that respect I would like to say that this is a provision contained in the Brussels definition of value, which is internationally accepted. The problems foreseen in this regard by the hon. member are not entirely clear to me, because this provision will only become operative if the price of the imported goods is influenced by the connection between the two firms. I am not altogether clear whether I follow that particular point. As far as countervailing duty is concerned, such duty is in fact regulated by the anti-dumping duty code of GATT, and that point ought to be borne in mind.

The hon. member for Yeoville referred to clause 21. My comment in that regard is that duty will not be paid on a higher value, because of the fact that at present the duty can be paid on either the current domestic value or the free-on-board price. That means that where the current domestic value is higher, a higher duty is payable. In the case of the new normal price, the current domestic value does not come into the picture, and the duty should therefore generally be lower. I will shortly be moving an amendment to clause 23.

The position is that the principle of the sales duty value on jewelry will be discussed with the trade. That will be done thoroughly, and I am sure that an equitable solution can be found to what has in fact been a very difficult problem for the department. I do not want to go into this whole issue now, but I would like to stress that the department has exercised considerable patience. It has gone to great trouble in this regard to handle a difficult situation. In the light of the amendment that I propose moving, I am sure that we can give ourselves additional time in the light of the recent representations which have come in to find a satisfactory solution.

The hon. member for Yeoville also raised the question of the lien in section 114. I can comment at some length on that, but I wonder if the hon. member would be satisfied if I make a copy of this comment available to him. It sets out the position in regard to the point he raised in a very relevant way. It is, however, rather technical.

The hon. member for Parktown raised the question of the surcharge on books and periodicals. Books and periodicals can be imported without the payment of customs duty, but they are subject to the surcharge at the moment. The position is that these articles are mainly imported by post. In terms of clause 2 provision is now being made to increase the value from R20 to R100 in respect of goods which are imported by post and that these goods may be cleared at post offices instead of customs and excise offices. In view of this, it was decided after discussions with the Associated Booksellers of South Africa, to allow importers of books and periodicals to clear individual parcels with a value not exceeding R100 at post offices.

Had this concession not been made, it would have meant that booksellers at places where no district offices of the department are situated, would have had to go to the nearest customs and excise office to pay the surcharge and after taking delivery of the goods, they would have had to forward the necessary documents and cheque to the nearest controller of customs and excise. As a further concession it was decided to exempt books and periodicals of a value of R5 per registered parcel from the payment of the surcharge. This will, I think, go a long way to meet the hon. member. The payment of a few cents in respect of surcharge on single copies of books or on copies of overseas publications subscribed to by persons in the Republic, does not to our mind justify the cost of collection of a surcharge by the post office. This also enables the post office to deliver the publications direct to the addressee instead of the latter having to go to the post office to pay the amount involved and to collect the publication. I may add that this concession does not affect the control in respect of imported publications exercised by the Department of Customs and Excise on behalf of the Director of Publications. However, that is another issue. I hope that this partial concession may remove a fair part of the hon. member’s problem, and I think we should wait and see how this works in practice. We can look at the matter again if there are serious problems. My difficulty here is that I badly require this money, and the more concessions I make, the more revenue I lose. We are, however, trying to be as fair as we can. I concede that this is an important issue.

The hon. member for Walmer spoke about the motor-car industry and consultations with it. I should just like to inform him that the latest report of the Board of Trade and Industries was submitted by the hon. the Minister of Economic Affairs to the industry for study and comment. That is an important report, and in that respect the industry is therefore definitely being consulted. I appreciate the hon. member’s general comments on the Bill. It is quite a substantial Bill, and I appreciate that it may perhaps be difficult to agree with all its provisions.

I should also like to comment on the considerable publicity in last night’s Argus under the headlines: “Delay this Bill,” says Commerce. “The Minister should not be allowed to play around on his own with duties and change them at will.” I do not think that that is a fair comment at all. This has been done by the department in a most considered manner over a long period. Indeed, I have here a document from the Secretary for Customs and Excise which states that—

I explained this in my Second Reading speech. I quote further—

It is further stated that in respect of the customs valuation the committee recommended the definition of value which I set out in my speech. The Secretary’s report to me today states that—

It is further pointed out how they did consult and that they approved this f.o.b. basis. I have here a note from the Secretary which has just been handed to me and in which he states—

That is the report I have just referred to. I quote further—

That comes from Mr. Goodwin, the president of Assocom, to me. He states—

I therefore think that the hon. House ought to be satisfied that there were proper consultations. I think that the report in last night’s Argus looks like a very hasty one, and in certain respects I do not think we can accept it as being correct.

I hope I have covered most of the points raised in the Second Reading debate.

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

Upon which the House divided:

Ayes—94: Badenhorst, P. J.; Ballot, G. C.; Botha, G. F.; Botha, L. J.; Botha, M. C.; Botha, P. W.; Brandt, J. W.; Clase, P. J.; Coetsee, H. J.; Coetzee, S. F.; Conradie, F. D.; Cronje, P.; Cruywagen, W. A.; De Beer, S. J.; De Jager, A. M. van A.; De Klerk, F. W.; De Villiers, D. J.; De Villiers, J. D.; De Wet, M. W.; Du Plessis, B. J.; Du Plessis, G. F. C.; Du Plessis, G. C.; Du Toit, J. P.; Greeff, J. W.; Greyling, J. C.; Grobler, M. S. F.; Grobler, W. S. J.; Hartzenberg, F.; Hayward, S. A. S.; Hefer, W. J.; Heunis, J. C.; Hoon, J. H.; Horn, J. W. L.; Janson, J.; Janson, T. N. H.; Koornhof, P. G. J.; Kotzé, G. J.; Kotzé, W. D.; Krijnauw, P. H. J.; Le Roux, F. J. (Brakpan); Le Roux, F. J. (Hercules); Le Roux, Z. P.; Ligthelm, C. J.; Ligthelm, N. W.; Lloyd, J. J.; Louw, E.; Malan, G. F.; Malan, J. J.; Malan, W. C.; Marais, P. S.; Maree, G. de K.; Meyer, P. H.; Morrison, G. de V.; Mouton, C. J.; Muller, S. L.; Niemann, J. J.; Palm, P. D.; Potgieter, S. P.; Raubenheimer, A. J.; Reyeneke, J. P. A.; Rossouw, W. J. C.; Roux, P. C.; Schlebusch, A. L.; Schoeman, H.; Scott, D. B.; Simkin, C. H. W.; Snyman, W. J.; Steyn, D. W.; Steyn, S. J. M.; Swanepoel, K. D.; Swiegers, J. G.; Terblanche, G. P. D.; Treurnicht, A. P.; Ungerer, J. H. B.; Van den Berg, J. C.; Van der Merwe, H. D. K.; Van der Merwe, P. S.; Van der Spuy, S. J. H.; Van der Walt, A. T.; Van der Watt, L.; Van Heerden, R. F.; Van Rensburg, H. M. J.; Van Tonder, J. A.; Van Wyk, A. C.; Van Zyl, J. J. B.; Viljoen, P. J. van B.; Vilonel, J. J.; Vlok, A. J.; Vosloo, W. L.; Wentzel, J. J. G.

Tellers: J. P. C. le Roux, N. F. Treurnicht, A. van Breda and C. V. van der Merwe.

Noes—38: Aronson, T.; Bartlett, G. S.; Basson, J. D. du P.; Baxter, D. D.; Bell, H. G. H.; Boraine, A. L.; Cadman, R. M.; Deacon, W. H. D.; De Villiers, I. F. A.; De Villiers, R. M.; Eglin, C. W.; Graaff, De V.; Hickman, T.; Hourquebie, R. G. L.; Hughes, T. G.; Jacobs, G. F.; Kingwill, W. G.; McIntosh, G. B. D.; Murray, L. G.; Oldfield, G. N.; Olivier, N. J. J.; Page, B. W. B.; Pyper, P. A.; Raw, W. V.; Schwarz, H. H.; Streicher, D. M.; Sutton, W. M.; Suzman, H.; Van Coller, C. A.; Van den Heever, S. A.; Van Hoogstraten, H. A.; Van Rensburg, H. E. J.; Von Keyserlingk, C. C.; Wainwright, C. J. S.; Webber, W. T.; Wood, L. F.

Tellers: D. J. Dalling and R. J. Lorimer.

Question affirmed and amendment dropped.

Bill accordingly read a Second Time.

Committee Stage

Clause 11:

Mr. Chairman, I move the amendment standing in my name on the Order Paper, as follows—

At Second Reading I did motivate the reasons why I did not consider that the hon. the Minister should have the powers he is taking in terms of this clause to amend the whole spectrum of the customs tariffs between sessions, only subject to being rubber stamped by Parliament in the following session. At Second Reading the hon. the Minister did reply that it was due to an oversight last year that this power was not taken then and that he found himself in a position where he had the power to amend excise duties without being able to amend the corresponding customs duties. By taking this power to amend every item in the customs tariff list in order just to be able to bring into line the odd items which are affected by an amendment to the customs duties, he is taking a sledge-hammer to kill a gnat. Surely this whole thing can be framed in such a way that the hon. the Minister achieves the aim he stated at Second Reading. Instead he is taking what I would describe as Draconian powers of taxation in order to achieve the small thing he wants to achieve.

As the Minister of Finance he has now put himself in a position in which between sessions he has the power to increase and decrease loan levies, sales duties and excise duties. Now he has the power to increase or decrease the whole spectrum of customs duties. What is more, he has also taken the power to increase or decrease the customs surcharge. The argument he used at Second Reading in regard to bringing customs duties into line with excise duties, does not apply to the surcharge. I believe that we are therefore doing the correct thing in moving this amendment, because what is involved is not just a bringing into line of customs duties with excise duties. We would support a different type of amendment to have just that effect, but when one is affecting the whole gamut of customs duties, we cannot agree to it.

Mr. Chairman, we support the amendment of the hon. member for Constantia.

Mr. Chairman, I did try to explain my position in my reply to the Second Reading debate, and there is really nothing much I can add. My object is most certainly not to take Draconian powers, but to place myself in a position which will enable me to avoid what could be a very serious anomaly. As I explained, as a result of the powers I had earlier, the anomaly could arise that a higher duty could be imposed on locally produced goods than applied to imported goods. The hon. member says this can be achieved in a different way, but it is not as easy as all that. This has been very carefully considered, and if the hon. member can find a way of doing this which will satisfy us and which will still enable me to deal with this anomaly, we can look at it again. However, as things stand, I am afraid this is a very considered amendment in the Bill and therefore I regret I am not able to accept the hon. member’s amendment.

Mr. Chairman, I am dreadfully sorry to hear from the hon. the Minister that he cannot accept this amendment, because I do not believe he requires powers to increase taxation between sessions without coming to Parliament. Since I do not believe he requires that power, I move as an amendment—

If the hon. the Minister had accepted the amendment of the hon. member for Constantia, we would not have moved this amendment because the effect of paragraph (c) is that not only the existing powers, which were outlined by the hon. member for Constantia, will apply, but also this new power of the Minister in respect of Part 4 of the schedule, which provides for a surcharge of 15% on imported goods, a surcharge for which the hon. the Minister has already asked. Since I believe he should not have that power, I have moved my amendment.

Do you not want me to reduce that surcharge if it is warranted?

Mr. Chairman, in view of what has gone before, I should with the permission of the Committee like to withdraw the amendment I have moved.

Amendment moved by Mr. D. D. Baxter, with leave, withdrawn.

In its place, I should like to move as an amendment—

The effect of this would be to enable the Minister to reduce tariffs but not increase them between sessions. Our argument has been throughout that we object to the additional taxing powers this clause involves. However, we would not object to the Minister having the power to bring customs tariffs down.

Mr. Chairman, I have just had the opportunity to consult the Secretary of the department who is the expert on this technical matter and he informs me that the amendment is definitely not satisfactory, and will not, in fact, put us in the position in which we might have to be as a result of the problem. I need more time … [Interjections.] No, it is not the same.

Are you prepared to look at it before proposing it in the Other Place?

What I am prepared to do is to look at it very thoroughly with the Secretary before I propose the measure in the Other Place. That I will do, but I cannot accept the amendment.

Amendment moved by Mr. D. D. Baxter negatived (Official Opposition dissenting).

Amendment moved by Mr. W. T. Webber negatived.

Clause agreed to (Official Opposition and Progressive Reform Party dissenting).

Clause 19:

Mr. Chairman, the hon. member for Constantia indicated during the Second Reading debate that we felt it was wrong that the Secretary of the department should have the right to impose different conditions for different agents and, similarly, that we felt that it was wrong that there should be a discretionary power placed upon the Secretary to allow the admission of one clearing agent and not to allow the registration of another. We are fully in favour of the registration of clearing agents and we are fully in favour of their being required to furnished certain securities but we do not believe that there should be a discretion in this matter. For that reason I move the three amendments printed in my name on the Order Paper as follows—

1. (1) On page 20, in line 37, to omit “may” and to substitute “shall”;
2. (2) on page 20, in line 37, to omit all the words after “to” up to and including “him” in line 39 and to substitute:
   the provisions of subsection (3), license any person applying therefor
3. (3) on page 20, in line 44, after “shall” to insert:

My first amendment makes it obligatory on the Secretary to register any person who complies with the regulations. The third amendment will created the situation that any clearing agent who complies with the conditions the hon. the Minister may prescribe by regulation and furnishes the necessary security as the Secretary may decide, shall be registered as a clearing agent. I know there is the question as to whether or not the hon. the Minister has the power to promulgate such regulations. I would refer the hon. the Minister to section 120(1), paragraph (n) of the Act, which provides that the hon. the Minister may prescribe—

I do not believe that this provision should be a hindrance to accepting this amendment and I would commend the amendment to the hon. the Minister as showing the bona fides of the department that they do not intend to discriminate as between one clearing agent and another.

