CHAPTER 3

DEDICATED TAXES AND USER CHARGES

3.1 BACKGROUND

3.1.1 The Commission has received a number of submissions which refer to various advantages or disadvantages of "dedicated" or "earmarked" taxes, either presently in use or proposed for South African application. Representations have also been received which point to concern regarding the role of certain user charges and surcharges in the revenue of the public sector, in particular of local authorities and extra-budgetary institutions, and to an apparent tendency to view such charges as a possible basis for implicit redistributive taxation.

3.1.2 The Commission has taken note, furthermore, of proposals which have been publicly discussed for the assignment of dedicated taxes or specified shares of general tax revenue to high priority spending programmes of Government. Examples include the suggestions that:

1. excise duties on cigarettes and alcoholic beverages should be assigned to the health authorities in view of the medical and hospital costs associated with tobacco and alcohol-related morbidity;
2. road construction and maintenance should be financed from a dedicated percentage of the fuel levy;
3. compulsory levies should be imposed on employers and employees for the funding of industrial training schemes; and that
4. VAT on ticket sales at entertainment events should be assigned to community arts councils.

3.1.3 In addition, the appropriate role of fees, charges and dedicated levies has been canvassed in several recent committee reports or departmental policy reviews. Of particular importance in this regard are the Report of the Committee of Inquiry into a National Health Insurance System and the Report of the Committee to Review the Organisation, Governance and Funding of Schools, in view of the priority of the quality and availability of primary health services and school education respectively. The Commission has noted that education and health account for some 33 per cent of national and provincial government expenditure, and that substantial private outlays supplement this expenditure by the fiscus. A mix of public and private spending similarly characterises the financing of low-income housing, water and electricity supply, transport infrastructure and commuter services, welfare services and vocational education and training.

3.1.4 The Commission noted in its first Report (section 17.2) that the use of dedicated taxes is a matter which has come under renewed consideration in overseas jurisdictions, and it recommended that attention be given to the use of dedicated taxes as a budgetary mechanism, in particular in the context of a new social security system. The question of tax earmarking in South Africa has subsequently come under careful scrutiny by two analysts. Drawing on this work, and taking account of representations received and the recommendations of various official inquiries, the Commission has examined the advantages and disadvantages of the assignment of selective taxes and user charges to specific funds or programmes. It must be stressed, however, that selective taxes and charges include a wide variety of financing and pricing arrangements. The Commission cannot examine the merits and demerits of all selective taxes and charges, and recognises that, in practice, a diversity of financing mechanisms is inevitable and desirable in modern public finance systems.

3.1.5 The Commission recognises that in several categories of public expenditure there are grounds for seeking revenue sources the incidence of which closely match the benefits of the public services in question. Both selective taxes and user charges can serve this purpose. However, there are also good grounds for avoiding a proliferation of dedicated taxes and extra-budgetary funding mechanisms. The Commission's proposals seek to strike an appropriate balance between these considerations.

3.1.6 As this topic inevitably involves questions of social and economic policy which go beyond its brief, it would be inappropriate for the Commission to set out detailed recommendations on dedicated taxes and user charges. It is important, however, that policy discussions in this area should be well-informed and should take account of relevant tax considerations. The Commission's purpose in reviewing the subject has in part been to locate discussion of dedicated taxes and charges within the context of the broader tax system. This Chapter is accordingly largely informative in content.

3.2 DEDICATED TAXES AND USER CHARGES IN USE AT PRESENT

3.2.1 Dedicated taxes are usually based on some indirect link between the incidence of the tax and utilisation of the services in question. Dedicated taxes currently employed in South Africa include levies on the sale of fuel (assigned to the Multilateral Motor Vehicle Accident (MVA) Fund, the Equalization Fund for subsidisation of Sasol and Mossgas and the National Road Safety Fund), social security taxes (unemployment insurance contributions and workmen's compensation levies) and RSC levies on turnover and payroll (for financing local infrastructure). In addition, minor selective taxes, levies or fees are assigned to various extra-budgetary agencies (see appendix 1) and local property taxes and surpluses on municipal water and electricity trading accounts are earmarked for municipal services.

