Reading the Division of Revenue Act and Division of Revenue Amendment Bill
Presenter: Ms Wendy Fanoe | Chief Director: Intergovernmental Policy and Planning, National Treasury
Outline • Outline of the intergovernmental fiscal system • Why a division or revenue bill? • How is it different from other “budget” legislation/documentation? • The process that culminates in the Bill • The Bill‟s contents • Does Bill get amended and why? • Where do you find amounts allocated per province/municipality for a specific grant? • How can the Bill be used? 2
Allocation of resources and functions to spheres The disparity between the spheres of governments’ responsibilities and fiscal capacities gives rise to significant ‘fiscal imbalances’ NG’s main revenues are: income tax, VAT, customs duties
Provinces’ main revenues are: vehicle licenses, hospital charges and gambling taxes LG’s main revenues are: Property rates and surcharges on service fees
National government:
National Share
Provincial Share
• Delivers policing, foreign affairs, defence, higher education • Makes policy • Sets priorities through legislation, norms and standards or political statements
Provinces:
• Deliver school education, health, social welfare • Generally fund national priorities
Municipalities:
Local Share
• Deliver water, sanitation, refuse removal • Have more autonomy on what their resources are spent on 3
Redressing the ‘fiscal imbalances’ • S214(1) of the Constitution reads as follows: An Act of Parliament must provide for –
Vertical division
Horizontal division
Conditional grants
TOP SLICE State debt and other national obligations
(a) the equitable division of revenue raised nationally among the national, provincial and local spheres of govt
Conditional allocations to provinces and municipalities made from NG’s share
(b) the determination of each provinces‟ equitable share of the provincial share of that revenue
Provincial equitable share determined i.t.o. formula
(c) any other allocation to provinces, LG or municipalities from NG‟s share, and any conditions on which those allocations may be made
Local government equitable share determined i.t.o. formula 4
Factors guiding the division of nationally collected revenue •
Factors listed in S214(2) of the Constitution (to be taken into account in the division of revenue): (a) the national interest (b) any provision that must be made in respect of the national debt and other national obligations (c) the needs and interests of the national government determined by objective criteria (d) the need to ensure that the provinces and municipalities are able to provide basic services and perform the functions allocated to them (e) the fiscal capacity and efficiency of the provinces and municipalities (f) developmental and other needs of provinces, local government and municipalities (g) economic disparities within and among provinces (h) obligations of the provinces and municipalities in terms of national legislation (i) the desirability of stable and predictable allocations of revenue shares (j) the need for flexibility in responding to emergencies other temporary needs, and other factors based on similar objective criteria
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Division of nationally raised revenue, 2007/08 – 2013/14 2007/08
2008/09 Outcome
2009/10
2010/11 Revised estimate
National departments
242,580
289,236
345,366
359,120
380,154
408,439
439,049
Provinces
207,504
246,836
293,164
323,080
357,929
380,450
404,251
Equitable share
171,054
201,796
236,891
265,139
288,493
305,725
323,604
36,451
45,040
52,073
57,941
69,436
74,724
80,647
–
–
4,200
–
–
–
–
Local government
38,482
45,487
51,537
61,152
70,171
77,029
82,317
Equitable share1 General fuel levy sharing with metropolitan Conditional grants
20,676
25,560
23,845
30,559
34,108
37,573
39,960
–
–
6,800
7,542
8,573
9,040
9,613
17,806
19,928
20,892
23,051
27,490
30,416
32,743
488,566
581,560
690,068
743,353
808,254
865,919
925,617
49.7% 42.5% 7.9%
49.7% 42.4% 7.8%
50.0% 42.5% 7.5%
48.3% 43.5% 8.2%
47.0% 44.3% 8.7%
47.2% 43.9% 8.9%
47.4% 43.7% 8.9%
R million Division of available funds
Conditional grants Gautrain loan
Total
2011/12 2012/13 2013/14 Medium-term estimates
Percentage shares National departments Provinces Local government
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The legal basis of the DOR Bill (2) • How does DoR and DoR Amendment Bills/Acts relate to other “budget” legislation/documentation? – DoR and DoR Amendment Bills/Acts are in terms of section 214 of Constitution (“section 76” legislation) – Appropriation and Amendment Appropriation Bills/Acts are in terms of section 213 of Constitution (“section 77” legislation) • money may be withdrawn from the National Revenue Fund only through an appropriation by an Act of Parliament
– Legislation is a Money Bill (“section 77” legislation) when it • appropriates money and/or imposes, abolishes or reduces national taxes, levies, duties or surcharges • authorises direct charges against the National Revenue Fund, except a Bill envisaged in section 214 authorising direct charges
