Call to relax tax laws for entrepreneurs

2013-02-21 13:36
Minister of Finance Pravin Gordhan will deliver the National Budget speech on February 27. (Picture: Sapa) ~ SAPA

Cape Town - The red tape and costs involved for small to medium businesses is stunting entrepreneurship, according to the South African Institute of Tax Practitioners (Sait).

The high costs involved to legitimise many small to medium businesses hampers entrepreneurship and this contributes negatively to the economy because it cripples job creation opportunities 

The institute is calling on Finance Minister Pravin Gordhan to make tax policy reforms that is in line with the ever changing business landscape.

Gordhan will deliver the National Budget speech on February 27 and is widely expected to touch on issues such as mining taxes, the National Health Insurance system and the National Development Plan.

“The NDP identified small businesses as the key driver to eradicate unemployment, but compliance with tax laws remains a massive obstacle to many entrepreneurs,” said Sharon Smulders, head of tax policy and research at Sait.

Smulders believes the current turnover tax regime, introduced in 2009, should be revised in order to remain relevant for the changing business environment.

“We commend the initiative of President (Jacob) Zuma to follow in the footsteps of former President (Thabo) Mbeki in establishing a commission of enquiry into tax policy,” said Sait's chief executive Stiaan Klue.

In 2010 Judge Dennis Davis, who was the deputy chair of the 1996 Katz commission of enquiry into taxation, called for the re-establishment of an enquiry into tax policy reform, pointing out that the final report of the Katz Commission was never presented to parliament or released to the public.

Klue said that the global financial crisis and the growing budget deficit highlight the need for a critical re-analysis of the sustainability of the South Africa's tax policy.

"An analysis of the lessons learnt over the past 18 years must be conducted, and should inform a new strategy which can achieve a more balanced democracy in the NDP for 2030 and beyond,” Klue suggested.

The institute also proposed a relaxation in the current provision in the Income Tax Act for registered internships. It said that this would address the youth wage subsidy and satisfy employers, labour unions and unemployed graduates.

“Promoting internships through tax incentives for business in a bid to educate the youth and serve as a tool to transfer skills, will not only achieve the objectives of government by introducing the youth wage subsidy, but it will also alleviate unemployment and provide practical business tools to the unskilled to become entrepreneurs,” said Ronel de Kock, head of the tax institute.

 - Fin24

* Visit our 2013 Budget section for full coverage of Finance Minister Pravin Gordhan's National Budget speech.

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