3.2.2 User charges, on the other hand, imply a direct link between financing and the use of services or exercise of certain rights. Examples include admission charges to museums and public parks, sales of agricultural or forestry produce, road tolls, charges for passports or ID documents, licence fees, mining leases, and hospital or school fees. User charges, like taxes, can be either collected as part of general revenue or retained as income of service providers. In some cases, the distinction between dedicated levies and user charges is hard to draw. TV licence fees and training board levies, for example, can be thought of as selective "benefit taxes" or as earmarked user charges. Appendix 2 provides estimates of the contributions of user charges to national and provincial government, universities and technikons and some 120 extra-budgetary agencies.

3.2.3 It appears that earmarked taxes outside of the national and provincial budget appropriations amount to about 1,5 per cent of GDP, or about 6 per cent of total tax revenue. During 1993 or 1993/94, social security taxes amounted to about R2 billion, levies on fuel contributed R1,11 billion to the Motor Vehicle Accident Fund and R1,15 billion to the subsidisation of Sasol and Mossgas, and RSC levies amounted to R1,7 billion. Selective taxes or levies contributed R167 million to the financing of other extra-budgetary accounts or funds.

3.2.4 User charges and sales contribute at least a further 1,5 per cent of GDP to public sector revenue. Departmental and other non-tax current receipts generated R721 million at the national level of Government in 1993/94 and R1,6 billion at the provincial level in 1992/93. In addition to these contributions of user charges to the fiscus, sales of goods and services accounted for R1,5 billion of the income of government enterprises in 1993/94, R1,8 billion of the 1993 income of universities and technikons, and R726 million of the 1993/94 income of extra-budgetary accounts and funds.

3.2.5 The estimates reported in appendices 1 and 2, amounting to earmarked tax revenue of some R6,4 billion in 1993/94 and user charge income of R6,3 billion, exclude local government revenue, income collected by the former TBVC and SGT authorities and fee income retained by government schools. Levies and charges imposed by industry training boards are also excluded.

3.3 ARGUMENTS FOR AND AGAINST TAX EARMARKING AND USER CHARGES

3.3.1 The main argument for selective taxes or user charges is that they provide a link between the costs and benefits of public services, and accordingly enhance the efficiency and fairness of public sector resource allocation. User fees impose a direct cost on consumers of services. Where this is not possible, selective taxes can provide an indirect substitute linkage. It is also sometimes argued that dedicated taxes serve to enhance public awareness of the general links between services and the required burden of financing, or that public expenditure management is enhanced by restricting funding of specific programmes to specific sources of revenue.

3.3.2 It must immediately be pointed out that the above arguments in favour of dedicated taxes do not encompass the proposition that important functions of government might derive additional resources from the employment of such financing arrangements. The overall quantum of resources available to the public sector is unavoidably constrained by macroeconomic considerations, so that financing mechanisms which enhance resource flows of one kind must be offset by reduced allocations elsewhere. The case for vesting particular departments or agencies of government with the right to impose selective taxes or fees cannot be made on the grounds of need for additional sources of finance, but must rather be sought in the efficiency and fairness of such assignments.

3.3.3 It must be added, however, that sound tax reforms will have the effect of enhancing the resources available to the fiscus in so far as they do contribute to efficiency, both through less burdensome distortions of prices and through indirect effects on economic behaviour. The appropriate employment of user charges, similarly, can contribute to the efficient management of resources in public facilities and can exert a healthy influence on the economic choices made by households. There is thus, notwithstanding the macroeconomic constraint referred to in paragraph 3.3.2 above, an important sense in which the question of selective taxes and user charges is about increasing the quality of the spending power of the fiscus.

