Proposals on a major reform for small business taxes have been around for years. In this preview, we explore some of the options that potentially features in Budget 2011.
Proposal to utilise taxes to support small business and entrepreneurship are a strong possibility to feature in Budget 2011.Minister Pravin Gordhan, in his 2010 Budget Speech indicated that small business taxation would be an area of focus in government. Work in this area has been undertaken, and government might be ready to offer significant tax incentives to small business and start-ups.The logic is important to understand – more employers = more jobs. The result is that economic participation and inclusion is supported.
The South African Institute of Chartered Accountants has developed a set of compelling proposals which could be candidates to support small businesses. There recommendations include:
- Amend legislation for provisional taxpayers, to make sure that a fairer assessment procedure is established. This would assist investors and freelancers with the management of cashflow.
- Extend tax breaks for learnerships which are scheduled to expire on 1 October 2011.
- Tax relief for small business, especially through raising the tax threshold for small business corporations
- Simplify VAT registrations
The proposals are sound, offering a set of creative ways to utilise taxation policy to support economic inclusion. This would coincide with the focus on small business in the State of the Nation Address. More to the point, proposals would provide a policy for supporting small business and economic inclusion. The SAICA proposals focus on the income side of the budget.
Zunaid Khan of Talent Stream however argues that a deeper alignment between jobs and taxes are required. Mr. Khan argues that the current alowances in the Income Tax Act support learnerhsips, but it remains questionable as to whether they are substantial enough to support a step-change in the number of learnerships. Mr. Khan further argues that:
It would be wise to have similar tax incentives implemented for Enterprise Development initiatives. Not only would this further align the Income Tax Act with the BEE Codes (from a human capital point of view) it would have a positive impact on job creation and furthering a culture of entrepreneurship in South Africa.
This proposal is suggestive of a deeper transformation of the tax regimes to support job creation. It is an area that Minister Gordhan should focus on.
Photo Credit: Media Club South Africa.