The upcoming national budget should facilitate and fund initiatives for government to access business skills to promote accountability, transparency and enhance service delivery across all levels of government.
“That’s one of my several tips for Finance Minister, Pravin Gordhan,” Muneer Hassan, project director: tax at the South African Institute of Chartered Accountants (SAICA), said in Johannesburg 8 February.
In this context, he scotched the myth that a clean audit implied real service delivery, except to the extent that it incorporated performance reporting.
While noting that SAICA was a conduit for business skills and that it currently assisted with process improvement, Hassan stressed that wider support and participation was imperative.
He also urged the Minister to go out of his way to do something for small business, “the backbone of the nation’s economy”. In particular, Gordhan needed to adjust small business corporations’ maximum marginal tax rate for inflation.
He explained that a small business corporation, defined in section 12E of the Income Tax Act, was taxed according to a separate tax table, whereby the maximum marginal tax rate of 28% began at a taxable income of R300 000.
“That R300 000 maximum has not been adjusted for inflation since the 2007 tax year, heightening the risk that the small business corporation tax benefits might lose their impact and be depleted.
“An increase of 8% a year is therefore requested so that the maximum marginal tax rate for small business corporations (currently 28%) should start at a minimum level of R400 000 for the 2011 tax year. On the same basis, the qualifying gross income threshold should thus also be adjusted to R19m.”
Hassan also pinpointed several areas of prospective relief for the individual taxpayer. Noting that deductions available to taxpayers earning remuneration were limited to section 23(m) of the Income Tax Act, he made a plea for several of such relief measures to be extended.
“Since the introduction of section 23(m), certain taxpayers earning remuneration have suffered hardship because they have incurred certain legitimate expenditure in the production of their remuneration (income),” Hassan pointed out.
“This was expenditure they were obliged to incur, but which did not qualify for a deduction in terms of section 23(m). In other words, although these expenditures were necessary in earning the remuneration, they were nonetheless specifically prohibited from deduction.”
Elaborating on subcontracting work, Hassan said: “In certain cases such ‘employees’ have not been seen as independent contractors by SARS, and the salaries paid to the subcontractors were disallowed as deductions.”
“It is recommended that consideration be given to the amendment of section 23(m) of the Act.”