3.3.4 The earmarking of revenue sources is related to, but distinct from, the question of the creation of special funds or separate accounts through which particular functions of government are financed. The inter-governmental assignment of revenue sources is itself a particular form of earmarking. In principle, revenue derived from specific taxes or departmental charges can be assigned to specific purposes while remaining "on budget" and flowing through the national or provincial accounts. Where extra-budgetary accounts are created, these can be financed wholly or in part through earmarked transfers from general funds. However, it is common practice both in South Africa and in other countries to pre-assign earmarked levies to separate funds or accounts, outside of the annual budgetary process. Charges levied for services provided wholly or largely by identifiable government agencies or institutions are commonly retained as revenue of these institutions, and thus need not appear as income at the national or provincial level. In these cases, it is clearly important that there should be clear and transparent arrangements for the governance of accounts, funds, agencies or institutions, and that appropriate financial regulations, audits and reporting requirements should be in place and should be strictly followed.

3.3.5 There are indirect or implicit forms of earmarking which may be of considerable significance in magnitude. These include the retention of profits by government enterprises and provisions in the tax structure intended to achieve non-tax purposes. Heyns writes: "tax expenditures represent a particular and extreme form of tax earmarking..." Thus, for example, section 18A of the Income Tax Act which permits the deduction within limits of donations to educational and other funds, is analogous to tax earmarking in so far as it assigns the right to receive tax-privileged donations to a defined class of funds. The Commission's views on this form of earmarking were set out in Chapter 12 of the 1994 Interim Report.

3.3.6 Although many countries make considerable use of dedicated taxes of one kind or another, there is now widespread recognition internationally that a proliferation of dedicated financing mechanisms distorts public sector resource allocation unduly and tends to undermine fiscal management. Amongst the issues which need to be considered in evaluating selective taxes and user charges are the following:

1. Dedicated taxes or charges provide assured sources of funds which bypass or pre-empt the annual budget, and thus affect the procedural fairness of the budgetary process through which departments compete on an equal footing for funds.
2. Pre-assignment of claims on the fiscus shifts the locus of accountability and responsibility for efficient resource allocation to the managers of specific programmes or agencies.
3. User charges represent prices for specific services, and therefore affect both access to services and the distribution across consumers of costs.
4. Where specific rights and public services are privileges which can be paid for by those who benefit, user charges can contribute both to the fairness and efficiency of public sector resource allocation.
5. As it is total public sector expenditure and the total burden of costs which citizens bear for the provision of public services which are relevant for purposes of macroeconomic management, a proliferation of dedicated funds complicates fiscal policy implementation.
6. As the incidence of specific taxes or levies is often hidden or hard to assess, the overall efficiency and fairness of the tax system may be negatively affected.

3.3.7 The Commission finds that there are significant disadvantages to the practice of earmarking tax revenue. Particularly under circumstances of considerable change in the Government's spending priorities, the integrity and transparency of the budgetary processes through which national and provincial expenditure appropriations are made should not be compromised by pre-assignment of tax revenue to specific programmes or functions. The Commission thus recommends that the earmarking of general tax revenues, including income taxes, the value added tax and customs duties, should be avoided. With regard to those excise taxes which can advantageously be assigned, caution should be exercised, taking account of the issues noted in paragraph 3.3.6.

3.4 CONSOLIDATED REVENUE AND EXPENDITURE ESTIMATES

3.4.1 The Commission has noted that, notwithstanding the disadvantages of tax earmarking, there are substantial extra-budgetary flows of tax revenue in South Africa. In addition, sales of goods and services and other user charges are important sources of revenue in much of the South African general government sector. In many areas of government's social and economic responsibilities it may be desirable that the costs of specific services should be passed on to consumers or clients, through either user charges or selective benefit taxes. Given the existence of diverse financing arrangements, which in some cases imply substantial flows of tax revenue outside of the normal budgetary process, there is a need for consolidated statements of revenue and expenditure of the general government sector, inclusive of extra-budgetary accounts and funds.

3.4.2 As selective benefit taxes and user charges will likely continue to be important sources of government revenue, and recognising the need for comprehensive financial data for fiscal management and planning purposes, the Commission recommends that the Department of Finance should submit to Parliament at the time of the annual budget a statement of estimated consolidated revenue and expenditure of the entire general government sector, including extra-budgetary funds and agencies. The Commission recognises that this would require projections prior to the actual budgetary decisions of lower tier authorities and extra-budgetary agencies, and that the resulting estimates would need to be qualified accordingly. Tax analysis and planning and overall fiscal management must inevitably be based on such estimates, however qualified.

