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US Congress Looks At Small Business Tax Reform

19 April 2013   (0 Comments)
Posted by: Author: Mike Godfrey
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Source: Mike Godfrey

On April 10, the United States House of Representatives Committee on Small Business, led by its Chairman Sam Graves (R – Missouri), held a hearing that highlighted the benefits that could accrue to small businesses from tax reform and simplification.

The hearing examined how small businesses are disproportionately affected by tax complexity. The growing number of code provisions means that small business owners must spend more resources complying with the tax code rather than growing and creating jobs.

The House Ways and Means Chairman Dave Camp (R – Michigan) testified about his small business tax reform discussion draft, a part of his Committee's effort to pursue comprehensive tax reform, and the efforts to simplify and reform the tax code so that small firms would be able to save time or money under an improved tax code.

"Over time, our tax code has become more complex and truly temporary, with tax relief being extended for one year, for months at a time or even retroactively," said Graves. "Small businesses pay a tax compliance cost that is nearly three times larger than big businesses."

The National Federation of Independent Business has noted that tax compliance costs are 65% higher for small businesses than for big businesses, and cost small business owners up to USD19bn every year. In addition, nearly nine out of ten small businesses rely on outside tax preparers.

"According to the US Chamber of Commerce Small Business survey released last week," Graves added, "eight out of ten small businesses support reforming the tax code. Creating a tax code that is easier to navigate and promotes growth will benefit small businesses and the US economy as a whole."

Camp testified that, "simply put, the tax code ought to be easier to understand and less expensive for small businesses to comply with – because every dollar they aren't spending on taxes and tax compliance is a dollar they have to invest in equipment, start a new production line, hire a new employee or provide more in wages and benefits. That is my goal for comprehensive tax reform – a simpler, fairer tax code that leads to more jobs and higher wages."

In addition, on March 12 this year, Camp issued a Ways and Means Committee discussion draft of a tax reform plan for small businesses, as part of a broader effort on comprehensive tax reform that could significantly lower rates while, as required, making the tax code simpler and fairer.

"With about half of the private sector workforce employed by a small business – a total of nearly 60m Americans," it was said, "tax rates as high as 44.6% are especially burdensome for a sector that has long been responsible for leading the nation out of economic downturns."

Therefore, as part of that larger effort to reform various portions of the tax code, the draft would, among other things, include permanent Section 179 expensing (that enables small businesses to deduct immediately up to USD250,000 of the cost of machinery, equipment, vehicles and other qualifying assets, but will currently expire next year); simplify and expand the use of cash accounting for small firms with gross receipts of USD10m or less; create a unified deduction for start-up and organizational expenses. It would also provide two options for the reform of the federal tax rules applicable to pass-through businesses.


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.


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.

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