Mr. Chairman, I have given considerable thought to the hon. member’s amendment, together with the department. We have looked at it very carefully. In terms of the wording of the clause as printed, the Secretary for Customs and Excise may in his discretion license a person as a clearing agent “subject to such conditions as he may in each case impose”.

The first amendment proposed by the hon. member is that the word “may” should be replaced by the word “shall”. In this connection it should be pointed out that it is customary, where provision is made for the issuing of licences, to make it subject to the discretion of the person issuing the licence. This custom is also contained in the present sections of the principal Act providing for the issue of licences. One can refer, for example, to sections 19(1), 21(1) and the proposed new section 64B. According to legal opinion the word “may” should, in instances where all the stated conditions are complied with, be interpreted as “shall”. That is according to our legal opinion. It was pointed out to me that should the Secretary refuse to issue a licence, the person concerned, according to the provisions of section 62 of the principal Act, has the right to appeal to the Minister. The second and third proposed amendments in effect mean that only conditions which must be complied with prior to the issuing of the licence, relating for example to a person’s nationality, age, etc., may be imposed and that no further conditions which must be complied with after the licence is issued, can then be imposed. In certain cases it is necessary to impose conditions in terms of which the licence may be used and if the amendment is accepted, it will mean that such conditions cannot, in fact, be imposed. That is our real difficulty and, in the light of that, I very much regret that I really do not see my way clear to accepting these amendments.

Amendments negatived.

Clause agreed to.

Clause 21:

Mr. Chairman, I move the following amendment—

I gave the reasons for this amendment during the Second Reading. The clause is so wide that people who, for example, are entirely unconnected, but who have shares in the same public company, without knowing it, are deemed to be in business together and that is why this provision cannot possibly remain in the Bill.

Mr. Chairman, I tried to deal with this point in my reply to the Second Reading debate. I am afraid I must adhere to that point of view and therefore I cannot accept this amendment.

Amendment negatived (Official Opposition and Progressive Reform Party dissenting).

Clause agreed to.

Clause 23:

Mr. Chairman, I move the following amendment—

I do not think it is necessary for me to say a great deal about this. The amendment is necessary only to delete the retrospective effect of that clause. This, of course, is specifically related to the jewellery industry and the problems experienced in that industry. I trust I have now said enough about that amendment.

Mr. Chairman, we welcome this amendment and we obviously support it. I want to move the following two amendments—

1. (1) On page 26, in line 27, to omit “highest” and to substitute “average”;
2. (2) on page 26, in lines 35 to 45, to omit paragraph (b).

I think the first amendment speaks for itself. In other words, the highest price should not be the price on which the duty has to be calculated; it should be calculated on the average price. I motivated the second amendment during the Second Reading debate. The simple reason here is that one actually cannot calculate the duty adequately, unless one has retail price maintenance or unless one retrospectively calculates the duty, because the manufacturer cannot control the price at which the retailer sells.

Mr. Chairman, I am in difficulty here. I am very anxious to give as careful thought as possible to these amendments. However, the hon. member for Yeoville will concede that this is a highly technical matter. I must have the opportunity of studying this, particularly in consultation with the department. I have only just had this put before me. What I therefore would like to suggest is that I am quite prepared to do this as soon as I can, and that I will endeavour to give careful thought to this before it comes before the Other Place. If I find merit in this, I will certainly raise the matter there. I am really not in a position to express a considered view on it at the moment. In the circumstances I am not able to accept the amendment.

Mr. Chairman, in the light of the hon. the Minister’s undertaking I ask the leave of the House to withdraw the two amendments. I hope the hon. the Minister will see his way clear to move them in the Other Place.

Amendments moved by Mr. H. H. Schwarz, with leave, withdrawn.

Amendment moved by the Minister of Finance agreed to.

Clause, as amended, agreed to.

Schedule No. 1:

Mr. Chairman, I move the three amendments standing in my name on the Order Paper, as follows—

1. (1) On page 48, in Tariff Heading 27.07, to omit the substitution for subheading No. 27.07.90;
2. (2) on page 48, to omit Tariff Heading 27.10;
3. (3) on pages 158 and 160, to omit Tariff Items 105.05, 105.10 and 105.15.

The hon. the Minister has heard our arguments in this regard before. These are the increased excise duties on petrol and customs duties on the import of petroleum products amounting in these schedules to two cents per litre on petrol and intended as a means of financing the construction of Sasol 2. We have raised our objection previously to this method of financing Sasol 2. We believe that it is not out of the bounds of the Government to find finance by other means than by raising the price of petrol to achieve this purpose.

Already we have a situation that four cents per litre are being levied on petrol for the purpose of financing Sasol 2, producing something like R250 million per year, which is having the effect of pushing the whole cost of living up by something approaching 1%. In our view this is not a time when the Government should be taking steps like this, steps which have the effect of inflating prices. The Government should be taking steps to keep prices down. That is the reason why we move this amendment, not that we want to stultify the development of Sasol 2 because, as I say, we believe there are other means of raising the finance which is necessary for the construction of Sasol 2.

Mr. Chairman, I move the amendments printed in my name on the Order Paper, as follows—

1. (1) On page 160, to omit Sales Duty Items 135.00 to 152.00;
2. (2) on page 160, in Sales Duty Item 146.00, in column III, to omit “8%” and to substitute “6½%”;
3. (3) on page 160, to omit Sales Duty Item 147.00;
4. (4) on pages 160 to 176, to omit Part 4.

The reasons which induced me to move these amendments have been put by the hon. member for Constantia in the Second Reading debate. However, I do want to say that I owe the hon. the Minister some comment as far as the amount that would be lost to the Government is concerned with the amendment on page 160 under Part 4. About R400 million is involved and the hon. the Minister has asked me to indicate where else this money can be found. I would say in all humility that savings could be made if the hon. the Minister would take under review in all earnestness the removal of apartheid measures from the Government’s present financial programme. R400 million would be a small pot of tea compared with the total that could be saved in that way. I mean that in all seriousness. Again, I would like to refer to the implication of not increasing sales duties by the amounts involved. I said last year in a similar debate that I believed that this reflected an undue burden on the taxpayer, and this was borne out in this session under the Finance Vote when the hon. the Minister himself has gone on record as saying, and I quote from the weekly edition of Hansard No. 19, column 9574—

This at a time like this when people are overburdened with the cost of living and when sales duties range over a wide range of articles, both luxury and necessary articles. I made the comment too during the debate last year that this was in a sense a hidden tax. The hon. the Minister queried my comment that it was a hidden tax and asked me to indicate why I thought it was a hidden tax. I say it is a hidden tax because the consumer is not aware of the amount he is actually paying. Therefore I would ask the hon. the Minister to indicate to me that in the event that he was buying, for example a refrigerator this evening for R575, what the taxable portion of that sum which is shown on the invoice is. It is hidden in that he does not know the sum. He might know the rate of tax is 33%, but it does not make the impact on the consumer that the tax which he is now proposing would do. That is what I meant by hidden tax.

Mr. Chairman, I would like to support the argument put forward by my colleague, the hon. member for Cape Town Gardens, particularly in respect of the sales taxes that are levied on passenger vehicles set out on page 160 of the Bill under item No. 147.00.1 think it is a little known fact that the sales and excise taxes on motor vehicles are far in excess of the profitability in respect of the vehicles to a motor dealer today. This is irrespective of what one might read about the tremendous profits which motor dealers are purported to make. I quote the instance of a small two-door, 1300 cc motorcar with an invoiced price from the manufacturer of R2 345. It has a list price of R2 895, which means the dealer profitability is R550. But the sales and excise taxes which have then to be added, on that vehicle are R640. I agree with the hon. member for Cape Town Gardens who says that the public is not aware of this fact. They labour under the misapprehension that the dealer or the motor industry is making enormous profits, and they do not appreciate the possibility that a tremendous amount of the inflation which takes place in the pricing of motor vehicles is due to increases in taxation. Here the hon. the Minister is asking again for substantial increases. He is asking for an increase in sales duty on vehicles below a sales duty value of R3 800 to 12,5% from the existing 10%. This represents an increase of 25% in the sales tax figure. On vehicles exceeding the R3 800 mark he is asking an increase from 16,5% to 20,5%,— approximately a 25% increase. It is truly said that the second largest purchase that an individual makes in his lifetime is a motor-car. There is a lot of truth in this saying. He buys his home and he buys a motor vehicle. He possibly buys quite a few motor vehicles during his lifetime, while he may buy only one or at the most two or three homes. I do feel that the hon. the Minister should reconsider the situation.

Business suspended at 18h30 and resumed at 20h00.

Evening Sitting

Mr. Chairman, at the time of the adjournment for dinner, I put the argument in respect of sales duty item No. 147.00. I merely did this to reinforce the argument put forward by the hon. member for Cape Town Gardens. I would like to add that an examination of this scale of tariffs will show that there have been increases in a tremendous number of component parts that go into the manufacture of motor vehicles. I do feel that we have a situation here where we have not only an increase in duties in respect of component parts but also an increase in the sales duty in respect of the completed article.

I would therefore ask that the hon. the Minister take note of my remarks. I support the amendment moved by the hon. member for Cape Town Gardens.

Mr. Chairman, I would like to point out, in the first place, that if I were to accept these amendments in respect of schedule No. 1, I estimate that I would lose R100 million in respect of the amendment moved by the hon. member for Constantia, R67 million in respect of the amendment moved by the hon. member for Cape Town Gardens, and in respect of the second amendment moved by that hon. member, R400 million. That is R567 million, and I repeat my friendly invitation to the hon. members opposite to tell me how to find this money in some other way. [Interjections.]

Order!

I want to deal with the first amendment, of the hon. member for Constantia, the one in regard to fuel and fuel products. If our problem, apart from the financing of the Sasol 2 project, is also to conserve fuel, particularly petrol, under the conditions prevailing, then this is a good opportunity to use the price mechanism— although hon. members opposite constantly say that we must not interfere with the market mechanism—to discourage the consumption of fuel. I think there is some merit in that, although it is not the main object of the amendment to the Act.

I have also taken into account the views expressed by the hon. member for Umhlanga in regard to the effects on the prices of motor vehicles. In view of the importance of these measures as budgetary measures, I must say that that is a secondary consideration, although I am not saying it is not important. However, one cannot automatically conclude that the effect of these measures will necessarily be inflationary, because, as I have said earlier, where one changes prices, consumers take account of these things and tend to alter their consumption habits and their demands, at least to some extent. That may well have the effect of countering inflation to that extent. It is, therefore, a question of the elasticity of demand for many of these things in relation to the price, which one has to take into account. My main reason, however, is that these are revenue measures. I believe that they are sound under the conditions that we experience and therefore I have no option but to pursue them. I regret that I cannot accept these amendments.

Mr. Chairman, I again regret to hear that the hon. the Minister cannot accept these amendments. I want to refer particularly to the amendments moved by the hon. member for Cape Town Gardens regarding the sales duty items where there has been an across-the-board increase by the hon. the Minister. I am sure that he must realize what the situation is going to be now. The effect of the amendment of the hon. member for Cape Town Gardens is simply to ask the hon. the Minister to help keep the cost of living down, in fact to keep it at the level at which it has stood for some time. I do not know whether the hon. the Minister is aware, sitting in his ivory tower as he does, that the cost of foodstuffs in the past 12 months has already gone up by 16%. Here he is asking, however, for a further increase, and although he says it will only be 1½%, i.e. from 6½% to 8%, he knows what happens in effect in the trade. That 1½% is going to be 6%, 8% or even 10% by the time it gets to the consumer. He knows that full well. He sits in his ivory tower, however, with no consideration or feeling whatsoever for the consumer who is faced with these increases. The hon. member for Cape Town Gardens put forward a matter, asking the Government to forego a few of the luxuries and the comforts and to forego a little of the expenditure on ideological claptrap to allow the poorer people to benefit from this. The hon. the Minister, however, stands up and says he regrets that he cannot do so.

Let me just say that there is no sales duty on foodstuffs.

With respect, there might be no sales duty on foodstuffs, but there are foodstuffs which are affected by that sales duty, and the hon. the Minister knows it. I am referring to aspects such as the manufacture, the packaging and the marketing of those foodstuffs. Those aspects are affected by this sales duty. The cost of living today is not, however, based only on foodstuffs. What about clothing? What about the essentials that people require for their homes? I am not referring to luxuries, not for a moment. I have never pleaded for the reduction of the sales duty on luxuries. In fact, we have advocated that the hon. the Minister should apply taxation to luxuries alone. Let me go a step further. Let us look at the fourth amendment of the hon. member for Cape Town Gardens. I am referring to the amendment to omit Part 4, from page 160 to page 176. Part 4 involves a 15% surcharge on the importation of products. What is involved? I do not believe that the hon. the Minister can say that there are no foodstuffs involved there. What about oil seed? The hon. the Minister of Agriculture is not here at the moment, but the hon. the Minister of Finance ought to know that there is a shortage of oil-seed. We have to import oilcake which is not only used for the manufacture of margarine, but is also used for feeding cattle.

