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First SMME colloquium will focus on ‘favourable tax regime’ for small business

21 October 2014   (0 Comments)
Posted by: Author: Samuel Mungadze
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Author: Samuel Mungadze (BDlive)

A favourable tax regime for small business will be the focus of the first-ever gathering to develop a master plan for the newly created Department of Small Business Development on Tuesday.

The government has been under pressure to consider flexible tax regulations for the sector, which is viewed as the country’s solution to an unemployment rate of 25%.

Small, medium and micro-enterprises (SMMEs) are expected to create 90% of the jobs required to meet the National Development Plan’s objective of 11-million jobs by 2030.

Small Business Development Institute CEO Xolani Qubeka said the tax regime needed to be relaxed, and this would be a focus at the National SMME Colloquium held in Sandton on October 21.

While the Department of Trade and Industry had worked towards developing SMMEs, the lack of a national master plan rendered most of its efforts ineffective.

"The national SMME policy colloquium is set to create constructive debate and interrogate these issues collectively and comprehensively among important stakeholders and thought leaders,” said Mr Qubeka

Despite concerns regarding the taxing of these enterprises, in recent years the government and revenue authorities have introduced a number of favourable tax breaks and measures to assist SMMEs with tax and compliance challenges.

In February this year the government announced a R6.5bn boost for the sector over the next three years.

Former finance minister Pravin Gordhan in his budget speech early this year said he had accepted two Davis Tax Committee recommendations. Mr Gordhan had appointed the committee, headed by Judge Dennis Davis, to review SA’s tax policy framework.

The recommendations include an amendment to the turnover tax for micro-enterprises, and that consideration be given to replacing the graduated tax structure for SMEs with a "refundable tax compliance credit”.

The current turnover tax regime targets businesses with an annual turnover of up to R1m. The committee recommended the retention of the regime, but proposed simpler requirements to qualify, and that the thresholds and tax rates be adjusted.

South African revenue authorities have also carried out a number of initiatives to ease the tax burden on small firms. These include a tax amnesty in 2006. The amnesty helped in lifting the turnover threshold for VAT to R1m and in introducing a special concession to allow smaller firms to submit VAT three times a year, instead of bimonthly.

Stiaan Klue, CEO of the South African Institute of Tax Professionals, said tax was one of the many factors that needed to be addressed to spur small business development in the country.

"Taxation brings good citizenry. For SMEs to get contracts and for them to develop they require tax compliance. Taxation is key to the success of the small business development formula but we need the government and stakeholders to have a critical re-look at the preferential tax regime,” said Mr Klue.

Fixing taxation was not a silver bullet, but certain taxation policies could be reformed to accelerate growth in this sector, Mr Klue, who is a member of the ministerial task team developing the colloquium, said.

"There is an urgent need to interrogate the shortfalls in current SMME policies, and to ensure that all important stakeholders are pulling in the same direction in an effort to align the growth and support of the SMME sector with the socioeconomic objectives set out in the NDP,” he explained.

Small Business Development Minister Lindiwe Zulu agreed. "We will pursue an aggressive entrepreneurship drive and create an enabling environment that will make it easy for South Africans, particularly the youth, women and people with disabilities to start and sustain their businesses.”

The Southern African Institute for Business Accountants and the Black Business Council are two of the leading organisations that will be taking part in the colloquium.

This article first appeared on bdlive.co.za.


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