Division of Revenue Bill 2008 B 4 2008
Division of Revenue Bill 2008 [B 4 -2008] Portfolio Committee on Finance National Assembly 21 February 2008 Lungisa Fuzile, Kenneth Brown, Jonathan Patrick, Jo-Ann Ferreira
Outline • Lay out of Bill and contents • Fiscal Framework • FFC proposals and government’s response • Provincial & LG allocations • Division of Revenue Bill – Changes to the 2007 Division of Revenue Act 2
General • The Bill does not propose material changes to the 2007 Division of Revenue Act • Changes to the 2007 Act include – Technical changes: A number of technical changes were made to improve the readability of the Bill, better align different sections and further facilitate implementation – Low capacity municipalities: All provisions that provided for the management of grants made to low capacity municipalities by provinces or other municipalities have been deleted – Accreditation: The 2007 provisions have been removed – Extension of reporting requirements: Provinces using public entities to deliver functions (such as housing) must report on such transfers and expenditure – Municipal Infrastructure Grant: The provisions relating to this grant has been amended to – • extend the reporting obligation of municipalities to include reporting on nonfinancial performance • place a reporting obligation on the transferring national department to monthly report on the implementation of the grant to the National Treasury and other national departments that have an interest in the grant 3
General – 2010 FIFA World Cup Stadiums Development Grant: The conditions of this grant have been extended. Municipalities must ensure, by no later than 1 June 2008, that any financial obligations of the municipality in terms of contracts and sub-contracts entered into for the construction or upgrading of the relevant stadium and supporting infrastructure expenditure are quantified and no longer negotiable – Duties of Provincial Treasuries: • The information that must be published as part of the budget documentation of the province has been extended to include detailed allocations to municipalities and schools, and the budgets of provincial hospitals • Alignment with municipal IDPs in respect of infrastructure plans a new requirement – Stopping of allocations: NT may authorise intervening (s 100 of the Constitution) transferring national officer to spend allocation on behalf of province – Preparations for the next financial year and the 2010/11 financial year: This section has been amended and extended to facilitate better planning. Municipalities receiving the Municipal Infrastructure Grant are required to prepare infrastructure plans and provinces receiving the Integrated Housing and Human Settlement Development allocation must agree allocations with municipalities identified by the transferring national officer in consultation with NT prior to the commencement of the next financial year 4
2008 Division of Revenue Bill • Section 76(4) Bill of Constitution requires that Do. R Bill must be tabled in NA, and go to NCOP thereafter • Clauses 1 -49 of the Bill • Schedules 1 -7 divide revenue between 3 spheres and within spheres • Memo on objectives of Bill • Explanatory attachments: – Annexure W 1 – Appendix W 2 & W 3: Frameworks on all conditional grants (provincial and local) – Appendix W 4 to W 8: LG allocations by municipality for both national & municipal financial year 5
2008 DOR Bill: Schedules • 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 6
Budget Review Chap 8 & Do. RB Annex W 1 • Chapters 7 and 8 of Budget Review summarise national/provincial/local government funding • Annexure W 1 of Do. RB provides greater detail • Five parts to Annexure W 1 – Part 1: deals with the division of revenue between the 3 spheres and how it takes section 214(2)(a to j) into account – Part 2: Government’s response to FFC proposals – Part 3: deals with the allocations to provinces – Part 4: deals with the local government allocations – Part 5: concludes with fiscal framework issues in prov/LG that need further work 7
Appendices W 2 and W 3 • Grant frameworks in Appendix W 2 & W 3 – To be gazetted within 14 days of Bill taking effect • Thereafter frameworks become legally binding • Measurable outputs & conditions • Allocation criteria – Some use sector data (e. g. enrolment in education) • Past performance – 2006/07 audit outcomes (financial) – 2006/07 non-financial • • Planning for 2009/10 Responsibilities of national departments Grant review process for health grants Transferring dept quarterly reports 8
Appendices W 4 to W 8 • Local government allocations per municipality in Appendices W 4 to W 6 • Total allocation per municipality in W 7 • National AND municipal financial year • W 8 – detailed breakdown of the local government equitable shares per municipality – Formula portion – RSC levies – Councillor remuneration 9
Changes to the provincial equitable share formula • Structure of the formula unaffected – Only impact is on the data • Data changes to the formula: – 2007 Community Survey – 2007 enrolment, 2006 GHS, 2005 GDP-R • Phasing in – Impact of updates phased in over the next three years 10
Full impact on equitable shares 11
Full impact on equitable shares 12
Full impact on equitable shares 13
Review of Provincial and LG Fiscal Framework • Differentiated approach to municipal infrastructure development • Permanent replacement for RSC and JSB levies • Funding poorer municipalities – MIG provided for – LES still to be reviewed 14
Fiscal Framework Part 1 of Annexure W 1
Division of revenue 16
Division of revenue 17
Division of revenue 18
Response of National Government to FFC Proposals Part 2 of Annexure W 1
FFC proposals • Response should be viewed against the review of LG and Provincial fiscal frameworks • Budget Council considered provincial proposals • Budget Forum considered LG proposal • All spheres deliberated on the proposals and response at Extended Cabinet 20
Process to consider FFC proposals • FFC Submission: Do. R 2008/09 (including supplementary submissions) – Focus is on 7 issues – Economic impacts of the 2010 FIFA World Cup – Extending the national school nutrition program to secondary schools – Financing school infrastructure and education outcomes – A clear definition of and a separate budget line item for learner support material – Addressing of challenges with the implementation of the nofee school policy – Roads and transport infrastructure • A more effective road management system • Consider provincial road expenditure needs in impending review of the PES – Collection of data on homelessness 21
Other proposals • Part B of the recommendations deal with the supplementary submissions made during 2006/07. These have been dealt with in 2006 and 2007 • Part C of the proposals looks at budget analysis; a model for sharing nationally raised revenue; and provides a framework for assessing function shifts. – Work in progress 22
Provincial allocations Part 3 of Annexure W 1
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Local Government Allocations Part 4 of Annexure W 1
Funding poorer municipalities • Formulae used to divide funds must always be objective and ensure certainty…. • LES formula not adjusted to make it more redistributive • Municipal infrastructure grant – Ensure a minimum allocation for municipalities – Formula adjusted to step up funding towards poorer municipalities – Constant element introduced • R 2. 2 million in 2008/09; R 4. 4 million in 2009/10; and R 5 million in 2010/11 28
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Thank you
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