Rubbish!

Who says rubbish? Those hon. members do not know what they are talking about. Do we have enough oilcake in this country? Are we importing oilcake or are we not? Of course we are importing it! The hon. the Minister is now imposing a surcharge of 15% on that, surcharge at the point of import, and that will not be 15% by the time it reaches the consumer. It is going to be 30% or more by the time it gets there. What about animal and vegetable fats, which again are imported for the production of margarine? What about fertilizer? What effect will a 15% surcharge on the importation of fertilizer have on the price of foodstuffs? I do not believe that this hon. Minister is being fair to the country at all, and I believe that the amendments moved by my friend, the hon. member for Cape Town Gardens, are quite reasonable. Neither do I believe that they will cost the country so much money that the hon. the Minister cannot, at this stage, accept those amendments and allow these decreases in the taxation, thereby alleviating the burden of the man in the street who is faced with this tremendous increase in the cost of living. As I have said it stands today at something more than 16% compared with this period last year.

Business interrupted in accordance with Standing Order No. 74 and amendments dropped.

Schedule put and the Committee divided:

Ayes—83: Badenhorst, P. J.; Ballot, G. C.; Botha, G. F.; Botha, L. J.; Botha, M. C.; Botha, P. W.; Brandt, J. W.; Clase, P. J.; Coetsee, H. J.; Coetzee, S. F.; Conradie, F. D.; Cronje, P.; Cruywagen, W. A.; De Beer, S. J.; De Jager, A. M. van A.; De Villiers, J. D.; De Wet, M. W.; Du Plessis, B. J.; Du Plessis, G. F. C.; Du Plessis, G. C.; Du Toit, J. P.; Greyling. J. C.; Grobler, M. S. F.; Grobler, W. S. J.; Hartzenberg, F.; Hayward, S. A. S.; Hefer, W. J.; Heunis, J. C.; Hoon, J. H.; Janson, J.; Janson, T. N. H.; Kotzé, G. J.; Kotzé, W. D.; Krijnauw, P. H. J.; Le Grange, L.; Le Roux, F. J. (Brakpan); Le Roux, F. J. (Hercules); Le Roux, Z. P.; Ligthelm, C. J.; Ligthelm, N. W.; Lloyd, J. J.; Louw, E.; Malan, J. J.; Marais, P. S.; Maree, G. de K.; Meyer, P. H.; Morrison, G. de V.; Mouton, C. J.; Muller, S. L.; Palm, P. D.; Potgieter, S. P.; Reyneke, J. P. A.; Rossouw, W. J. C.; Roux, P. C.; Schlebusch, A. L.; Scott, D. B.; Simkin, C. H. W.; Snyman, W. J.; Steyn, D. W.; Steyn, S. J. M.; Swanepoel, K. D.; Terblanche, G. P. D.; Treurnicht, A. P.; Ungerer, J. H. B.; Van den Berg, J. C.; Van der Merwe, H. D. K.; Van der Spuy, S. J. H.; Van der Walt, A. T.; Van der Watt, L.; Van Heerden, R. F.; Van Rensburg, H. M. J.; Van Tonder, J. A.; Van Zyl, J. J. B.; Viljoen, P. J. van B.; Vilonel, J. J.; Vlok, A. J.; Volker, V. A.; Vosloo, W. L.; Wentzel, J. J. G.

Tellers: J. P. C. le Roux, N. F. Treurnicht, A, van Breda and C. V. van der Merwe.

Noes—37: Aronson, T.; Bartlett, G. S.; Basson, J. D. du P.; Baxter, D. D.; Bell, H. G. H.; Cadman, R. M.; Deacon, W. H. D.; De Villiers, R. M.; Eglin, C. W.; Graaff, De V.; Hickman, T.; Hourquebie, R. G. L.; Hughes, T. G.; Jacobs, G. F.; Lorimer, R. J.; McIntosh, G. B. D.; Miller, H.; Mills, G. W.; Murray, L. G.; Oldfield, G. N.; Olivier, N. J. J.; Page, B. W. B.; Pitman, S. A.; Pyper, P. A.; Raw, W. V.; Schwarz, H. H.; Streicher, D. M.; Suzman, H.; Van den Heever, S. A.; Van Hoogstraten, H. A.; Von Keyserlingk, C. C.; Wainwright, C. J. S.; Webber, W. T.; Wiley, J. W. E.; Wood, L. F.

Tellers: W. G. Kingwill and W. M. Sutton.

Schedule agreed to.

Remaining Schedules agreed to (Official Opposition, Progressive Reform Party and South African Party dissenting).

House Resumed:

Bill reported with an amendment. Third Reading

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

Agreed to (Official Opposition, Progressive Reform Party and South African Party dissenting).

Bill read a Third Time.

Mr. Speaker, I move—

Since neither my department nor I have received very many enquiries about the draft Bill and explanatory memorandum which were made available to hon. members of all parties in this House approximately 14 days ago, I am convinced that the provisions contained in the Bill are so clear that a detailed explanation from me of all the clauses will not be necessary.

As is customary, the Bill contains the taxation scales of normal income tax which, regardless of whether alterations have been made or not, have to be enacted every year. The amendment in clause 5 of the scales of normal tax payable by oil-mining companies may perhaps flabbergast hon. members since no oil is being mined in South Africa and the amendment is only academic importance at this stage. However, there are two important reasons for the proposed alteration of the basic scales: Firstly, it is essential that we keep pace with the world-wide tendencies in the taxation of profits made from the exploitation of natural oil; and secondly, and this is a more important reason, those who invest money in oil exploration, wish to have certainty about their tax liability if oil is fact discovered. Their experience in other parts of the world has justifiably made them a little distrustful, but as usual, South Africa is putting all its cards on the table. I want to give the assurance that, as with all our undertakings in the past and in future too, we shall not commit a breach of faith.

There are a few amendments which stem from the budget and others which one could call domestic amendments, to improve the implementation of the Income Tax Act.

I want to concentrate on two areas, however, to fill in the background to the proposals for the amendments a little more fully for hon. members, and to further elucidate the amendments as such. The two areas, which do not necessarily appear in this order in the Bill, are firstly the proposals relating to the taxation of agricultural co-operatives and their members and secondly those relating to the exporters’ allowance.

I have on various occasions here in the House and by way of Press statements furnished information on the work done by the Cabinet Committee and the committee of departmental heads in regard to the question of the equal treatment of private undertakings and agricultural co-operatives and the decisions which have been arrived at in regard to the taxability of agricultural co-operatives.

Therefore I do not want to cover the entire field again, but only elaborate on those aspects on which a possible misunderstanding may arise and to put a stop to unproductive recriminations which are not to the advantage of the principle of free enterprise on which our South African economic system is built.

Firstly I want to make a few observations on the proposed method of determining the taxable income of agricultural co-operatives. It is no strange phenomenon in South African tax laws that different procedures are adopted in the determination of the taxable income of different industries, owing to the particular nature of industry or the structure of the enterprise. In this way, for example, the deduction of expenditure which is normally of a capital nature and therefore not permissible as a deduction from revenue, is in fact permitted in the case of mining and to a lesser extent in regard to farming revenue.

Certain allowances are granted to industry, while they are not granted to traders and farmers for example. In determining the taxable income of a short-term insurance company, allowances are also made which are unique to that industry, while there is a world of difference between the method of determining the taxable income of long-term insurance and that of other commercial and financial undertakings, once again as a result of the particular features of the specific industry.

Owing to the particular capital structure of a building society the so-called dividends paid by such a society on paid-up and subscription shares are calculated as deductions in the determination of a building society’s taxable income, while the dividends of ordinary commercial or financial companies accrue from after-tax profits. In addition the dividends on paid-up shares, with the exception of the specially exempted shares, are dealt with in exactly the same way as the dividends of commercial companies in the hands of shareholders, while subscription share dividends are entirely free of taxation in the hands of shareholders. There are other examples as well, but I shall let those I have mentioned suffice.

Mr. Speaker, I am mentioning this aspect of differences in the determination of taxable income to sketch the background against which the entire question of determining the taxation of agricultural co-operatives has to be evaluated, viz. that special circumstances require special treatment in order to ensure that justice is done in accordance with the basic principles of a sound taxation system which have remained in force since they were formulated for the first time by Adam Smith almost two centuries ago.

There are a considerable number of differences between ordinary companies and agricultural co-operatives, but the two most important which were definite factors in considering the method of determining the taxable income of agricultural co-operatives were—

1. (a) the capital structure and relationship of shareholders to the co-operative, and
2. (b) the way in which the surplus or profit of a co-operative is distributed among shareholders.

As far as the capital structure is concerned, the owners of shares in an agricultural co-operative become members of the co-operative rather than shareholders in the ordinary sense of the word. The shares do not increase in value and bear a statutorily determined dividend rate; they are not negotiable, and even if they were, there would not, in my opinion, be an open market for them since they do not offer a good investment as such. In the aggregate therefore: A co-operative cannot obtain capital on the open market, and at the same time they find it difficult to persuade members to invest their available funds in the form of shares in co-operatives.

As far as the method of profit distribution is concerned, consideration must be given to the meaning of co-operative; viz. co-operative— in the true sense of the word—marketing of farming produce in order to negotiate a stable price for the producer, and the co-operative acquisition of agricultural requirements to reduce production costs.

With these objectives it is therefore obvious that when a surplus arises, either as a result of better marketing or higher prices for members’ produce after members have already received payment for their produce upon delivery, such surplus still forms part of the return on that produce, and when the distributable surplus is paid out to them, in full or in part, in accordance with a resolution of the members, the distribution takes place in the form of a bonus according to the extent of each member’s business transactions with the co-operative, and not in accordance with his shareholding.

The bonus is therefore essentially a deferred payment or “agterskot” for the delivered produce and is therefore a permissible deduction for the co-operative while, on the other hand, it may also be regarded, in so far as the surplus relates to dealing in farming requirements, as a discount on the farmer’s purchases, which are similarly deductible in determining the taxable income of the co-operative.

But now I wish to emphasize an important aspect, namely that the bonus paid by a co-operative to its members is fully taxable in the hands of its members. This accords with the principle that the taxation of a company— and now a co-operative as well—does not end with the taxation of the company or co-operative, but that the combination company/shareholder or co-operative/member should also be considered.

I regret having had to spend so much time on the background, but I deem it to be of cardinal importance that the special position of co-operatives should be correctly assessed, for then it would be clear to everyone that, with the exception of the bridging measure to which I shall return in a moment, the method of determining the taxable income of an agricultural co-operative accords with the special circumstances of this form of undertaking.

I should now like to dwell on a few specific deductions which agricultural co-operatives will be allowed to make.

Firstly, the annual allowance and investment allowance in respect of storage buildings and the special machinery initial allowances and the special machinery investment allowances for which provision is being made in clause 17(1) of the Bill.

Agricultural co-operatives erect storage buildings for the storage of agricultural produce in remote areas for the convenience of the producer, as well as with a view to efficient marketing. These storage buildings ensure that the harvested crops are protected from the elements until they can be fed into the processing pipeline. It is therefore no strange phenomenon that these buildings and machinery should qualify for the allowances if they comply with the statutorily stipulated requirements, for if similar buildings are constructed by a company and utilized in a manufacturing process, or for the storage of a supply for material until it is utilized in the manufacturing process, or for the storage of manufactured produce until it is sold, they would also qualify for the allowances. The only difference is that the co-operative, in many cases, does not undertake the further manufacturing process itself, and that the storage building is not necessarily on the same site as the factory building. On the other hand the importance and necessity for the protection of the harvested crop has to be weighed up so that essential foodstuffs are not sacrificed.

The second and important concession proposed in clause 17(1) relates to the deduction, subject to the conditions and limitations laid down in the clause, of amounts paid off on loans and advances obtained and utilized in financing the specific assets mentioned in the clause.

I am not going into the details of the conditions and limitations, for they are clearly set out in the clause and explanatory memorandum, but I feel that in the interests of good order it is necessary to explain why this provision, which is diametrically opposed to sound taxation principles, is being proposed in the Bill.

It is merely a temporary bridging measure. I explained previously what disadvantages cooperatives have in mobilizing capital or obtaining it on the open market. While there was no taxation liability, a co-operative could place a portion of its surplus on reserve and utilize it to finance the construction of buildings in full or in part.

The Cabinet Committee agrees with me that since agricultural co-operatives are now being deprived of the tax exemption, they should be afforded an equitable opportunity during the bridging period to strengthen their capital structure from tax savings which will be brought about by this concession, as well as the encouragement which is being given to co-operatives in this way to reduce their loan obligations. However, the concession should not be seen as a precedent and it is not the intention to make it a permanent feature of the Income Tax Act.

The only other important aspect of the taxation of agricultural co-operatives which might require elucidation is the method of dealing with funds transferred by the KWV to a price stabilization fund. It is not necessary for me to explain the background to the development and objectives of the KWV, but hon. members are all aware of the role which price stabilization plays in agriculture. During the present month reports have appeared in the Press on the part played by the KWV in helping the wine farmers, who had had poor harvests owing to downy mildew, by means of the stabilization fund with an improved financial return of their harvest.

