Upload
holland
View
61
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Review of the SACU revenue-sharing formula. Standing Committee of Finance 14 September 2010. Content. Context An economic perspective of Union SACU revenue-sharing regimes (1910 to 2002) How the 2002 formula works and its outcome Exposure to a volatile form of revenue - PowerPoint PPT Presentation
Citation preview
1
Review of the SACU revenue-sharing formula
Standing Committee of Finance14 September 2010
2
Content
Context
An economic perspective of Union
SACU revenue-sharing regimes (1910 to 2002)
How the 2002 formula works and its outcome
Exposure to a volatile form of revenue
Objective of a new formula and proposed changes
Some tentative ideas
Proposed way forward
3
Context
In December 2006, SA notified Council that it intends to review the RSF
Following national consultations and in accordance with Article 43, SA formally proposed the review of the RSF, because:
The revenue sharing arrangement is unsustainable – great volatility
Revenue considerations should not be the single driver of trade policy decisions
Great deal of polarisation caused by trade and revenue reconciliation
SACU payments to the BLNS is seen increasingly by the SA public and parliament as a fiscal burden
RSF limits the possibility of expansion – building block of a SADC customs union
4
An economic perspective of the Union
505.3
25.4 13.9 5.9 3.3
SA Botswana
Namibia
Swaziland
Lesotho
Nominal GDP @ PPP (US$ bn)
EIU data for 2009
1,840.6
27.6 64.0 16.4 12.9
Real domestic demand (R billions)
An economic perspective of the Union, cont…
5
Real imports of goods and services
EIU data for 2009
Real export of goods and services
6
SACU revenue-sharing regimes – 1910; 1969 and 2002
1910
1969
2002
Size matters
SA keeps residual
Shares based on forecast and reconciled against actual collections and intra-trade data
SA collected and distributed according to size of economies
• Share calculated for BL(N)S based on trade data of past 3-years
• SA received residual• Adjustments made in year t+2
• Revenue earned from customs and excise
• Customs component is redistributive• Introduced a development
component
7
Workings of the 2002 revenue sharing formula
Customs component
Excise component
Development component
• Value of GDP• % of total SACU GDP
• 15% of excise component
• CIF value • Imports from member states
into area• % of CIF value of intra-SACU
imports
Ci= Mi * Ci=n
∑ Mii=1
Ei= GDPi * Ei=n
∑ GDPii=1
Di= 20 * (1-(F/H-1)/10) *I
8
Result of 2002 revenue sharing formula
South AfricaBLNS
2008/09
B L N S SA
R ’m 149.6 100.3 361.0 135.1 45 422.6
% 0.3 0.2 0.8 0.3 98.4
Contribution into CRP
2008/09
B L N S SA
R ’m 9 001.4 4 097.7 6 621.8 4 989.0 21 456.1
% 19.5 8.9 14.3 10.8 46.5
Received from CRP
South AfricaBLNS
SARS Annual Report
9
Customs collected by SA o.b.o BLNS
A destination principle was applied to approximately R1.75 billion worth of goods entering SA and destined for the BLNS in 2006/07 – goods that enter SA, bonded on route to the BLNS, and the duty collected when it enters the territory of final destination
Destination Botswana Lesotho Namibia Swaziland
Total value 776.5 188.1 483.0 299.8
Value of bonded goods in 2006/07 – R millions
SA collected duties of R5.2 million on behalf of the BLNS in 2006/07
Botswana Lesotho Namibia Swaziland
Customs 706.9 11.2 193.9 261.2
Duty 1.4 0.051 0.365 3.4
Customs duties collected in 2006/07 obo the BLNS – R millions
Source: CAPE System operated by SARS Customs
10
High dependency on customs revenue
20.1
5 6
12
5
1215
70
55
34
29
4 3
18
24
3333
Customs as a percentage of total revenue
•2006
•2008
•2010
11
…and exposed to volatility
Global recession has forced SACU revenue down to pre-2005/06 levels
Actual customs revenue declined from a forecast of R31.3 bn to R22.8 bn in 2008/09
The BLNS will all experience a decline in excess of 50% btw 2009/10 and 2010/11
Revenue will return to 2005/06 levels in 2011/12
% B L N S
Decline btw ’09/10 and ’10/11 32.2 30.6 31.8 30.7
Incl. recovery of deficit 55.7 53.7 55.6 58.2
Trends in SACU Revenue
• Customs revenues a function of the structure of the tariff book
• Higher tariffs on final consumer products-sensitive to demand-side pressures
• Low or no tariffs on capacity building capital goods and most inputs
• Customs revenue highly dependent on consumer goods
• About half of all customs revenue collected from vehicles (29%), Electrical goods, footwear, beverages and clothing.
• Reasons for sharp decline in revenue…
• Evident in the large share of capital goods in VAT collection on imports
• Over indebted consumers (low levels of private credit extension, NCA etc.)
13
SACU revenue as a percentage of Budget Revenue
14
A new formula should …
Achieve a sustainable revenue-sharing arrangement
Have a strong development thrust that supports regional infrastructure
Lead to greater transparency and parliamentary oversight
Support the expansion of SACU
Contribute to:
a reduction in non-tariff barriers
the harmonisation of customs systems and procedures
fiscal and tax administration reforms
15
…will require changes
Customs Component Based on volume of
internal trade Largely redistributive
Receive what economy produces Determined from own collections, re-
exports and duty drawbacks Eliminate intra-SACU trade data from
formula
Excise Component Linked to size of GDP
Eliminate excise Should be a sovereign tax that all
members set individually
Development Size of GDP and
percentage of excise duties
Each member contributes based on GDP and p.c. GDP
Redistributive Subject to parliamentary appropriation Partly conditional?
Current RSF under 2002 Proposed changes
16
Some tentative ideas
Customs Each member state receives
what they are entitled to: customs collected in
individual territories customs collected on behalf
of another member state re-exports
Revenue distributed as forecasts in year t and adjustments in year t+2, in accordance with above customs collections
Structural/Development Fund Contribution as a
percentage of GDP Inverse redistribution of
contribution by each member state
Inverse factors can include GDP and p.c. GDP and others
Can be determined at level of revenue-shares in 2008/09
17
Proposed way forward
Presentation sets the tone for discussion and further study
Negotiations that should not take longer than six months
Parallel consultations in each Member State Formulation of changes to 2002 Agreement Parliamentary ratification of amended Agreement Council approval of new revenue-sharing
arrangement when determining revenue-shares in December 2010
Implement new revenue-sharing arrangement in 2011/12