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Report-back on the Submission Relating to the Impact of Tax on Small Businesses Growth in SA

Monday, 23 September 2013   (1 Comments)
Posted by: Author: SAIT Technical
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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 @ 21 %

Any amount over R1 000 000 taxable income taxed at 28%

3. What incentives and allowances should be introduced to assist small businesses?

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.  


Foreman F. Sibanda says...
Posted Friday, 31 January 2014
Thank you colleagues for your contributions and comments. There is great need to support small businesses since contribute quite a substantive portion within the economy.

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