When funds are set aside for the same purpose by control boards they are not affected by taxation, so that the income of the farmer—who is taxable on the return—from his harvest is passed on to him untaxed. The same objectives are envisaged in the proposed provision, clause 17(1), in regard to funds which the KWV pays into a stabilization fund on behalf of the wine farmers and which they are obliged to pay out to the farmers in due course.

This, then, covers the provisions in regard to co-operatives, and I am certain that hon. members will agree with me that, in view of the particular operating set-up of agricultural co-operatives, the way in which taxation is being dealt with is fair.

While I am dealing with agricultural matters now, I may just as well discuss clause 24 of the Bill which deals with the deduction of the cost of farm machinery, implements, utensils and articles in determining the taxable income of a taxpayer from farming.

Pleas have been made from time to time in this House and the Other Place, as well as by organized agriculture, for the initial and investment allowances applicable to manufacturing machinery to be extended to agricultural implements and machinery. After thorough consideration of the representations, and having regard to the sharp increases in the replacement costs of agricultural machinery and implements, I am satisfied that an accommodation is justified to compensate to a large extent for the effect of inflation on the value of productive assets.

My department is, however, of the opinion that the position of agricultural and manufacturing machinery are distinguishable from one another and that in view of this, and also out of practical considerations for a simple measure, the existing initial and investment allowances should not be extended to agricultural machinery and implements but that, instead, the cost of such assets should, in the year of purchase, qualify in terms of existing paragraph 12 of the First Schedule to the Act as a deduction against farming income subject to the conditions of that paragraph.

I agree with my department’s finding and solution, and the proposed clause 24 gives effect to this. Actually, the measures grant deferment of taxation rather than surrender thereof, since the costs of the assets would have been written off over a period in any case, and that write-off is simply being brought forward. For the present financial year it is not expected that there will be any appreciable effect on the income tax yield since it will only be felt in the assessment of the 1978 tax year returns. It is estimated that the costs for a full year will amount to between R15 million and R20 million, which will gradually decrease as the effect of the deferred taxation becomes significant.

I trust that this concession will help to counteract the effect of increasing production costs, and will lead, as an incentive, to increased production in order to feed our ever-growing population.

†I now come to the second major area in the Bill which I mentioned earlier in my speech and that is the question of the exporters’ allowance, and the proposed amendments to the relevant provisions in the Income Tax Act, as contained in clause 10 of the Bill.

Hon. members will recall that in the course of my budget speech I referred to the importance of encouraging exports with a view to strengthening our balance of payments and mentioned the important role played by the income tax export allowance as well as the export incentives under the control of my colleague, the hon. the Minister of Economic Affairs. At the same time I said that I believed that a greater measure of co-ordination and rationalization was desirable in order “to ensure that the maximum effect is produced within the limits of our resources”. I would stress these words, “within the limits of our resources”.

It is an inescapable fact that the resources at our disposal are not unlimited and, just as important as controlling direct expenditure by the State, so it is my duty to ensure that vital tax revenue is not foregone as a result of the abuse of certain provisions in the Income Tax Act or as a result of the granting of concessions which are valuable to the taxpayer but do little if anything to stimulate exports. The State cannot afford to hand out largesse in the form of unwarranted allowances but must instead husband its resources so that they can be used in areas where they produce the maximum benefit for the tax-paying public as a whole.

The Department of Inland Revenue has therefore had a critical look at the nature of commodities being exported as well as those items of expenditure qualifying for the exporters’ allowances and, after consulting with the Department of Commerce, has recommended certain changes with which I fully agree and which I am now proposing in this Bill.

The first proposed amendment relates to the definition of “goods” for the purposes of the exporters’ allowance. From the time that allowance was introduced in 1962, specie, gold and silver bullion and uncut diamonds have not constituted goods the export of which would entitle the taxpayer to an allowance on marketing expenditure incurred. The amendment now proposes that all precious metals should be excluded from the definition of the term “goods”.

In this connection I may say that the object of the exporters’ allowance was, and still is, to encourage the export of South African products. It was therefore intended to act as an incentive to manufacturers and producers to produce goods for export and to seek and expand export markets. Some commodities must, however, of necessity be exported because there is no market for them in South Africa, or at best a very limited one; consequently there is no need of a special incentive to encourage the export of such goods. All precious metals and uncut diamonds fall into this category and the proposed amendment merely represents the setting right of something which appears to have been overlooked when the provisions relating to the exporters’ allowance were originally introduced into the Income Tax Act. Needless to say, those producers of precious metals who have hitherto been granted the allowance have enjoyed a double benefit in that the lease consideration payable by them has also been reduced. That matter will automatically be adjusted as a result of the proposed amendment.

Mr. Speaker, I now come to a few items which at present qualify for the exporters’ allowance but which, because of difficulties experienced in administering the provisions which govern them, are being abused and which I must reluctantly recommend be excluded in future from the marketing expenditure on which the exporters’ allowance is calculated.

The first item relates to expenditure incurred by way of salaries and wages and so on in connection with a marketing operation carried on in South Africa in respect of sales both in export countries and in the South African market—section 11bis(4)(j) of the Act—and the second to packaging costs where those costs are in excess of the cost of packaging similar goods for the South African market— section 11bis(4)(m).

In both cases the amounts claimable are usually not readily ascertainable and therefore require to be calculated, frequently on a complicated and arbitrary basis. This is in marked contrast with the general pattern of the Act which is simply that the expenditure or losses must have been actually incurred. This fact, coupled with the wide interpretation of which the relevant provisions are capable, has tempted many exporters into inflating their claims under these headings and has led to considerable abuse and an unjustifiable sacrifice of revenue. Such a situation can no longer be tolerated and the only solution is to remove these items from the list of expenditure which qualifies for the allowance.

Mr. Speaker, may I ask the hon. the Minister a question, a very short question?

If it is a very short question, yes.

Does the hon. the Minister really think he should make such wild allegations on a Wednesday night? [Interjections.]

A further item, relating to special discounts granted by an exporter, has once again been reconsidered by the Secretary for Commerce who, in terms of section 11bis(4E) of the Act, is responsible for determining the amount to be included in the exporters’ marketing expenditure; and a recommendation that this concession be withdrawn has been approved by my colleague, the Minister of Economic Affairs, and I concur with him.

It is proposed that no application for a determination of the special discount which is received after 30 June 1977 be considered by the Secretary for Commerce.

This will not cause hardships or embarrass exporters as they could, and did, establish in advance whether they would in principle qualify for the allowance. Amendments are also proposed in clause 10 of the Bill to ensure that there will be no overlapping of cash grants given to exporters by the Department of Commerce and tax concessions granted under the Income Tax Act. As the provisions regarding primary market research, foreign storage facilities, travelling and hotel expenses of visiting foreign buyers and the cost of participating in foreign trade fairs now read, it is possible for an exporter who receives a grant from the Department of Commerce and/or a tax allowance in respect of these items to make a profit on the expenditure incurred by him on these items.

The proposed amendment, which provides for any recovery or recoupment of such expenditure to be set off against the expenditure on which the allowance is calculated, will remove this anomaly.

The last matter I wish to mention under the heading of the exporters’ allowance relates to paragraphs (a), (d), (e) and (0 of section 11bis(4). In those paragraphs reference is made to the export and marketing of goods and to buyers and there is therefore considerable doubt as to whether a taxpayer operating an export service industry, and who does not export goods—as defined—can claim the allowance in respect of expenditure incurred under those headings. The amendments now proposed will clear up the matter.

Mr. Speaker, this concludes my dissertation on the main areas of the Bill. There are a number of minor, but perhaps equally important matters, which are dealt with adequately, I hope, in the explanatory memorandum and I shall not dwell on them here.

I wish to inform hon. members that the tax exemptions I announced under my Vote in respect of the interest accruing to holders of Defence Bonus Bonds, Defence Prize Bonds and 8% Treasury Bonds were announced too late for incorporation in this Bill without further delaying its introduction, but I wish to assure the House that the appropriate amendments to the Income Tax Act will be introduced next year with retroactive effect.

I am aware that I am talking at some length …

Hear, hear!

… but there is one more matter for which I would ask hon. members’ indulgence, namely that I wish to refer to the allegedly high marginal rates of income tax in South Africa. Hon. members will remember that during the discussion on my department’s Vote mention was again made of the high marginal rate of tax and the maximum rate of 72% was then compared with the maximum marginal rates of tax in certain other countries.

Such a comparison can be misleading as the rate of tax cannot be viewed in isolation. It must be evaluated with regard to a host of other factors, for example, the tax structure as a whole, i.e. what other taxes are in operation; a country’s political structure, i.e. the levels of government and the taxing powers and financial responsibilities at each level; the spread of wealth of the population; the sources available and, most important, the range of income tax rates, i.e. the commencing rate, the rate of progression, the maximum rate and the income level at which it is reached.

Although the maximum marginal rate is important, it is not the rate at which the total income is taxed as it is sometimes represented to be.

The marginal rate does not represent the total tax burden; it is in fact the rate at which successive increments of income are taxed and, in South Africa, the maximum marginal rate applies only to that portion of taxable income which exceeds R28 000, for married persons, or R24 000 for unmarried persons.

It is true that our maximum marginal rate of tax—66% tax and 6% loan levy—is higher than one would like to see it, but our overall tax burden, that is the slice taken from our income by way of income tax paid, is probably the lowest among comparable countries— comparable in general terms because there are no two countries quite comparable with each other.

It was stated in the debate under my Vote that our maximum marginal rate of 72% compared unfavourably with those of other countries such as Australia where the rate is 65%; in Austria, 62%; Canada, 47%; West Germany, 46%; Sweden, 65% and the USA 70% on incomes of $200 000 and more. No mention was made of the total tax structure or the other factors I mentioned earlier. I do not think that comparisons with the United States and European countries are sound or even fair. Let us rather compare our position, if we must compare, with countries with whom we have more in common, for example Australia, New Zealand and Canada. First of all, the ranges of marginal rates: South Africa’s starting rate for married persons is 9%; Australia, 20%; New Zealand, 19,5%; and in Canada, including the average provincial income tax, 12,4%.

These starting rates as well as the progressive marginal rates that follow, all have a bearing on the ultimate amount of tax payable as it is the accumulative effect of marginal rates, applied to the various categories of income, that add up to the total tax payable.

The rate of progression, i.e. the number of income categories required to reach the maximum marginal rate, is as follows: South Africa, 29%; Australia, 7%; New Zealand, 22%; and Canada, 12%. The maximum marginal rate and the income level at which it is reached is as follows: South Africa 66% tax and 72% with the loan levy which is reached at R28 000. In all fairness the comparison should be between the taxes of the various countries and I believe that the repayable portion should be ignored. In Australia it is 65% reached at R26 803; in New Zealand it is 57,2% reached at R18 107; and in Canada it is 64,5% reached at R57 549. The result of all this is that the percentage of income paid by way of income tax on total income is, in respect of a married couple with two children and where the husband is the sole breadwinner. On an income of R5 000 5,9% in South Africa—that excludes the loan levy—15,1% in Australia; 20,7% in New Zealand; and 6,5% in Canada. In other words, ours would be the lowest and in two comparisons, very much the lowest. On an income of R10 000 it is 12,7% in South Africa; 22,6% in Australia; 34% in New Zealand; and 18,3% in Canada. On an income of R20 000, the figures are as follows: South Africa, 25,9%; Australia, 31,4%; New Zealand, 43,5%; and Canada, 29,7%. Again we are the lowest. So one can go on. Let me take an income of R30 000, to get above the R28 000 bracket.

But do you really think this is a realistic comparison?

Absolutely. For an income of R30 000, the figures are as follows: South Africa, 36,6%; Australia, 38,1%; New Zealand, 48,1%; and Canada, 36,4%. Suffice it to say that South Africa compares exceedingly favourably, and if regard is had to the fact that 98% of all South African taxpayers have incomes of R20 000 or less, I think that the main body of taxpayers would rather be here than elsewhere, from a taxation point of view. I have been accused of failing to do many things, for example of not having done much to reduce the marginal tax rate. I do not think that is a particularly kind remark. My department is paying constant attention to improving the tax rate, but in the final analysis it is the yield that is required for budgetary purposes that must dictate the level of taxation.

What about married women?

It is the easiest thing in the world to reduce taxation to seek popularity, but it would be highly irresponsible if this were to be done and we were to end up with even greater calamities which deficit budgeting can bring in its wake. I therefore ask those who clamour for a reduction in the maximum marginal rate without looking at the effective average rates of tax, i.e. what people actually pay at particular levels of income: Have they ever considered how the tax rates are made up? There are (a) the basic marginal rates; (b) the decreasing abatements where the taxable income is above R5 000; (c) the 10% surcharge; and (d) the 10% loan levy. I think it would be a futile exercise to tamper with the basic rates whilst retaining the other appurtenances. The way to go about a tax reform might well be, firstly, to abolish the surcharge and the loan levy as soon as we can afford to do so. This would reduce the maximum marginal rate to 60%, but would mean a sacrifice of R343 million in tax and loan revenue on present estimates. Secondly, there is the abolition of the diminution of the abatements beyond R5 000. This would smooth out the tax curve, but would entail a sacrifice of R170 million in tax revenue. Thirdly, one could consider an amendment to the basic rates. Here there are many variations which could be applied, and I shall quote the results of only two. I can assure the hon. member for Durban Point that I have now virtually finished.

