Print Page   |   Report Abuse
News & Press: TaxTalk

Drawing Small Businesses Into the Tax Net: Tax Amnesty Under the Spotlight

01 April 2007   (0 Comments)
Posted by: TaxFind™
Share |

Drawing Small Businesses Into the Tax Net: Tax Amnesty Under the Spotlight

There are an estimated three million small businesses in South Africa, including businesses of an informal nature. Add to this figure South Africa’s estimated 130000 taxis of which about 117 000 have legal transport permits and the impact of these sectors on the South Africa’s economy becomes a serious force to be reckoned with.

Drawing small and medium enterprises(SMEs), including the taxi industry in to the tax net, was one of the main motivations when the minister of finance,Trevor Manuel, announced the tax amnesty for small business in his budget speech in February this year.

The tremendous success with the amnesty on foreign exchange most probably provided the impetus for the small business amnesty which started on 1 August this year and which will provisionally run until the end of May 2007.

David Williams of the  Financial Mail reported that by the beginning of October SARS had received 832 applications from small businesses for the amnesty.

According to SARS commissioner, Pravin Gordhan, it was clear that there was a high level of interest in the amnesty,although the uptake had been slow. He added that this also happened with the exchange control amnesty where many potential applicants waited until the last minute to apply.

Focus on the taxi industry

SARS stresses that the amnesty process does not focus specifically on the taxi industry, but it is a fact that the department of transport (DoT) has been working with SARS since 2003 to make tax compliance a requirement of the taxi recapitalisation programme. When tabling the legislation for the tax amnesty in parliament in June this year, Trevor Manuel said that the amnesty would support the government's taxi recapitalisation programme, since all licence applicants would be required to have a tax clearance certificate.Says Leonard Radebe, general manager for Operations at SARS: "In dealing with this informal, often undisciplined industry with its many associations and substructures, the Commissioner is inviting taxi operators to declare their earnings, with SARS committed to displaying an understanding of this industry during negotiations with taxi businesses during the amnesty period."

Moving on to small businesses

According to SARS there are more than 924 000 business entities on the tax register of which about 250 000 have turnover of less than R10m per year. It is unsure at present how many of these registered businesses will apply for amnesty and this is one area that has not been resolved.  SARS is still unsure how to deal with small businesses already registered as taxpayers that have fallen in arrears,and now owe penalties and interest. "We must find a way of dealing with that. It presents us with enormous difficulties. It is not as clear-cut as that category of people who have just been out of the system," Trevor Manuel said.

The problem does not lie with them,however, but with the thousands of small businesses that have never been tax compliant. SARS estimates that at least 150 000 entities may be eligible to apply.

Included in the amnesty are:

The following persons may apply for the tax amnesty: A natural person, an insolvent estate, the estate of a deceased person, any trust whose beneficiaries were natural persons (including the deceased or insolvent estate of a natural person) throughout the 2006 year of assessment and any unlisted company which shares or members’ interest were held directly by natural persons (including the deceased or insolvent estate of a natural person) throughout the 2006 year of assessment.

A requirement for all the above is that the individual or entity must have carried on a business and the gross income of that person for the 2006 year of assessment from carrying on a business did not exceed R10 million.

Excluded are:

The amnesty does not apply to salary income earned by employees of the business.Individuals who are not carrying on a trade are also excluded, such as directors and members who may have paid themselves a salary.

Penalties

On tabling the amnesty bill in parliament in June, Trevor Manuel introduced the issue of penalties. Under the new provisions, businesses making use of the amnesty would pay a penalty of two percent on taxable income between R35 000 and R100 000, three percent up to R250 000, four percent up to R500 000,and five percent thereafter. No levy would be payable if a company's taxable income was less than R35 000.

Manuel said the penalty was necessary and generous, considering the amnesty discriminated against compliant taxpayers. He described the levy as "the forgive-me-for-I-have-sinned" part of the amnesty process. "To say you don't need to do anything about it does not appear to be fair at all,”Manuel said. On the other hand, having made the penalty too onerous might have encouraged small businesses already struggling to survive to merely stay out of the tax fold.

And if you choose not to do so?Business could apply for the amnesty from August this year to next May."Come the first of June, businesses that have not complied will face pretty heavy penalties," said Manuel.He was confident that SARS had the enforcement capabilities required to come down hard on small businesses that continue to stay out of the tax fold."What you are able to catch depends on the size of the boot", Manuel said.

Source: By TaxTALK


WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

MINIMUM REQUIREMENTS TO REGISTER

The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

Membership Management Software Powered by YourMembership.com®  ::  Legal