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The legal basis of the DOR Bill (3) • Money Bills Amendment Procedure and Related Matters Act (MBAPRMA) impact on DOR Bill – When budget is tabled, a report must also be tabled that responds to the recommendations made by the Parliamentary Committees on Appropriations regarding the proposed division of revenue and conditional grant allocations to provinces and local governments as contained in MTBPS – The report must explain how the DoR Bill and the national budget give effect to, or the reasons for not taking into account, the recommendations contained in the Committee reports
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The process • The DOR Bill is an outcome of extensive consultations – Budget Council and Budget Forum – National Departments – Extended Cabinet with provincial Premiers and chairperson of SALGA
• The current Act serves as the point of departure – Sets out baseline DOR: both ES and CGs – Contains clauses governing or regulating transfers and amendments are informed by: • Are there clauses that have become redundant? • Are there new developments that necessitate special and new provisions? • Are there gaps that have been identified in implementing the Act? 9
The Bill’s contents • The contains: – A vertical division of revenue – Schedules setting allocations • Global amounts per sphere • Shares/allocations per province and municipality
– Clauses • Generally applicable to all transfers • Applicable to specific transfers
– Frameworks for each grant – Annexure W1 which is a detailed explanation of all decisions taken and a response to the FFC recommendations 10
More on the schedules/allocations • Schedule 1: Division of Revenue between the 3 spheres
• Schedule 2: Provincial equitable shares among the 9 provinces • Schedule 3: LG equitable shares among 283 municipalities
• Schedule 4: Other transfers to provinces and municipalities supplementing programmes funded from „own resources‟ • Schedule 5: Specific purpose allocations to provinces • Schedule 6: Specific purpose allocations to municipalities • Schedule 7: Allocations in-kind to municipalities • Schedule 8: Incentives for special programmes • Schedule 9: Immediate disaster response 11
Does the DoR Act get amended? • In terms of section 12(4) of the MBAPRMA the Minister of Finance must table a Division of Revenue Amendment Bill with the revised fiscal framework if such revisions impact on the division of revenue act of the relevant year – Any amendments to fiscal framework that impact on the Division of Revenue Act will require a Division of Revenue Amendment Bill/Act – Any amendments to fiscal framework contained in schedules to Division of Revenue Act, i.e. which forms part of the gazette required within 14 days after enactment of Division of Revenue Act, could be dealt with through a Gazette by Minister of Finance • A gazette on adjustments, including new allocations per province/municipality, is issued around December
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Possible uses of the Bill • Around budget tabling – Is the division equitable? – Is it aligned to the priorities? – How much is due to each municipality of province?
• Key tool for administration and accountability – During the course of the FY – Compliance • Duties and responsibilities of various parties
– After the end of the FY • Ex post audit
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Planning, Budgeting and Reporting Cycle
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Provincial Reporting • Provinces report revenue and expenditure monthly to NT and at the end of each quarter they report expenditure and revenue up to the end of the quarter - required by PFMA (“Section 32 reports”) – This is the in-year-monitoring system
• NT publishes quarterly reports within 30 days after end of quarter – Available at http://www.treasury.gov.za/comm_media/press/2011/default.aspx – Summary press release/report • Detailed analysis of social services (health, education and social development) – Personnel and Capital in health
• Analyses of capital and personnel (all sectors) • Comparisons with expenditure for same period during the previous year – And detailed report per province • Expenditure by vote • Conditional grants transferred (this can be used to track withholding of conditional grants), expenditure on conditional grants 15
Sources of information on municipal budgets • Information on municipal budgets – Division of Revenue Act http://www.treasury.gov.za/legislation/acts/2010/Default.aspx – Individual municipalities‟ budgets – in new formats – Consolidated budget information – published by National Treasury http://mfma.treasury.gov.za/Media_Releases/mbi/Pages/default.aspx
• Information on in-year spending – Monthly budget statements – should be published by Provincial Treasuries – Section 71 reports – published quarterly by National Treasury http://mfma.treasury.gov.za/Media_Releases/s71/Pages/default.aspx
• Information on end-year spending – Municipalities‟ annual financial statements and annual reports http://mfma.treasury.gov.za/Documents/Forms/AllItems.aspx – Consolidated expenditure information – published by National Treasury http://www.treasury.gov.za/publications/igfr/2008/lg/default.aspx
• Information on the flow of funds http://mfma.treasury.gov.za/Media_Releases/Municipal%20Payment%20Schedule/Pages/1 011.aspx 16