Firstly, if the rates are left unchanged up to R16 000 for married persons and R12 000 for single persons, and the subsequent progression is less steep as a result of widening the bracket so that the maximum of 60% is reached at R40 000 for married persons and R36 000 for single persons, the tax sacrifice would be approximately R35 million, but such a revision would benefit only 2,3% of the taxpaying population. That is, of course, one of the problems. In view of that effect, one is led to ask whether that would be a correct approach. I say this because the principle of ability to pay applies equally to all taxpayers and, of course, not only to the select few. Secondly, if all the rates are adjusted to reach 60% at R40 000 for married persons, or R36 000 for unmarried persons, this would require the sacrifice of no less than R750 million in revenue.

I trust that what I have said about the tax rate may help to put the matter in better perspective. It is easy to talk of changing the tax structure, but there are, of course, many far-reaching implications, and the question is that there is always the piper to be paid. Finally, I want to assure hon. members that no Government—and I think least of all this Government—would wilfully impose more burdensome taxes than are absolutely necessary. That this is both our policy and our practice is demonstrated by the fact that despite the heavy calls on our resources, there has, in fact, been no increase in the rate of income tax this year, either for individuals or for companies. Our aim is a reduction in the rate of tax. Both my department and the Standing Commission on Taxation Policy are constantly labouring to this end.

Mr. Speaker, I feel I owe you an apology for keeping you so long but I could not resist the temptation to clarify some of these issues affecting income tax.

Mr. Speaker, I would like to start as I have on previous occasions today by thanking the hon. the Minister and the officials of his department for the very comprehensive explanatory memorandum which has been given to us in connection with this Bill. As you have heard from interjections from this side, Sir, an understanding of the Income Tax Bill does not come so easily to all of us as members of Parliament. An explanatory memorandum such as we have received is extremely helpful to us.

It is a pity somebody did not explain it to the hon. the Minister.

One of my regrets is that the hon. the Minister did not release his Second Reading speech in time for us to study it before this debate. He has given us a lot of facts and figures regarding tax rates in this country and compared them with tax rates and marginal tax rates in other countries. This is information which is no doubt very interesting but it is information that requires very careful study if one is going to draw conclusions from it. Later in my speech I will come to certain comparisons that I have made and the conclusions that I have drawn will be somewhat different from the conclusions that the hon. the Minister has drawn.

This is another Bill, like most of the taxation Bills which we have dealt with today, which contains some features which we welcome and other features which we find unacceptable. First of all, I would like to deal with three of the features of this Bill which we welcome. The first is in regard to the introduction of the taxation of agricultural co-operatives. We regard this in principle as being a fair and equitable step to have been taken. Co-operatives for long have enjoyed a very privileged position as far as taxation and licensing are concerned in comparison with their counterparts of firms doing the same sort of business in the private sector. Under the provisions of this Bill agricultural cooperatives are now going to be eased into the position of being entities, taxable entities. I think that the hon. the Minister is being very kind to them in easing them into this taxable situation in a very gentle manner. There are for instance concessions given to co-operatives such as the deductibility of loan repayments which, I think, will ease the initial burden of taxation on co-operatives very considerably. I do, however, think that the hon. the Minister must not lose sight of the ultimate aim of equity in taxation of co-operatives, which is complete equality as far as the tax burden is concerned for co-operatives vis-à-vis private firms.

Is the hon. member prepared to give the co-operatives equal rights with the private sector?

I am prepared to put them on a complete basis of parity.

The second measure in this Bill which we welcome is of course the increases in various abatements which have been allowed, namely increased abatements for insurance premiums, for contributions to provident and benefit funds, increased medical expenses and increased contributions to pension funds and retirement annuity funds. These small reliefs are all very welcome. In fact, I would say that these are the crumbs which are going to be enjoyed by the heavily taxed taxpayer in South Africa. I hope these small reliefs, these small increases in abatements, are going to be some counter to the large-scale commandeering of institutional savings, by giving an incentive to save more by increased contributions to the various funds which are affected by these abatements.

The third provision we can support is the one concerning the changes which the hon. the Minister is proposing in regard to the export incentives contained in this Bill. These amendments are primarily to iron out administrative problems and to close certain loopholes which have developed in the administration of the export incentives scheme.

A little slower please. [Interjections.]

You come and make my speech for me. [Interjections.] I believe that the export incentive scheme is an attractive scheme and provides a considerable reward for exporters who make the effort to export successfully as a result of it. However, I also believe that the benefit of the incentives in this export tax scheme is not generally well enough known amongst or appreciated by businessmen. I therefore think that in future the effort of the Government should not be directed in any way to increasing the actual financial benefits, but should be directed in making these existing incentives better known and understood in the business world generally.

I now come to the main purpose of the Bill, and that is that it sets out the income tax and loan levy rates for the current year. Here we are dealing with a Bill which provides the State with its principal source of revenue. According to the estimates, a total of R4 641 million is going to accrue to the State coffers as a result of this Bill. Roughly half of that is going to be paid by private individuals and roughly half by companies and mines. This total amount that is dealt with in this Bill represents roughly two-thirds of our whole budget as far as the income from revenue is concerned. It represents approximately 15% of our whole national income. That is the broad picture of what we are dealing with in this Bill. No one will deny that the transfer from the private sector to the public sector of a sum of this relative and absolute magnitude, is going to have a profound effect on the economy and its performance. To obtain this sum private individuals are to be taxed for the second consecutive year at rates which are approaching historically high rates. Companies are to be taxed for the second consecutive year at rates of taxation that are so high that they are record rates.

Now I would like to make some comparisons in regard to the burden of taxation in South Africa. As far as I have been able to ascertain, income tax in South Africa, as a percentage of total taxes, is higher than in any other country in the world. This comparison with other countries includes Austria, Belgium, Germany, Italy, Japan, the United Kingdom, Canada, Denmark, France, the Netherlands, Norway, Sweden and the United States of America.

Is that in respect of all taxes?

No, this is in regard to income tax expressed as a percentage of all taxes. Therefore, the burden of income tax in South Africa, expressed as a percentage of all taxes, is higher than in any other country I have been able to get information about. As a percentage of the gross national product, income tax in South Africa is higher than in most other countries. The only other countries I have been able to find where income tax as a percentage of the national product is higher than it is in South Africa are Canada, the Netherlands, Denmark, Sweden and the United Kingdom.

They are all socialist.

Yes, they are all socialist countries.

Not Canada.

No, Canada is not socialist. Sir, I think that that is a valid comparison of the burden of income tax in South Africa as opposed to other countries.

Mr. Speaker, I would also cross swords with the hon. the Minister in regard to the effect of marginal rates of taxation.

You cannot include the loan levies.

I am including it, because it is a tax as far as everyone who has to pay it is concerned. As I say, I want to cross swords with the hon. the Minister on his conclusion in regard to marginal tax rates in South Africa. I am not so concerned here about the actual comparison with other countries. What I am concerned about as regards marginal rates is the effect the present high marginal rates have on our development and our growth rate. I think there are few people who will argue about the fact that these rates have in many cases already passed the margin of productivity and are now producing counter-productive results. I think we have seen the first possible sign of that counter-productivity in the tax returns for April and May of this year when inland revenue for the first time in many years showed a decrease compared with the corresponding period of the previous year. I know there are other factors involved, but the counter-productivity of high rates is certainly one of the factors involved. While the hon. the Minister in his Second Reading speech made comparisons with other countries in respect of marginal rates, in his budget speech, viz. his Second Reading speech to the Appropriation Bill, he admitted, certainly by implication, that our marginal tax rates had reached a level which he would not like to see increased. That this has had to happen for a prolonged period at a time when we are going through the most serious recession since the 1930s I regard as a very sad reflection on the state of our economy. The situation is crying out for certain things to happen. It is crying out for stimulation, stimulation which could be provided by lower taxation and which could engender growth to relieve unemployment. It is crying out for encouragement of productivity which could also be provided by lower tax rates.

However, the story which this Bill has to tell us is that we are in a straitjacket and we cannot have relief from these high rates of taxes because we are in such a straitjacket. We cannot have relief for two reasons: First of all because our balance of payments situation is not under control and, secondly, because we have not licked double-figure inflation. I say that it is an indictment of the Government that these problems remain unsolved. The balance of payments situation remains unhealthy primarily because of the decrease in the inflow of foreign capital, which is without any doubt caused by the lack of investor confidence in our political direction.

Inflation remains with us, despite the damping effect of a stagnant economy, despite the anti-inflation manifesto that has been with us for 18 months and despite the high rates of taxation and the monetary measures taken to dampen the economy. It remains with us because the Government is still spending too high a proportion of our national income on unproductive controlling of the lives of virtually every one of us.

Hear, hear!

Inflation remains with us because whenever it shows any signs of abating the Government comes along with measures which add fuel to the fire, measures such as the petrol excise duties to raise money for Sasol, sales duties, import surcharge, electricity surcharge, etc., etc., etc.

These are the factors which are behind a Bill which presents this House with tax rates as high as they are in this Bill. This is a situation which is quite unacceptable to us on this side of the House, and as we cannot see the Government taking the necessary steps to cure the weaknesses which have caused these high tax rates, we will oppose this Bill at Second Reading.

Mr. Speaker, the hon. member for Constantia was very level-headed this evening. In the first instance I agree with him wholeheartedly about the excellent memorandum which we have at our disposal, and I want to join him in paying tribute to the hon. the Minister and the officers of the department for this memorandum, as well as for the illuminating second reading speech by the hon. the Minister. As the hon. member has justifiably said, this is a technical Bill. It is very complicated and if one does not have access to these documents beforehand, it is not so easy to study the legislation. Therefore, I also want to express the thanks of our side of the House for this.

The hon. member mentioned three things which he agreed with and made it clear that he was opposed to others. We understand the hon. member’s attitude very well. After all, he really cannot agree with everything. They have to go and form another party and that is why they must at least be able to tell the world that they asked for lower tax. [Interjections.] We understand this coming from the Opposition. The hon. member also made a few positive statements and I shall deal with them.

I want to turn to one of the measures which the hon. member welcomed, i.e. the one concerning agricultural co-operatives. The argument of the hon. member was that he would like to see this measure eventually working out in exactly the same way as in the private sector. However, the hon. member vaguely insinuated that during the year the co-operatives were favoured more than the private sector. I do just want to point out that if the agricultural co-operatives in the country could not function as they have done, we would have had to pay a great deal more for our food. The hon. the Minister can tax these co-operatives today, but then the prices of the products will have to rise so that the farmer will still be able to produce. Whether we want to admit it or not, everyone in South Africa—whether farmer, manufacturer or consumer in the city—has to eat and somebody has to produce the food. This is the function of the whole country: The consumer, producer, dealer and the private sector must contribute towards the production of cheap food. In the past, tax concessions to the co-operatives comprised one of the methods by which to ensure that food could be produced cheaply.

Hear, hear!

In connection with the income tax rates which have been increased, this hon. member drew his own comparison. Unfortunately I do not have the figures which the hon. member for Constantia presented and therefore I cannot go into the matter. However, one cannot go into matters like this across the floor of the House either. I do not want to differ with the hon. member if he alleges that income tax in South Africa, expressed as percentage of total taxation, is the highest in the world. This may be so, but what does it mean? All it means is that we in South Africa have a very low indirect tax. The direct tax is very high and therefore we have a very low indirect tax. This means that the vast majority of people generally score on this. This year I ask that we should equalize this ratio by reducing direct taxation. The hon. the Minister pointed out that the Standing Taxation Committee is considering these matters in order to see what they can do about them. I am pleased that the hon. member emphasized this, because we on this side of the House support this. I should like to thank that hon. member in advance for supporting me in this matter. If we can levy more indirect tax and less direct tax, the ratio will be more balanced.

The hon. member also contended that the taxation, expressed as a percentage of the gross domestic product, is higher than in most other countries of the world. Unfortunately I do not have the necessary figures and therefore I cannot reply to him on this. After all, it is not fair of the hon. member to include the loan levy while referring to the marginal scale. The hon. the Minister pointed this out to him as well. After all, it is impossible to add the levy to the taxation. How can one do this? If one wants to compare, one must compare taxation with taxation. For a married man who earns more than R28 000 in taxable income, the taxation scale is 60%, plus a 10% surcharge, which then gives us a total of 66%. The additional 6% loan levy which pushes the taxation scale up to 72%, can definitely not be added when one compares South Africa with other countries. The hon. member must not make his good arguments quite ludicrous by dragging in an argument like this.

The hon. member also maintained that we spend far too much on unproductive things and, believe it or not, gave Sasol as an example. Does the hon. Opposition want to tell me that they are opposed to South Africa building Sasol 2, so that, as far as oil is concerned, we can be more independent of the outside world? I do not think that the hon. Opposition and the hon. member are serious when they make such an allegation. As far as this is concerned, we must see to it that we do not criticize those things which are of the utmost importance to South Africa. I think that Sasol 2 is one of the projects most important to South Africa and therefore should enjoy top priority. The money needed for Sasol 2, is not so much, especially not in view of the amount spent on defence. I could mention a string of examples in this regard.

