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If you have a small business then these are the factors you should pay attention to in Budget 2022

We are at a crucial point in the future of our country. There has been much negative attention on our economy - with the unemployment rate at a record rate. File Image: IOL

We are at a crucial point in the future of our country. There has been much negative attention on our economy - with the unemployment rate at a record rate. File Image: IOL

Published Feb 22, 2022

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By Colin Timmis

We are at a crucial point in the future of our country. There has been much negative attention on our economy - with the unemployment rate at a record rate. This shouldn’t be understated, especially since we’re still in the throes of Covid-19, but with a business community ambitious to rebuild, we have a real opportunity to turn the tide. We all need to get behind this next phase of recovery.

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This week’s Budget speech from Minister of Finance Enoch Godongwana is critical. It’s his first one in the new role, and it’s vital he sets the right tone, and his approach gives our small business community the support to succeed.

Two key areas that we need to see addressed are expanding the taxpayer base and driving growth in the biggest area of our economy, small businesses. The two are also closely linked.

A focus on tax

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The South African Revenue Service (SARS) has just released its annual tax statistics, which give a strong indication of the health of our economy through the lens of tax revenue.

Expanding the taxpayer base is key to boosting our economy, and technology can be a vital enabler in making this happen. It’s already great to see SARS taking strides to modernise the system through its Strategic Plan - like cleaning up the database, so there are clearer numbers.

They’ve also started embracing new technology to simplify the tax burden for businesses. The latest tax stats show eFiling now sits at 77%. And we launched a new tool with Sars last year to allow direct VAT eFiling from our accounting platform - significantly reducing time investment for small businesses.

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But there is still a huge tax gap that exists. Worryingly, tax revenue collection (for the fiscal year 2020/21) was down 7.8% compared to the previous year. Small Business Corporation Tax (SBC) is also down compared to the same period. The contribution of Corporate Income Tax (CIT) to overall tax revenue over the last 10 years has decreased consistently from around 30% to 16.4% - we need to arrest this decline and better enable business growth, which will support employment.

This shows there is a huge opportunity to boost our economy by supporting and enabling businesses to pay their taxes with the support of technology. Hopefully, we’ll see some focus on this in the budget.

Lifting the small business community

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Technology is one enabler to close the tax gap and give our economy a much-needed boost. Another critical part is supporting small businesses.

Our latest research among over 400 small businesses in South Africa found that a massive 87% of respondents are confident about their businesses in 2022. This is positive to see and shows how ambitious business owners are to grow this year. But only 3% said they thought government support for small businesses was adequate.

We need to see a genuine focus on small businesses in this week’s budget. The redesigned loan guarantee scheme announced at SONA and the decision to include alternative lenders is a good step in the right direction, but we need to see more action.

Stronger grants and incentives for technology uptake are two that comes to mind. We know that businesses embracing digitisation have a greater chance of survival - it can help them streamline admin, trade internationally and reach new customers. And tax relief for small businesses to up-skill staff in critical digital skills that will help them to grow.

Colin Timmis is Xero South African Country Manager

BUSINESS REPORT

Related Topics:

Free Market Economy

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