92000E1246

WRITTEN QUESTION E-1246/00

by Bart Staes (Verts/ALE) to the Commission

(14 April 2000)

Subject: Adjustment programmes for tax systems in Southern Africa

In order to cope with the financial consequences of the free trade agreement between the European Union and South Africa, Botswana, Lesotho, Namibia and Swaziland will have to drastically reform their tax systems. Together with South Africa, these four countries are in a customs union and are not allowed to levy duties at their common frontiers. Accordingly, EU products are bought and sold via South Africa duty-free, even though Botswana, Lesotho, Namibia and Swaziland are heavily dependent on customs tariffs for their revenue. In its answer to written question E-2382/99(1), the Commission announced its willingness to help the countries in Southern Africa with the tax reforms needed to diversify their sources of income.

1. Has the Commission already started programmes for advising the countries in question on the tax reforms needed to diversify their sources of income? If not, why not?

2. When will the programmes be started and by when must the adjustments be made?

3. What institutions and/or organisations are involved in the programmes?

4. What is the main thrust of the programmes with the countries in question?

5. What budget will be released for the programmes?

(1) OJ C 280 E, 3.10.2000, p. 36.

Answer given by Mr Nielson on behalf of the Commission

(15 June 2000)

The Commission would like to repeat its assurance to the Honourable Member, following the answer to the Honourable Member's Written Question E-765/00(1), that the Community is ready to assist Botswana, Lesotho, Namibia and Swaziland (BLNS) in implementing fiscal reform according to their own established timetables and their own fixed priorities.

The Commission is currently assisting the BLNS countries, at their request, with the preparation of a general support programme. The first phase will undertake analysis of adjustment issues arising from trade liberalisation and prepare activities to take advantage of the new opportunities in addition to coping with the necessary adjustment process. This phase is valued at 6 million and is foreseen to be implemented over a three year period from January 2001-December 2003. It could be set up as a BLNS wide or a South African Customs Union (SACU) facility,

while its financing would come from a mix of European development fund (EDF) regional funds and European programme for reconstruction and development in South Africa (EPRD) resources and would thus be additional to national programme funding. South Africa has already accepted to earmark 3 million of the EPRD allocation of 2000. A second phase will involve a package for assisting the private sector to enhance its competitiveness (through the introduction of new techniques, improved management and work practices and retraining of labour) and the design, where appropriate, of transitional budgetary support programmes within the context of coherent macro economic programmes. A third phase would focus on the implementation of such programmes.

Furthermore, a fiscal restructuring programme has been prepared at the request of Swaziland and will be presented to the EDF committee in June 2000. The project will be implemented over a four year period at a cost of 5,6 M. The purpose of the project is to assist Swaziland in building up its capacity to formulate and implement a sound and equitable fiscal policy within a continued stable macro-economic environment. The International monetary fund (IMF) has been involved in the preparation of this programme.

Botswana recently submitted a request for support for an intended fiscal reform programme with the objective of enhancing government revenue. Its projected results will include the introduction of value added tax and the improvement of the assessment and the collection of taxes and duties. It has been agreed with Botswana that Community aid will firstly concentrate on the recruiting of a revenue adviser (July 2000) who will then assist with the design of a fiscal reform project.

(1) OJ C 46 E, 13.2.2001.