Amongst other things, the hon. member referred to a crash programme for Bantu education. But taxes which are collected, are largely intended for those items which the hon. members are asking for. I am thinking for instance of the subsidy which we pay on Bantu transport, for train services and for bus services. This amounts to almost R90 million. This is what these taxes are spent on. Is this, then, unproductive? We as the Government will not tax unnecessarily—this is the policy of the hon. the Minister; we only do our best. If we could say this evening that we would get rid of taxation, then surely we would rejoice, because then we would be in power for ever.

Mr. Speaker, I would like to join the hon. member for Sunnyside and the hon. member for Constantia in thanking the department for the explanatory memorandum. With respect, I think it goes to the credit of the hon. the Minister that in respect of all the Bills we have had, we have had very good explanatory memoranda. I think it makes the task so much easier for all of us. Therefore I think it has to be said that we do appreciate it.

The debate has turned in a rather strange way in that, on a long piece of legislation, the major portion of the debate has related to marginal rates of taxation. What is of course being ignored is that, as a result of fiscal drag—that is due to inflation—the figure of R28 000 being the level at which the top marginal rate commences, has remained constant for many, many years. That is of course an unfair situation. It is quite obvious that when one was paying a top marginal rate of taxation 10 years ago one was paying it on a real income quite different from the income on which one is paying it today. I think the case that can be made out—a case which, I think, is unanswerable—is that that level of R28 000 should be moved in order to keep some sort of relation between that figure and the real value of money and the earnings of people.

The other point is that it is quite a ludicrous exercise merely to compare rates of taxation when one does not take into account the other material factors. I think the real test is to compare disposable income after tax in relation to the purchasing power which that disposable income has, and in relation to the income level in that particular country. Let us take an example. The hon. the Minister spoke about Canada. Anybody who looks at Canada’s wage levels will know that a shorthand typist earns in Canada as much as hon. members of this House earn in South Africa. With respect, how does one really compare those sort of income levels? It is quite ludicrous then to make comparisons in relation to this.

With great respect, one cannot just take these levels and compare them without taking into account the other factors. Then we also have to look at the services, the social services, which the State renders. Where, for example, is the equivalent in South Africa of the service in respect of the medical provisions which are provided in a country like Canada?

And Australia.

Where is it? Where is it as in Australia, as the hon. member for Houghton points out? Where can we compare some of the pension benefits that are given to people in those countries as opposed to here? If one takes all these things into account, then only can one make a real assessment of what the comparative structures are. However, I think it is an idle exercise to seek to select particular figures from any particular country without taking all the factors into account and then to say that we are better off in South Africa. With great respect, Sir, that is not a logical argument.

If I may, I would like to look at one other matter which the hon. member for Sunnyside referred to. If I understood him correctly, he argues that he prefers to see higher indirect taxation, and as a result of that, lower direct taxation.

That is right.

The hon. member confirms that that is what he has tried to convey. If the hon. member will remember, the Franzsen Commission said we should have indirect taxation, something we did not have. As a result of that, the commission said, we would be able to reduce direct taxation. However, what happens to a tax-hungry Government? They impose the indirect taxation and then they do not decrease the direct taxation. I want to make a forecast. When we have more indirect taxation in South Africa we will have a temporary little decrease in direct taxation, and then the tax-hungry Minister will push it up again. That is exactly what happened after the recommendations of the Franzsen Commission were put before us. [Interjections.] That is precisely what happened.

The other point which, I think, we cannot ignore—and I think the hon. member for Sunnyside should remember it because he has a responsibility to an electorate the same as we have—is that indirect taxation hits the lower income group far more than it does the higher income group. It is true. The taxation burden is spread wider, but there is little doubt that the lower-income groups are hit more by indirect taxation. That is something we have to bear in mind. One of the questions which I have asked the hon. the Minister …

Mr. Speaker, will the hon. member agree that by imposing indirect taxation, relief can be granted to the 2,3% to which the hon. the Minister referred, the top group, mostly employers?

The mistake which the hon. member makes is that he thinks that if indirect taxation is increased, there will in fact be relief for the small top group of people. This cannot happen. I predict that this will not happen. I shall return to this in a moment to prove that the economic situation in South Africa today is in fact of such a nature that it is impossible to do this. I shall prove it. I think there are problems in this regard, but before I come to that, I wish to put another question to the hon. the Minister.

†I have asked the hon. the Minister before whether he does not believe there should be one Income Tax Act in South Africa that applies to all races in South Africa and that all races are taxed equally on the same basis, without discrimination. Why should the income tax legislation only apply to Whites, Coloureds and Asiatics? Why does it not apply also to Blacks in South Africa? Why have we heard nothing about the inquiry that is supposed to be going on into this particular issue? There is a complete injustice in taxing people of a different colour at a higher rate than others. There is no doubt that at the lower levels of income in South Africa the Black man pays a higher tax than does the White, the Coloured and the Asiatic. There is no logic for it, and I have quoted examples. What is remarkable, however, is that in the higher income group, the income group which the hon. member for Sunnyside is worried about, at the R20 000 level, the Black man pays less than the White man. The illogicality of this is that if one takes the small number of Whites who earn over R20 000 per annum, the number of Blacks who earn over R20 000 must surely be infinitesimal. The logic of this escapes me, and I cannot get an answer from the hon. the Minister. I want to appeal to the hon. the Minister on this occasion to give us what his views are, whether there should not be one piece of legislation in that regard.

I should like to draw attention to another matter, viz. in relation to the level of taxation, and I should like to quote from the Economic Development Programme for 1976 to 1981. It says—

That is what I was talking about a moment ago. It goes on—

Sir, our population is increasing at a rate of about 3% per annum. Therefore, with rising aspirations on the part of the people who are at the lower levels of income, there is little doubt that this will have to be satisfied by more expenditure on social services. The difficulty we find is that we are not financing the expenditure of Government from ordinary income, from income from taxation, but what we in fact have been doing is that we have been financing the fiscal deficit by means of loan moneys obtained from overseas and locally. When the hon. the Minister talks about there not being deficit budgets, he knows as well as I do that the fiscal deficit, viz. the difference between the income from taxation and the expenditure of Government, in 1974 was almost R600 million, by 1975 had increased to over R1 800 million, while in 1976 it was also about R1 800 million. But because of the problems for the current year, it is now being reduced. And it has to be reduced because of the problems in relation to capital.

On top of that we have the situation that the Deputy Governor of the Reserve Bank has indicated that some 3% of our gross domestic product comes from foreign capital, and we have to adjust ourselves to a situation where that might not be so readily available. The question that has to be put and clearly answered tonight is whether, instead of reducing taxation next year because he has kept it at the same level this year having obtained the money from insurance companies, banking institutions, building societies and all sorts of people, the hon. the Minister is not going to come with far more demands in respect of taxation next year. The difficulty is that the fiscal deficit which has existed, has to be financed in some form or another by loan capital and it is going to be decreasingly financed by way of foreign loans.

But not domestic loans.

You are getting domestic loans because you are forcing people to lend the money to you. You are compulsorily forcing people to lend you money. That is the whole argument we have had for days and days in this House. The degree of voluntary investment in Government stock is very limited. The issue that I want to put to the hon. the Minister is whether there is not a case to be made for a complete inquiry as to whether we can continue to spend at the rate Government expenditure is taking place at the moment. It must also be established whether priorities need to be reviewed because we are going to find ourselves in a situation where we have problems in regard to foreign capital which will require us to review the whole position in respect of both expenditure and income. We will also have to look at the question of the fiscal deficit in the years that lie ahead. Cannot a case be made out for a commission of inquiry to go into the situation as to where our priorities lie, where the money is going to come from and where further taxation can be raised without killing incentive? The tragedy that exists today is that with a high degree of marginal tax, indirect taxation, inflation and the lack of confidence which unfortunately exists, the incentive to work and save has to a large extent been killed. Both these aspects are essential for the future of South Africa. I believe that we have to look at this whole structure again. The premises on which the Franzsen Commission operated are outdated. I think we are in a different ball-game.

The whole economy is now in a different ball-game. I believe that we now need a new inquiry in order to establish our priorities of expenditure and our ability to raise money in order to finance that expenditure. One thing is clear, and that is that in the years ahead we are going to have increasing demands for defence expenditure, and on top of that, there is no doubt that we have to satisfy the aspirations of people in South Africa who are not at the present moment treated equally in respect of social services. That is going to require more and more money as we go along. This means that we are going to have two hungry things upon us. They are going to feed upon us and we now have to find the money in order to satisfy them. I believe the time has come for this inquiry to be held without further delay.

May I deal with some of the specific matters which exist in this piece of legislation ? Firstly, there is the question of co-ops. I think this is a start in respect of this matter. I do not believe that this is the final form this legislation will take. I do not believe that it is entirely fair at the moment nor is it entirely effective. However, I believe it is at least a start and one can therefore support these provisions at this stage.

I want to make two points in respect of what the hon. the Minister said. He drew comparisons between different institutions which were taxed on a different basis. I think it is a good point, there is no question about it. However, on has to approach competing businesses on a similar basis because if they do compete, then certain norms must be applied to both. The second aspect which I think the hon. the Minister overlooked is that it is quite true that what is paid to farmers from co-operatives is taxable, but so are dividends which are paid by companies, even though the companies have already paid tax. Admittedly, the dividends are taxed at a lower rate. The principle, therefore, is no different from this.

The second point I should like to deal with is the question of savings. I must say that I continue to have a feeling of disappointment about the hon. the Minister’s approach towards saving because he will not accept the concept that in this inflationary age in which we live, when the Government demands and compels investment in Government stocks, there is also an obligation on the part of the Government to provide an inflation-proof investment, and to provide that investment in the form of an index stock for pension funds and to provide for it, in particular, for the person who has to save for his old age.

It is true that here there are further concessions to saving in respect of retirement annuities, but let me tell the hon. the Minister that it is clearly accepted in South Africa today that one can hardly find an investment for a retirement annuity fund or anyone else to go into which can keep up with the rate of inflation and show one some eventual profit. One of the tragedies of South Africa today is that the backbone of the country, the people who save for their old age and do not want to be dependent on social pensions, are having to be satisfied with continually decreasing standards of living. I have hundreds of these people living in my constituency. Husbands save throughout their lives, for example, so that their wives can eventually have a reasonable standard of living, but every year the standard of living of those women goes down because inflation erodes their savings and there is no means of investing in order to keep up with inflation. I believe that a Government which has the greatest interest in inflation, because it borrows good money and then pays back Mickey Mouse money 20 years later, has a responsibility to ensure that these people can retain their standard of living since they have saved up for it. They are the backbone of the country. They do not rely on social pensions.

You would do the same if you borrowed money.

Certainly I would also pay back Mickey Mouse money after 20 years, but the difference is that anyone who lends me money does so voluntarily, whereas in the hon. the Minister’s case one is compelled to lend money to the hon. the Minister. One has to lend it. One has no choice. Pension funds have to lend more than 50% of what they have to the hon. the Minister.

I now want to deal with the aspect in the Bill concerning the increase in building society shares from 7½% to 8%. The hon. the Minister has provided two other savings media at the moment, and I am forgetting for the moment about the lottery defence bonds. He has provided the new premium bonds which are going to show an interest rate of 8%, and in addition to that there are the existing Post Office Savings Certificates which also give a return of 8%. By the way, I believe that those certificates are one of the best investments available, but what about the building societies and the subscription shares? Is it fair to keep those at 7½% so that they cannot compete with the new premium bonds, and is there not a strong case to be made our for the hon. the Minister also to authorize that building society subscription shares can also pay 8% tax free? I should like a reply to this from the hon. the Minister because I believe that money would be lost to the building society movement unless these changes are, in fact, made.

I also want to deal with export incentives. I think that the hon. the Minister has plugged up some of the loopholes, but with great respect there is still another matter to look at. I am referring to the fact that it seems as if the whole system of export incentives needs to be looked at again with a broader vision, and looked at with a view to eliminating some of the other abuses that are still taking place. I believe that there is a strong case to be made out for a complete inquiry into export incentives.

I just want to mention the subject of married women because the hon. member for Houghton will speak about this in more detail. I believe that it is only the minor concessions that she requested, that have been granted here, though I am grateful for even those minor ones. There is still no real incentive for the married woman to work. I believe that the hon. the Minister is making a mistake in not creating an adequate incentive for this.

I would like to touch on the donations tax, where the hon. the Minister is making a change in respect of non-resident property. We support this change. I would like, however, to draw the hon. the Minister’s attention to another matter, and that is that the donations that are allowed to be made to children without the paying of donations tax are fixed at R10 000 per child, with a maximum of R30 000 on an accumulative basis. That has remained constant for many, many years, and with the inflation that has taken place, is there not a case here for increasing those levels? I would like to suggest to the hon. the Minister that he should double the amounts from R10 000 to R20 000, and from R30 000 to R60 000. I believe that the present amounts are archaic. It is quite clear that inflation has overtaken them.

I would like to make one last plea, and that is that there are tax concessions being granted here to farmers in respect of implements, and to all sorts of other people, but I would like to make a plea for the flat-dweller of over 60 years of age, who is battling to maintain a reasonable standard of living, to be allowed to deduct his rental for tax purposes. The hon. the Minister knows that in other countries of the world this is deductable, irrespective of age. In yet other cases interest in respect of the occupation of houses is deductible. In the South African scene today, with what inflation has done to elderly people, for what has happened to their savings and for the problems which they face in trying to maintain a reasonable standard of living, I believe that a very strong case can be made for the aged to be allowed to deduct their rental from their income before paying tax. On behalf of these people, who made their contribution to society and are now battling to keep up their living standards, I appeal to the hon. the Minister for some concession being granted to them.

