The government hopes to draw about 100 000 small businesses into the tax net through a new amnesty that opens in August, Minister of Finance Trevor Manuel said on Tuesday.
Businesses with a turnover of up to R10-million would qualify for a waiver of taxes and penalties for all assessment years up to March 2005, he told reporters in Cape Town.
But those qualifying would have to pay a levy of no more than 5% on taxable income for the 2005/06 financial year.
Manuel was to table legislation that makes provision for the amnesty in the National Assembly on Tuesday afternoon.
He said the provisions in the Small Business Tax Amnesty and Amendment of Taxation Laws Bill are ”significantly more generous” than those he announced as part of a broad framework during his Budget speech in February.
At the time, he proposed the amnesty apply to businesses with a turnover of no more than R5-million, while the penalty would have been 10% of the 2005 taxable income.
Initially, the amnesty would have been applied in two phases, starting with the taxi industry and then the remainder of the small-business sector. There would now only be one phase.
The changes are the result of consultation with stakeholders since February, said Manuel. But the objectives remain the same — to broaden the tax base and enhance a culture of tax compliance.
The Bill also seeks to support the government’s taxi-recapitalisation programme, the minister said, since all licence applicants would be required to have a tax-clearance certificate.
Under the new provisions, businesses making use of the amnesty would pay a penalty of 2% on taxable income between R35 000 and R100 000, 3% up to R250 000, 4% up to R500 000, and 5% thereafter.
No levy would be payable if a company’s taxable income is less than R35 000.
Manuel said the penalty is necessary, and generous considering the amnesty discriminated against compliant taxpayers. He described the levy as ”the forgive-me-for-I-have-sinned” part of the amnesty process. ”To say you don’t need to do anything about it does not appear to be fair at all.”
On the other hand, having made the penalty too onerous might have encouraged small businesses already struggling to survive merely to stay out of the tax fold.
Business can apply for the amnesty from August this year to next May.
”Come the first of June, businesses that have not complied will face pretty heavy penalties,” said Manuel. He expressed confidence that the South African Revenue Service (Sars) has the enforcement capabilities required. ”What you are able to catch depends on the size of the boot.”
One area not yet resolved is that of small businesses already registered as taxpayers that have fallen in arrears, and now owe penalties and interest.
”We must find a way of dealing with that. It presents us with enormous difficulties. It is not as clear-cut as that category of people who have just been out of the system,” said the minister.
Regulations will be passed to deal with this matter separately.
Sars is to create a special sub-section focusing on the amnesty process.
While amnesty is not guaranteed to all applicants, the decision is not discretionary. The Treasury believes the criteria stipulated in the bill are objective, and that applicants would be able to identify ”with a great extent of certainty” whether they qualify or not.
Manuel said it is hard to estimate how many businesses might qualify, but 100 000 is ”kind of the ballpark”. — Sapa