3.5 CONSTITUTIONAL PROVISIONS

3.5.1 Section 185 of the Constitution prescribes that a "National Revenue Fund" be established, "into which shall be paid all revenues, as may be defined by an Act of Parliament, raised or received by the national government, and from which appropriations shall be made by Parliament...". Section 186 stipulates that an annual budget reflecting the estimates of revenue and expenditure shall be laid before the National Assembly for each financial year. Provision is similarly made (section 159 as amended) for Provincial Revenue Funds in each province, "into which shall be paid all revenue collected by or accruing to the provincial government, and all financial allocations ... made by the national government to such a provincial government and to local governments within the province of such a provincial government." The Constitution stipulates, in effect, that the national government and provincial governments should receive revenue into and make appropriations from single general-purpose funds. The Constitution lays the basis for consolidated national and provincial revenue and expenditure accounts, thereby contributing to the transparency and the effective accountability to the legislative authorities of the public finances.

3.5.2 The Commission points out that, although the notion of "revenues" in section 185 is not defined and the sections of the Constitution dealing with financial matters are open to various possible interpretations, these provisions appear to bar the extra-budgetary assignment of national or provincial government revenues to special-purpose funds.

3.5.3 The Constitution, in addition, charges Parliament with the responsibility, after consideration of recommendations by the Financial and Fiscal Commission, for assigning shares of several major nationally collected taxes for the financing of schedule 6 legislative competencies of provinces. Provinces are assigned certain discretionary taxing powers and provision is made for their receiving conditional or unconditional transfers.

3.5.4 Although these Constitutional provisions do not altogether preclude the earmarking of nationally collected taxes for the (conditional) financing of specific schedule 6 services within the budgetary process, it is clear that any such arrangements could only be considered as an integral part of the broader inter-governmental financial framework. On the other hand, the Constitution provides explicitly for the imposition by provincial legislatures of user charges, taxes, levies and duties other than income tax, value-added tax or other sales taxes, and surcharges on taxes. These may not discriminate against citizens who are not residents of the provinces concerned.

3.5.5 As the financial viability and health of provincial governments depend in part on the development of robust own revenue bases, it is important that their comparatively limited taxing capacity should not be unnecessarily exploited by national government. Possible provincial revenue sources include selective taxes on goods and services or on property and user charges. In respect of taxes other than those on casinos and gambling, enabling national legislation is required. The Commission finds that, apart from other considerations, further earmarking of specific taxes should not be considered in the South African context until a satisfactory system of intergovernmental financial transfers is in place and provinces have developed sound revenue bases.

3.6 LOCAL GOVERNMENT FINANCE

3.6.1 The attention of the Commission has been drawn to the important role which implicit selective taxes on electricity and water supplies play, alongside property taxes, in the revenue base of South African municipalities. Regional Service Council levies, discussed in Chapter 5 of this Report, are at present the other principal source of revenue for third tier government.

3.6.2 The Commission has received representation regarding the following concern. Whereas municipalities have traditionally been able to finance a share of their general activities from surpluses generated on water and electricity trading accounts, this implicit tax assignment is now somewhat in conflict with the imperatives of accelerated urban electrification and water reticulation, to the extent that these programmes are to be financed through cross-subsidisation within utilities' tariff structures.

3.6.3 There are no clearcut arguments for assigning implicit taxes on services to one thing rather than another, and the Commission does not wish to make recommendations on this question at this stage. Utility pricing reforms will need to be examined with regard to their possible effects on the tax bases of local authorities. The question should, in the Commission's view, be addressed in the context of a broader review of local government financing, including those issues canvassed in Chapter 5 of this Report.

3.6.4 The entire question of local government taxation and finance is of renewed importance now that newly demarcated local governments are or will shortly be in place. It is clearly vital that a sound structure of local government financing should be established. Within the overall tax structure, local authorities must be assured their rightful place. The Commission may need to return to this matter.

