Report-back on the Submission Relating to the Impact of Tax on Small Businesses Growth in SA
23 September 2013
Posted by: Author: SAIT Technical
Author: SAIT Technical
The South African Institute of Tax Practitioners (SAIT)
submitted a consolidated response to the Tax Review Committee on the impact of
tax on small businesses growth in South Africa on the 20th of
September 2013. The purpose of the submission was to outline different
proposals aimed at assisting small business growth in South Africa and reducing
tax compliance costs with the ultimate goal of increasing jobs in South Africa.
The submission consisted out of the three sections outlined below:
1. The definition of
a small business
Concerns were raised regarding the fact that a small
business is not defined in any act which leads to high compliance costs for
small businesses on obtaining specialist advice. It was suggested that a small
business be defined and classified according to turnover, because the majority of the small business tax concessions use turnover
as their primary criterion for qualification.
A micro business should be
defined as any business with a turnover of a R1 million or less and the service
businesses should be included in this definition in order to ensure fairness.
It was suggested that a small business be defined using the definition of the "Small
Business Corporation" as a basis but the current definition of SBC should
amended to allow for a turnover limit of R50 million and the definition should
also be extended to cover "personal services" as well; perhaps it
could be limited to instances where a small business operation is conducted
with at least one non-connected employee. Furthermore, the small business
definition should include all forms of business types – that is, it should not
be limited to companies and close corporations.
2. What should be
used to tax small businesses?
The SAIT proposed the following tax tables to encourage the
starting-up of small businesses in South Africa:
R 0 - 250 000 taxable income taxed @ 0%
R 250 000 to R 500 000 taxable income
taxed @ 7%
R 500 000 to R 750 000 taxable income
taxed @14 %
R 750 000 to R 1000 000 taxable income taxed @
Any amount over R1 000 000 taxable income
taxed at 28%
3. What incentives and allowances should be introduced to assist small
Various incentives were included in the
submission of which the following were the most prominent:
- The tax and
accounting treatment of transactions should be aligned to the greatest extent
possible in order to reduce compliance costs.
- Amendments to
tax legislation and the submission of forms should be kept to a minimum.
- In addition to
the Employment Tax Incentive, it was proposed that a company tax rebate be
introduced. The amount of the rebate can depend on the number of employees that
the company employs.
- It was suggested
that the VAT registration process be streamlined and that all small businesses
be allowed to register for VAT on the payment basis in order to prevent the
cash flow problems associated with the current system.
- It was suggested
that all small business initiatives be centralised so that small businesses
know where to go as a starting point for assistance – of whatever nature, be it
tax, financial or business related.
The SAIT would like to thank all of its
members and industry experts for their valuable contributions in this regard.