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Compliance sees small business tax contribution grow

08 April 2016   (0 Comments)
Posted by: Author: Hilary Joffe
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Author: Hilary Joffe (BDlive)

The tax take from small and medium-sized companies surprised economists by growing much faster than that from SA’s largest corporations in the latest fiscal year, with the South African Revenue Service (SARS) attributing this to higher levels of compliance among small businesses.

SARS reported last week that it had collected just more than R1-trillion in the fiscal year to March 31, exceeding the revised target in this year’s February budget estimate by R154m, but falling R11.4bn short of the original target in last February’s budget.

This week, SARS officials said that corporate income tax collections from the large companies served by SARS’s Large Business Centre (LBC) had contracted 1%, whereas collections from what SARS calls "Ops" — the medium and smaller companies that fall outside the LBC — jumped 13%.

The result was that SARS managed to exceed February’s revised R192bn estimate for corporate income tax collections by about 1%, although the year-end number still fell more than R10bn short of the original target in the 2015 budget.

Total tax collections from large businesses — including value-added tax and the PAYE from their employees, along with their corporate income tax — showed growth of just 0.6%, while the figure for smaller and medium-sized "Ops" businesses increased 12.6%, showing strong growth across all the tax categories.

Personal income taxes paid by employees of businesses falling under the LBC grew only 4.3%.

SARS group executive for revenue-analysis and planning Randall Carolissen said PAYE had been a mainstay of revenue collections up to December, but had come to a standstill since then, especially in large businesses in the financial sector, reflecting reduced bonuses and possible job losses among higher-income employees.

Smaller businesses often depend on larger businesses and on government for supply contracts, and economists said it was unlikely that in this economic environment, small and medium-sized enterprises could be thriving, while large businesses were not.

Economist Dawie Roodt of Efficient Group said if small business tax collections were doing much better than expected, while large businesses were doing worse, it could not be because of the economic environment. "The only thing I can think of is they must be really squeezing the smaller guys," Mr Roodt said.

Mr Carolissen conceded that smaller businesses would have been expected to trend down with larger business, but the increased focus on compliance accounted for the latest year’s trend. SARS’s systems and analysis had got much better. The establishment of regional revenue steering committees had also helped.

As part of the controversial new operating model that SARS commissioner Tom Moyane is in the process of implementing, SARS has effectively disbanded the LBC, which had offices only in SA’s three main economic centres, and has replaced it with centres in each of the nine provinces.

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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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