3.7 COMMENTS ON CERTAIN SPECIFIC DEDICATED TAX PROPOSALS

3.7.1 The Commission comments as follows on certain specific dedicated tax proposals.

The Fuel Levies

3.7.2 The levy on fuel is an important source of general tax revenue, and is expected to contribute R8,9 billion in 1995/96. Additional earmarked levies on fuel, assigned to the Equalisation Fund, the MVA Fund (which provides insurance cover to third party victims of motor accidents) and the National Road Safety Council, will yield about R3 billion in 1995/96.

3.7.3 The Commission is aware that the MVA Fund has experienced management and accountability problems in the past. Although the present dedicated financing mechanism is not the immediate cause of these difficulties, it is the Commission's view that the financing arrangement should be re-examined along with the review which is in progress of the management and operation of the MVA Fund and of the provisions of the relevant legislation.

3.7.4 It remains to consider the case for a dedicated fuel levy assigned to the financing of road infrastructure. In many countries, fuel taxes are regarded as a satisfactory proxy for charges on road users, and provide an important source of finance for road construction and maintenance or for other transport services. A levy on fuel has in the past been assigned to the National Road Fund, but this arrangement proved unsatisfactory due in part to the perceived poor prioritisation of spending through this financing mechanism. Careful consideration has been given by the Department of Finance to the various possibilities for assigning user charges or earmarked tax revenue to roads programmes. Mechanisms in use in other jurisdictions include fuel taxes, road tolls, purchase or excise taxes for buses, trucks and trailers, purchase taxes on tires or retread services, annual licence fees for motor vehicles, tax stickers for specific roads or highways, and heavy vehicle use taxes based on axle weight and distance travelled. The main aims of dedicated financing mechanisms for roads are to pass the costs associated with roads on to users and accordingly to relieve the fiscus of this financing burden. The main problem with earmarked financing mechanisms is that the appropriate distributional incidence of the costs of roads are both difficult to determine and unlikely to correspond closely with available financing instruments. In addition, the administrative costs associated with specific charges, such as road tolls or tax stickers, are comparatively high.

3.7.5 In South Africa's present circumstances of fiscal restraint, it is important that infrastructural financing should be approached within a coordinated budget process, and it is accordingly not deemed advisable to pre-assign dedicated taxes to off-budget roads authorities. There is, nonetheless, a good case to be made for further extension of the principle that road users should pay for road construction and maintenance. A fuel levy, assigned to provinces on an appropriate basis, is an administratively efficient mechanism for this purpose. The Commission recommends that consideration should be given to the assignment of a percentage of the fuel levy to road construction and maintenance within the broader budget process.

Payroll Taxes

3.7.6 Unlike many other countries, South Africa does not collect a general social security tax on wages. A payroll tax (of 1 per cent on employers and 1 per cent on employees) is assigned to the Unemployment Insurance Fund, and selective payroll taxes are imposed in certain industries as industry training board levies. The RSC regional services levy is also in effect a payroll tax, at a low rate (see Chapter 5). Compensation for work-related injuries is financed through specific assessments assigned to dedicated funds, whereas other components of the social insurance system (including health care, social grants and welfare services) are financed through the national and provincial budgets.

3.7.7 Many countries employ a national levy, usually in the form of a payroll tax, to provide a pool of funds available for financing vocational education and training. Against the background of the apparent stagnation of industrial training during South Africa's recession years and the need to promote productivity and competitiveness as key elements in the country's growth strategy, alternative mechanisms for enhancing the financing of training are currently under examination, inter alia, under the auspices of the National Training Board and the NEDLAC Trade and Industry Chamber.

3.7.8 The Commission is also aware of various reports and investigations which have given consideration to possible extensions of South Africa's social insurance system. Should South Africa move in the direction of more comprehensive social insurance, consideration will need to be given to the possible role of a payroll-based social security tax in financing social security provision. In drawing on international experience, regard will have to be taken of the role which social security financing has played in sustaining high savings rates in some fast-growing economies. Consideration must also be given to the rising tax burdens associated with inappropriately designed social insurance programmes in some countries.

