Uncategorized 26.2.2014 06:04 am

Tips for Gordhan ahead of 2014 budget

Former finance minister Pravin Gordhan. File Picture: Refilwe Modise

Former finance minister Pravin Gordhan. File Picture: Refilwe Modise

All eyes will be on Finance Minister Pravin Gordhan today when he tables his budget.

Amidst a forecasted budget deficit of 4.2% for the 2013/14 fiscal year and questions about the country’s growth expectations, the minister will be under pressure to rein in spending and increase collections.

At the same time, government needs to address the country’s unemployment, which stood at 24.1% in the fourth quarter of last year. Analysts have repeatedly emphasised that small and medium enterprises (SMEs) are central to solving the country’s unemployment problem.

Somaya Khaki, project director for the South African Institute of Chartered Accountants (Saica)’s Tax Suite, says whilst one understands that the revenue collections are under pressure this year, one cannot underestimate the important role small businesses in South Africa play in growing the country’s economy and overcoming unemployment.

“However, many people have been deterred from starting their own business because of the perceived complexities and administrative costs involved, particularly where tax is concerned,” Khaki notes.

Saica is calling on National Treasury to consider further tax relief and incentives for small business corporations (SBCs) in order to encourage more investment into small businesses as a means of stimulating the economic growth.

Several years ago, accelerated capital allowances and concessionary tax rates were introduced for SBCs. More recently the gross income threshold for SBCs was increased.

“Whilst this change in the gross income threshold is no doubt welcome, we would like to see further changes, which will assist in decreasing both the tax charge and the administrative burden on SBCs,” she notes.

Khaki says from a value-added tax (VAT) perspective, the administrative burden and compliance issues related to SBCs are in many instances no less than those applicable to larger businesses.

The South African Venture Capital and Private Equity Association (Savca) says it looks forward to government rethinking existing SME-support programmes that have good intent but don’t work because of poor administration.

“Success would require hiring and empowering competent managers for these programmes, and possibly outsourcing management to skilled private sector administrators,” it says.

Savca also hopes that National Treasury will implement powerful incentives to employment as well as workable government funding programmes aimed at attractive private sector capital and skills into the venturing industry.

The Davis Committee, which was tasked with reviewing the current tax system, delivered its first report (on SMEs) to the minister in December last year.

PwC expects that the Budget will refer to this report and that the recommendations contained therein will be considered during the course of the year.

 

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