In respect of the technical matters, we have very little quarrel with most of the provisions of this Bill, but in regard to the tax structure we join with the hon. member for Constantia in saying that we will vote against this measure.

Mr. Speaker, unfortunately time does not allow me to reply fully to the hon. member for Yeoville. I want to content myself by saying that we have already become accustomed to the Opposition wanting the best of both worlds at all times. On the one hand he is asking for a drop in taxation for the higher income groups and on the other hand he is asking for a drop in taxation for the lower income groups. And then he criticizes the hon. the Minister once again because he spends certain amounts of money. We have already become so accustomed to this that one does not even want to reply to it any more, but as far as the hon. member’s speech is concerned, I have just one more point to make. He asked why we do not have an Income Tax Act for all races, including the Blacks, in this country. I think that he should go and study the policy of the NP a little better. Then he will know why our taxation is not the same for everyone. I also think that the hon. the Minister will not let himself be hoodwinked so easily.

To begin with, I want to refer to clause 24, which the hon. the Minister has already dealt with in detail. It is probably one of the biggest concessions made in the sphere of agriculture for a long time, the concession in respect of the writing off of machinery. I think that I am speaking on behalf of the grain-farmers in this country in particular when I say that this concession is going to be extremely valuable. I am thinking of the wheat industry in particular here, which is saddled with a tremendous problem. With the increase in production costs, this concession will be invaluable. We express our thanks for this concession. I believe that the whole agricultural sector is grateful for it.

With the introduction of this Bill, I think the hon. the Minister has made history, in that a year’s struggle about the taxability of co-operative profits is now being ended. I should like to place on record the heartfelt gratitude of all who have been involved in this matter over the years. I am aware of hour-long and day-long discussions which have been held over the past two years in particular. I am also aware, however, of the considerable differences which it was possible to eliminate due to the discussions. To me, this is evidence once again of the fact that when people who have a common goal in mind gather around a table with the honest intention of trying to find solutions to their problems, these problems will ultimately be solved to the satisfaction of all. On behalf of the South African Agricultural Union and especially on behalf of its co-operative branch, I want to express my thanks to all the heads of departments, as well as to the Cabinet Committee for the particularly sympathetic approach which was shown during these negotiations and especially for the spirit of conciliation.

The hon. the Minister’s particular role in the peaceful settlement of this matter, cannot be over-emphasized. That is why we thank him very much.

Mr. Speaker … [Interjections.]

The hon. member for Graaff-Reinet is not even halfway finished yet.

The hon. member for King William’s Town is always the source of some amusement in this House. However, he must be patient, because I will not take up much more time.

Today we accept the principle of co-operative taxation. I can foresee that many growing pains will be experienced in applying the measure to co-operatives. Therefore, what I want to ask for is that the department should apply this measure to co-operatives with great care because we know that problems will occur in its implementation.

†The hon. member for Constantia expressed his delight in the fact that this Bill makes provision for the introduction of income tax to be paid by co-operative societies in the future. He also made the remark that the ultimate aim should be to place co-operatives on complete equity with companies in regard to taxation and to remove gradually the concessions which are provided for in this Bill. I am in full agreement with the hon. member, but on condition that the restrictions under which co-operatives operate should also gradually be phased out. I am of the opinion that we should look at some of these restrictions immediately with the object of removing at least some of them in order to allow co-operatives to operate more freely. I trust the hon. the Minister will give us a good hearing and a sympathetic ear when we approach him with representations in this regard.

*I also want to make this very clear so that there will be no misunderstanding, because the impression may arise that co-operative organizations have never made a contribution towards the Treasury. The hon. the Minister referred to this and I should like to emphasize that it is a fact that bonuses which have been paid out by the co-operatives in the past, have always been taxable in possession of the person receiving them. The statement which is sometimes made that co-operative profits have never been taxable in this country, is untrue. The person receiving them has always paid income tax on them.

After the discussions which the hon. the Minister held with the South African Agricultural Union in this regard, a few problems arose. I should just like to dwell on a few of them very briefly. It is an accepted principle that when a co-operative which erects grain silos, for instance, and borrows the necessary money on a repayment loan from the Land Bank, the control board incorporates a factor when determining the agent’s remuneration which enables the co-operative to repay the Land Bank therefrom. A co-operative like this will be entitled in terms of this legislation to claim the repayment of this loan as a deduction annually. If a co-operative has not, however, negotiated such a fixed payment loan, but finances its storage buildings, machinery and plant in another way, the factor incorporated in the agent’s remuneration by the control board for the repayment of loans used for storage buildings, machinery and plant will in fact be taxable. This holds for a co-operative which does not have repayment loans. I think we shall have to take a look at this, because I am aware of the fact that some co-operatives did not in fact make use of Land Bank loans for the financing of buildings and machinery.

Another problem which I just want to mention briefly, is the period of 10 years. I want to ask the hon. the Minister whether it is not possible to make this period the same as the period determined by the National Marketing Board for the repayment of this type of expenditure in determining the agent’s remuneration in the case where a control board handles the product in terms of the Marketing Act. I want to ask whether it is not possible to reconsider this term in the light of these facts.

A third problem on which I should like to dwell briefly, concerns the amalgamation of co-operatives. A problem has crystallized out here, too, after the S.A. Agricultural Union held discussions with the Minister. Hon. members will know that when co-operatives amalgamate they disappear entirely in terms of section 94 of the Co-operatives Act and a new organization is founded. All assets and liabilities of the old co-operatives are then transferred to the new co-operative, and this has a few far-reaching implications, of which I should just like to point out a few briefly. If there is an estimated loss amongst cooperatives which want to amalgamate, it will fall away on amalgamation. Secondly: Assets possessed by the co-operatives before amalgamation, will be considered as new purchases when they are taken over by the new co-operative, and will be subject to loss of value from the beginning. Thirdly: Debts which occurred before amalgamation, but which are written off after amalgamation, will not in my opinion, be deductible. Fourthly: The Bill provides that a co-operative can deduct bonuses paid within six months after the conclusion of its financial year, as permissible expenditure. Therefore, when cooperatives amalgamate and the old cooperatives disappear and a new one is formed, the old co-operative cannot convene a member’s meeting, because in fact it does not exist any longer. Consequently it cannot convene a members’ meeting to declare a bonus, and this creates problems for us too. I think that the problems in connection with amalgamation can be better rectified—I ask the hon. the Minister to give his opinion on this—by amending the Co-operatives Act. Perhaps urgent attention should be paid to this.

Mr. Speaker, we in the co-operative sector welcome this legislation. We accept the challenges and we assure you that we will make our contribution towards stabilizing and expanding the economy of our country.

Mr. Speaker …

Mr. Speaker …

The hon. member for Houghton has the floor. I saw her first.

Sir, it seems that the hon. member for King William’s Town has once again been thwarted. However, I shall not keep the House very long. There are just one or two points I wish to make.

First of all I want to support the plea made by the hon. member for Yeoville for the implementation of one taxation system for all races in the country. The hon. member for Sunnyside appears to think that the arguments used by the hon. member for Yeoville are not valid. I would simply like to point out to him that there is a myth abroad in this country, and that is that the Whites carry the full burden of subsidizing all the services—housing, welfare, etc.—for Black people and that Africans pay no taxes.

Only a very little.

The hon. member says they pay only very little. Well those who do not earn, cannot pay. I think he will admit that that is equitable in respect of any modern country, i.e. that one pays according to one’s ability to pay. Here in South Africa Africans begin to pay taxes when they earn R360 per annum, whether they are females or males. I may also tell the hon. member that White, Coloured and Indian taxpayers begin paying when they earn R700 per annum if they are unmarried and at R1 700 per annum if they are married. I would also like to point out that Africans do not get the rebates that members of other races get. They do not get any rebate for dependants, for insurance policies, for medical or dental expenses or for any of the other items for which Whites, Coloureds or Indians do get rebates. The hon. member ought to remember that.

They also pay the same indirect taxes as Whites, Coloureds and Indians. So, the myth that Africans pay no taxes should be exploded. Incidentally, they also pay a head tax of R2,50 per person, which Whites do not pay.

Order! The subject of the taxation of all the population groups is only indirectly relevant to the Bill and therefore this point must not be taken too far. There are other matters to be discussed.

Mr. Speaker, I only wanted to put that particular point.

I very briefly want to come to the question of separate taxation of married working women, a subject which I raised at an earlier stage in the budget debate. I do not wish to labour it at this stage and certainly do not want to repeat the points I made then.

First of all I want to thank the hon. the Minister for having removed one anomaly, in clause 15. I am grateful that the hon. the Minister has done that, although …

It was generously intended …

I am very glad that the hon. the Minister has done it. Although I do not want to spoil the beautiful friendship which has suddenly developed between us, I do want to point out, however, that his generosity is, in fact, going to affect very few people indeed. It is only going to affect a very small number of people. No doubt that is why the hon. the Minister has agreed to this concession. Nevertheless, I am grateful for it and I do thank him for his consideration.

But the hon. the Minister has also disappointed me. He said earlier this evening that he was going to tell us about the generosity and the good spirit with which he had considered the whole question of separate taxation for married women. However, I have not heard one word from the hon. the Minister about it tonight. I sat listening most eagerly, all ears, and I might say no mouth, for once. I did not utter one word or make one interjection while the hon. the Minister was talking, because I was hoping that he was going to give us some good news after all. However, we have not heard a single thing from the hon. the Minister. I do hope that in his reply he is going to tell us what it is that he considers as such generosity as far as married working women are concerned. I do not want to cover the ground again. The hon. the Minister knows perfectly well that there are thousands upon thousands of women who are contributing to the national product of South Africa and who feel very hard done by because their earnings are whittled away so considerably when added to the earnings of their husbands, placing them immediately into a higher tax rate where a higher marginal rate applies to them.

I know the hon. the Minister has had a commission of enquiry which, together with the departmental standing commission, has gone into this matter in some detail. I do not believe all their findings are valid as, for instance, they do not know the number of women who would come into the labour field in skilled capacities, where there is still a shortage of skilled people in South Africa. I know there is unemployment in other fields, but in the highly skilled fields there is still a shortage of trained people, while many highly trained women are not working simply because it does not pay them to do so. I want once again to ask the hon. the Minister not to close his mind and his heart to this whole question of separate taxation for working married women. I am obviously not asking for any concessions for people who have unearned income, but I am asking for concessions on behalf of married working women.

Mr. Speaker, the hon. member for Houghton must pardon me if I do not react to her speech. I see the hon. member for Graaff-Reinet is not in the House at the moment, but I nevertheless want to apologize to him for getting up too quickly. As usual, the hon. member made a “thank the Minister” speech and when the hon. member said thank you for the fifth time, I thought he had finished saying thank you. [Interjections.] The hon. member for Graaff-Reinet dealt for the most part with agricultural affairs and amongst other things, he thanked the hon. the Minister for the major concession which he made to the farmers in respect of the wear and tear …

Not wear and tear; depreciation.

No, wear and tear. [Interjections.] The hon. member was terribly grateful to the hon. the Minister for the concession, but it was actually only a very logical step which the hon. the Minister made. It is not something which requires such tremendous gratitude. What is the true position? The depreciation is going to take place over three years.

No!

The depreciation is going to take place in three parts of one year each for three years, instead of 20% per annum. [Interjections.]

You have got hold of the wrong end of the stick!

It is quite logical after all. If the prices of machinery have increased so much, then surely it is impossible for the farmer with an income of R10000 per annum to buy a machine of R12 000 or R35 000. A concession had to be made at some time or other, after all. I am mentioning this because I do not want hon. members to have the impression that this was a farmer’s budget, for that was what the hon. member for Yeoville insinuated. The hon. member said: “Concessions are being given to the farmers and now I am going to talk for the other people.” I can mention several examples where concessions were made.

You are only concerned about the farmers.

Why does he make insinuations about the farmers? Look how the co-operatives are being taxed today, but the hon. member is not yet satisfied. What more does he want? Does he want to destroy the co-operative in this country? The hon. member must say what he wants now. [Interjections.] Unfortunately I do not have much more time at my disposal. [Interjections.] After all, the PRP has spoken twice now and has used up some of my time too in getting in another blow at the farmers. Apart from the concessions which have been made to the farmers in this regard, there are also concessions which concern not only the farmers, but practically everyone. There are the concessions in respect of special tax-free paid-up period shares in building societies—the interest was increased from 7½% to 8%—the retirement annuity funds in respect of which the deductible contributions were increased from R3 000 to R3 500, the income tax rebates on insurance premiums, the increase in deductible medical expenditure from R700 to R1 000 and the deduction not exceeding R750 from the income of married women before their earnings are added to those of their husbands, is now being extended to women who receive royalties. There are also certain concessions for industrialists. An industrialist can even deduct 25% for tax purposes on a house which he provides for his employees. This privilege has also been extended to those who provide houses. I can mention many such examples. This party is not sectional and we do not want to play one off against the other. [Interjections.] I am not making a thank-the-Minister speech. We are an unbiased party. We welcome advantages which are offered in Bills, but we are going to oppose this Bill … [Interjections.] We are going to oppose the Bill for very good reasons and not for sectional reasons. [Interjections.]