3.7.9 The arguments for reform in this direction would be:

1. the broadening of the tax base which would be achieved; and
2. the link which would be established between social security contributions and the set of social insurance benefits financed.

3.7.10 It should be noted that although this approach to tax reform implies some reduction in the progressiveness of the tax structure, a social security tax is typically redistributive in the incidence of the benefits financed.

3.7.11 In taking this matter further, careful attention will have to be paid to the overall structure and incidence of income tax, including possible provincial surcharges, payroll taxes and any other compulsory levies on wages. The juxtaposition of several taxes on personal income can all too easily lead to an anomalous rate structure with excessive marginal rates of tax in particular bands. An examination of the effect of payroll taxes on employment will also be needed.

3.7.12 The larger question of social security taxation is a subject to which the Commission intends to return in a future report.

Graduate Tax Funding of Higher Education

3.7.13 The attention of the Commission has been drawn to the possible role of a benefit tax on graduates as a source of financing of higher education. This option has come under scrutiny in South Africa in recent years in view of the deteriorating real value of per student state subsidisation of universities and technikons, and the rapid growth in demand for higher education.

3.7.14 Proposals for graduate tax financing of higher education have been made in many countries in recent years. No country has implemented a full-scale graduate tax, but the designs of student loan schemes have brought these arrangements close to the graduate tax model in several cases.

3.7.15 Conceptually, the graduate tax recognises that higher education confers substantial advantages on beneficiaries and attempts to recoup some part of the costs of public provision of degree and diploma study courses from the subsequent earnings of graduates. Where the amounts to be recouped are related to specific study costs incurred, the tax is in the nature of an individual assessment and resembles a loan repayment. Where the tax is levied at standard rates on all graduates, the concept is usually that of a levy related to earned income, thus bearing more heavily on higher than lower income graduates.

3.7.16 The latter concept suggests a graduate tax schedule imposed as a surcharge on PAYE income tax deductions by employers. In order to place the further discussion of higher education financing arrangements on a practical footing, it might be helpful to put the following aspects of the South African context on record:

1. Taxpayers pay marginal rates of income tax on income that are high by international comparison, and reach the maximum rate at a comparatively low level. Under these circumstances, additional taxes on earned income applicable to particular taxpayers would interfere unduly with labour market incentives and would be perceived as discriminating inappropriately between persons of similar income.
2. Tax collection in South Africa at present is simplified by the SITE system which does not require individual tax files to be maintained by the Receiver for a majority of taxpayers. This means that individualised graduate tax or loan repayment liabilities could not at present be accommodated in the Receiver's information system.

3.7.17 The Commission does not recommend the introduction of a graduate tax.

3.8 COMPULSORY INCOME-RELATED USER FEES

3.8.1 Several interesting proposals have been made recently for the enhancement of the role of user charges in education and health, amongst other areas. The Commission recognises that many of the services provided by government departments or agencies are "mixed" public and private goods which cannot be provided on strictly equal terms to all consumers. On grounds of both fairness and efficiency, there is a role for the price mechanism in distributing the costs of such services and rationing access to some extent.

3.8.2 This is a subject which extends beyond the Commission's brief, except in so far as the realm of regulated user charges intersects with questions of tax structure and incidence. Much depends upon the specific character of user fees in question. Two main problems can be distinguished.

3.8.3 The first concerns the use of differential schedules of fees, related to income or to a means test of some kind. Income-contingent fees apply in respect of many hospital services and have recently been proposed as an important source of finance for government schools and as a possible basis for financing mandatory health insurance. While it is clearly necessary that access to essential public facilities should not be regulated by households' abilities to pay prescribed fees, attention must also be given to the interaction between compulsory income-related charges and the progressive character of the personal income tax. A progressive schedule of health insurance premiums and school fees, together with the personal income tax and other deductions, could result in an arbitrarily distorted and unbalanced schedule of implicit marginal rates of tax on wages, with unintended undesirable effects in the labour market and in household behaviour.

