The government finally appears to be noticing small business, tabling a range of tax breaks and benefits in the Budget to stimulate the second economy.
Don Moody, a spokesperson for Cofesa, a body that supports small business, says the tax breaks and benefits are a step in the right direction.
“Finance Minister Trevor Manuel has given small business some leeway with a number of concessions. This is a positive sign,” says Moody.
Manuel announced a set of relief measures for small business, saying they were collectively worth R400-million.
From April 1, companies with an annual turnover of less than R14-million (previously R6-million) will qualify for the special graduated corporate tax regime, details of which still have to be announced.
From March 1, the one-time capital gains tax relief for small business will increase from R500 000 to R750 000.
The government has also increased the taxable income threshold for the reduced corporate tax rate of 10% to R300 000 (previously R250 000), while at the same time increasing the small business income tax exemption threshold to R40 000 (previously R35 000).
Another benefit for small business is the proposed tax amnesty for businesses that want to comply with South Africa’s taxation laws, but have not done so for fear of retribution owing to past non-compliance.
The proposed amnesty will allow the South African Revenue Service (Sars) to waive taxes due for any years of assessment ending on or before March 31 2004 and where turnover for that year does not exceed R5-million.
The waiver will be granted on the condition that an income tax return for 2005 is submitted and a non-declaration penalty of 10% of 2005’s taxable income is paid.
The amnesty will be implemented in a two-phase approach, with the first phase targeting the taxi industry. Taxi owners will have between August 1 2006 and May 31 2007 to apply for amnesty, while amnesty for other small businesses will begin later in the year.
The Budget Review states: “Small businesses that do not take advantage of this opportunity to enter the tax system voluntarily will be the subject of Sars enforcement activities and subject to additional tax, interest and prosecution.”