We cannot agree with clause 1. This is the clause in which this year’s taxation scales are determined. Although there is no increase on last year’s scales, we want to make it very clear that we believe that last year’s scales could not have been increased in any event. The scale was already so high last year that it could not have been increased any further. [Interjections.] I am not only going to talk about the marginal tax. I am going to talk about the tax which is levied on the higher income groups.

But what about the poor people?

Mr. Speaker, here we have a sectional man once again! [Interjections.] Mr. Speaker, we shall be guided by the interests of South Africa. [Interjections.] I want to make it very clear that we are not opposed to the higher income groups. The people in the higher income group are those who provide the capital for the growth of South Africa. They are also those who provide work to the poor people, as the hon. member for Yeoville says. They are the people who provide the work. Why is the hon. member opposed to them? [Interjections.]

Another reason why we cannot support clause 1 is when we look at company tax. This is 40% plus a further 7½% surcharge, which means an extra 3%. This brings it to 43%. Then there is a loan levy of 15%, which means 6% on the total. The total is therefore 49%. On top of that there is another tax of 33⅓% on the undistributed profits or accumulated profits above R50 000. [Interjections.] Now I want to know what remains. What incentive is there for one to expand?

Rather drink a little water first! [Interjections.]

What incentive is there for anyone to begin a new business undertaking, to provide work, to provide growth in South Africa? Now I want to point out to the hon. the Minister that the undistributed profits … Who is affected by this? It affects the beginner, the man who wants to get on, the young company. [Interjections.] The old established companies built up their reserves long ago. They can resist the pressure. It is the young companies, however, especially the young Afrikaner companies, which suffer most in the process because they are not given the opportunity to build up reserves. I want to emphasize once again that I am not acting sectionally when I single out the young companies. The question, however, is how they must build up their reserves, while they have to pay these extensive taxes.

Hon. members who are now so ready to agree and to thank the hon. the Minister must say whether they agree with me and whether they still believe that everything is as it should be [Interjections.] Now they say that they agree, but with whom? [Interjections.]

Order!

Now I want to talk about personal income tax. [Interjections.] Let us take as an example someone who earns R13 000 a year. Someone like this is not particularly rich. He pays R2 200 in tax. In addition, he pays 30 cents in the rand for every rand which he earns above R13 000. Over and above that he also pays a surcharge of 10% and a loan levy of 10%. Now he is already paying 36 cents in the rand for every rand that he earns above R13 000, and this is not a very rich man.

No, Boet, your calculations are wrong!

Someone who earns R16 000 a year pays R3 100 in tax. [Interjections.]

Order!

In addition, he pays 36% plus a surcharge of 10% plus a loan levy of 10% for every rand above R16 000. This brings his tax to far more than 43% for every rand above R16 000. [Interjections.] When we come to R21 000, he pays R5 620, plus 46%, plus 10%, plus the other 10%; in other words, much more than 50% on every rand above R21 000. Now I want to ask the question: If that man is a businessman, what opportunity does he have to build up capital? [Interjections.] Hon. members must remember, however—the hon. the Minister quoted figures to compare the position with Australia—that over and above this, after he has paid all this tax, he still has to pay municipal tax, divisional council tax, accident tax and, in addition, dog tax into the bargain. [Interjections.] When he goes to sleep at night, his head spins like a gramophone record, with the needle stuck in a groove, repeating: “Taxes, taxes, taxes.” [Interjections.] Once he has paid all those taxes and his living costs too, how is he to build up capital for his business undertaking?

He does not have a chance.

How does he build up capital to expand his business and to get on in life? South Africa, after all, does have a free enterprise system. Surely it is no disgrace to get ahead, as the hon. member for Yeoville wanted to make out, though he is so rich and only represents the rich people. It is no disgrace to want to get ahead, and this party has never said so. This is the basis of the free enterprise system. If the Government wants to become socialistic, however, it must at least make a good job of it. If the Government wants to tax people so heavily, at least it should govern well. It is not, however, even doing that. [Interjections.] I do not want to make a budget speech now, because these matters have already been thrashed out in great detail during this session, but if the hon. the Minister is concerned about where the money must come from, let me allege that the hon. the Minister himself gave the answer this afternoon. Earlier this afternoon he said that the balance of payments has improved so much over the past three months that we now have a surplus, that we are R700 million better off than we were last year.

R800 million.

If we are therefore R800 million better off than the hon. the Minister estimated, there is surely more money in South Africa. He can therefore borrow that extra money to finance those capital works he now wants to finance from the current account. Thus he can decrease taxes in South Africa.

The balance of payments has nothing to do with income tax.

This hon. member does not understand the situation. He cannot understand that if there is more money in South Africa, the Government can borrow that money. Of course it has nothing to do with income tax, but then it is not necessary to use money from the current account for capital works either. It is as simple as that. The difficulty is that we have people here with one track minds. All they can think of are the Soweto riots or the Black people, and as soon as one talks about anything else, they are completely confused. [Interjections.] I do not want to take up the time of the House any further, except to say that although there are positive aspects in the Bill, we cannot get by clause 1. We cannot accept these heavy taxes and that is why we have to oppose the Bill.

Mr. Speaker, in the few minutes that are left I want to make a plea for our senior citizens. I want to remind the hon. the Minister what we have said before regarding the imposition of a loan levy on our senior citizens. I know the hon. the Minister has made concessions over the years. At the moment the position is that a person over the age of 60 years who has an income of less than R5 000, does not pay any loan levy. However, we believe that those persons who are over the age of 65 years should be granted the concession of not paying a loan levy because of the contribution that they have made to the well-being of the country over the years. Moreover, I do not believe that many persons over the age of 65 years will live to draw the interest and the repayment of the loan levy, in terms of the rules as they apply at the moment where the hon. the Minister can hold that money for up to seven years and pay it back then together with accrued interest. Unfortunately the rules are not going to allow us to go into the Committee Stage today as the time is running out. Therefore I want to urge upon the hon. the Minister to consider the amendment which stands in my name on the Order Paper, at least when the Bill goes to the Other Place. I want him to consider that a natural person who has attained the age of 65 years should not have to pay the loan levy portion of the tax.

There is also another aspect, and here too I want to be quite unashamedly sectional, because I am going to plead for further concessions to the farmers. The hon. the Minister has made concessions here and he is allowing farmers to write off, unlike what the hon. member for King William’s Town said, the capital cost of equipment for farming purposes within one year. The situation does arise, however, where many unfortunate farmers are expropriated for one reason or another by the Government or by a Government agency. The situation is then that the value of the equipment at the date it is disposed of as a result of expropriation is added to the income of the farmer. Therefore, although he enjoyed the concession over the years of not having to pay tax on his capital outlay for equipment, etc., he can find himself, when his farming enterprise is wound up, faced with a massive tax bill at an enhanced rate because of the capital value of the assets which are then disposed of. In precisely the same way, we had the situation last year and the year before where this was experienced by stock-farmers in regard to their livestock and also by timber farmers in respect of the value of the timber. In paragraph 20 of schedule 1 of the Act provision is already made that, for the purposes of tax, any surplus profit derived from the sale of livestock and plantations will be taxed at a lower rate, viz. 9%.

Business interrupted in accordance with Standing Order No. 74.

Mr. Speaker, I find it difficult to understand why the Opposition parties object to this measure, why they should want to oppose it. If one makes a thorough study of this measure, which is a bulky one, there are many merits to be found in it. It is true that hon. members opposite have furnished various reasons as to why they do not agree with us. However, if one analyses their objections, it becomes apparent that they are not very substantial objections.

I want to begin with the hon. member for Constantia. This hon. member said that he agreed in general with our view as far as the export allowances were concerned, and also as far as the question of the taxability, the tax liability, of the co-operatives was concerned.

†Then, however, the hon. member used a wrong argument. He talked about South Africa’s tax burden and said that our income tax, as a percentage of all taxes, is one of the highest. That in itself could mean nothing at all. Surely one has to see what the other factors are. One has to look at the indirect taxes as a whole and whether social security taxes are involved, as there are in some other countries, in some instances very heavy indeed. It does not therefore mean anything at all if one merely says that our income tax, as a proportion of total tax, is high. That is not necessarily to the detriment of our tax system as such.

[Inaudible.]

Let us take a country such as France or one of the so-called Mediterranean countries. It is well known that they tend to evince very strong opposition to direct taxes. One will find that their indirect taxes are proportionately considerably higher than in many other countries. That one has to take into account. It is the burden of taxation as a whole that one should be concerned with. Personally, I do not think that one can say that our tax structure is in itself good or bad simply because the proportion of direct taxes is higher or lower than a country that one is comparing it with.

That immediately brings me to the point the hon. member for Yeoville made when he said that in order to make these comparisons, one has to take a number of things into account. That is exactly what I said in my speech. I listed about six different criteria that have to be taken into account in order to make a meaningful comparison. I therefore obviously agree with him on that point.

He then talked about a high marginal rate. In my introductory speech I tried to deal with the gist of that. I mentioned that in South Africa only 2% of the taxpayers were earning more than R20 000 per year whereas 98% earned less than R20 000 per year. Above R20 000 one is, relatively speaking, dealing with very few people. I admit that in a private enterprise economy, one is dealing with important people, because that may be the very important top entrepreneurial class. However, the fact remains, if one takes the range of taxpayers into account, one is dealing with a very small number. Therefore I think one must retain some perspective in that regard.

The hon. member for Constantia referred to the receipts of inland revenue having declined. I imagine he was referring to The Financial Mail. The issue which appeared on 7 June 1977 referred to this. I would just like to refer to it because I think it is important. The article in The Financial Mail made three points. The first point was the following—

What this entails is that for the first two months of the financial year revenue from all sources had declined—not much, but it had, in fact, declined. Secondly, it states—

That, of course, was simply inland revenue for one month. Thirdly it states—

Here we have inland revenue again.

Are they not comparable?

These are not complete and they are …

Are they not comparable?

They are misleading. They are not complete. This refers only to cash. It does not refer to amounts in transfer or to the various adjusting items. I am therefore saying that true tax receipts are reflected in the monthly statement of revenue collected, and this is a different figure. Both these statements are, of course, published in the Government Gazette every month. The analysis of revenue collections for May have not been finalized and have therefore not yet been published. I think it is far too early, in any case, to predict any trends for a year after only one completed month and a very rough estimate for the next month, for May. Another point one must bear in mind is that April and May are never exceptionally good indicators for the rest of the year. We know that from experience. This article then reverts to revenue collected for April 1977. The increase of 10,9% mentioned here refers to total inland revenue including the loan levy, but the figures given in The Financial Mail exclude the loan levy. That again brings about a very substantial difference.

I did not take my figures from there.

Well, the hon. member did say that thus far inland revenue has been lower this year than last year. This is consequently very relevant. It is the same point that is being made here. As I have said, the loan levy is not included in the figures published in The Financial Mail. If the loan levy is included, the comparison is as follows: For April 1977 the revenue collected was R335,9 million, and for April last year, R302,1 million. There has consequently been an increase of R32,9 million. This is 10,8% and deviates only 0,1% from my estimates for the year. I must therefore be pretty well on target after one month, if I am only out by that amount. So I could go on. I just want to say, however, that one must be very careful to ensure that one is not dealing only with cash items, but that one is taking the full revenue collection into account. If one does so, on the figures thus far published, one can hardly come to the conclusion reached by the hon. member for Constantia. As I understood him, he was dealing with inland revenue.

I want to thank the hon. member for Sunnyside for his … [Interjections.] Listen to that chorus. When we have a constructive contribution, the hon. members opposite, who are usually so negative, immediately object. The hon. member for Mooi River is very quick to interject. Why does that hon. member not get up and make a constructive speech on taxation?

How much time are you going to give me?

I do not determine the time. That hon. member knows, before we start, exactly how much time is available for a financial measure. [Interjections.]

Order!

I want to thank the hon. member for Sunnyside for his positive contribution. I want to go further and I also want to thank the hon. member for Graaff-Reinet … [Interjections.] for his contribution in regard to the co-operatives. I have great appreciation for what he said. This is a very thorny matter. Our side of the House is thoroughly cognizant of this. It is a matter which has been very thoroughly studied. It even extends much further than the report of the Steenkamp Commission. It goes as far back as 1968, and it is already 1977. I want to express my appreciation to the bodies that have co-operated so wonderfully, and none co-operated better than the S.A. Agricultural Union and the Co-operative Council. I should therefore like to express my thanks here for that splendid, positive attitude. I pay no heed at all to the disparagement from the opposite side as soon as recognition is given to the contributions from our side of the House. I really think it is a childish attitude which is discernible here. I think it is a great pity; it is negative and childish. I do not think that the Opposition deserves any recognition for that kind of attitude. All they are doing is simply to disparage and to criticize. I hope that I would be fair enough in such a debate to accord recognition where recognition is due.

†I hope I shall be fair enough to give credit where credit is due, and that is precisely what I am doing at the moment.

I should now like to come to some of the issues that have been raised.

*I just want to refer to the hon. member for King William’s Town. He referred to the tax on undistributed profits, but I am sorry to say that I think he misstated the matter. I am saying this because an operating company does not pay any undistributed tax. If its profit is R100, its tax is R49. Of course then only R51 remains of that profit. But there is a plough-back of 55%, and he therefore pays no tax whatsoever.