3.8.4 On this complex theme, variations of which will be found in many areas of social service cost recovery, infrastructural financing and public utility pricing, the Commission can do no more than urge caution. In determining policies regarding user charges for publicly provided services, the Commission recommends that explicit assessment should be undertaken of the interaction of fee schedules with the structure and incidence of taxation.

3.8.5 The second problem concerns the assignment of user charge revenues. Where financial management and accountability vest in autonomous governing bodies of, for example, schools, hospitals, housing boards or government enterprises, tariff and fee income is appropriately assigned to these service providers. In the absence of decentralised retention of revenues, user charges are treated as a source of general revenue and, from the point of view of service providers, income collected is taxed 100 per cent. Institutions accordingly have little incentive to collect income due and user charges do not contribute properly either to gross revenue or to efficient resource allocation.

3.8.6 The Commission favours the assignment of user charges to the institutions responsible for providing associated public services where such charges represent cost recovery, fully or in part, rather than their appropriation as general national or provincial revenue.

3.9 RECOMMENDATIONS

3.9.1 The Commission recommends that the earmarking of general tax revenues, including income taxes, the value added tax and customs duties, should be avoided. With regard to those excise taxes which can advantageously be assigned, caution should be exercised, taking account of the issues noted in paragraph 3.3.6. Apart from other considerations, further earmarking of specific taxes should not be considered until a satisfactory system of intergovernmental financial transfers is in place and provinces have developed sound revenue bases. [paras. 3.3.6-7; 3.5.5]]

3.9.2 It is recommended that the Department of Finance should submit to Parliament at the time of the annual budget a statement of estimated consolidated revenue and expenditure of the entire general government sector, including extra-budgetary funds and agencies. [para. 3.4.2]

3.9.3 It is recommended that the financing of the MVA Fund by means of an earmarked fuel levy should be reviewed. [para. 3.7.3]

3.9.4 Consideration should be given to the assignment of a percentage of the fuel levy to road construction and maintenance within the broader budget process. [para. 3.7.5]

3.9.5 The introduction of a graduate tax is not supported. [para. 3.7.17]

3.9.6 In determining policies regarding user charges for publicly provided services, explicit assessment should be undertaken of the interaction of fee schedules with the structure and incidence of taxation. [para. 3.8.4]

3.9.7 The Commission favours the assignment of user charges to the institutions responsible for providing associated public services where such charges represent cost recovery, fully or in part, rather than their appropriation as general national or provincial revenue. [para. 3.8.6]

Appendix 1: Extra-budgetary Earmarked Taxes and Levies - 1993/94

Sources: Central Statistical Service, Financial statistics of extrabudgetary accounts and funds 1993/94 (P9102), Financial statistics of local authorities, regional services councils and joint services boards (P9144); Reports of the Auditor-General on the SABS (RP165/1995), on the Financial Service Board (RP 165/1994), on the Multilateral Motor Vehicle Accidents Fund (RP 202/1994) and in respect of the Equalisation Fund (RP155/1995); South African Broadcasting Corporation Annual Report and Financial Statements 1994; J vd S Heyns, The Theory and Practice of Tax Earmarking: Implications for South Africa (mimeo).

Appendix 2: General Government Revenue from User Charges, Fees and Sales - 1993/94 (selected items only)

Sources: Department of Finance, Budget Review 1995, Annexure B; Central Statistical Service, Financial statistics of extrabudgetary accounts and funds (P9102), Reports of the Auditor-General on the Accounts of the Provincial Administrations of Natal (RP123/1994), Cape of Good Hope (RP109/1994), Orange Free State (RP111/1994) and Transvaal (RP115/1994); Central Statistical Service, Financial statistics of universities and technikons (P9103).

Government enterprises include 13 sheltered employment factories, the National Parks Board, the National Road Fund: toll roads, the Reinsurance Fund for Export Credit and Foreign Investments, the Central Computer Services and the trading accounts for Government Auditing, Government Motor Transport, State Water Schemes and the Government Printing Works.

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