Presented by Xero

What is needed to increase the taxpayer base in 2024?

 ·6 Mar 2024

Colin Timmis, Country Manager, Xero South Africa

There was a lot of focus in the 2024 Budget Speech around specific tax changes, but it’s important to look at the bigger picture when it comes to expanding the taxpayer base.

Put simply, not enough small businesses understand tax, and they’re missing out on benefits individually and to the country.

The annual SARS tax statistics show despite overall tax revenue increasing from R1 287.7 billion in 2018/19 to R1 686.7 billion in 2022/23, a worryingly small number of businesses are reporting taxable income.

For example, of the 1 million+ businesses that were assessed for company income tax, 67.1% of all CIT was paid by just 432 companies.

Closing the gap

Small businesses make up such a large percentage of the economy, yet the numbers registering for Small Business Corporation tax (SBC) and turnover tax remain very low.

Just 160,000 registered for SBC in 2022/23 and this figure has increased very little in the last few years.

This is a huge, missed opportunity for smaller businesses who aren’t aware of the benefits like paying less tax through SBC.

Another area that could boost tax growth is targeting those within the PAYE and VAT tax band specifically.

There needs to be greater education on the different types of tax and an understanding of how they can benefit small business owners.

Building the taxpayer base by supporting small businesses

To continue building the taxpayer base, we need to help businesses use the right technology.

Our research shows 64% of small businesses want government investment in digital skills and innovation.

If the government can encourage more small businesses to use technology to manage their finances, it will boost tax compliance and create healthier businesses.

More could be done to enhance the support system for small businesses.

SARS is one element, but other government departments and organisations can all play a part in supporting small businesses – whether it’s providing education and training, connecting them with a network, or simply paying them on time.

The role of accountants should not be understated.

They are the ones who will help close the tax gap and educate businesses about which tax options are right for them.

We should be encouraging every business to work with an accountant or bookkeeper to help them understand what’s going on in their business and make informed decisions.

We need to make starting a business more appealing.

Tax breaks are good, but they only help established businesses.

There could be more government support for small businesses when they’re just starting and greater incentives to encourage entrepreneurs.

For more information about how Xero can help small businesses stay on top of their numbers, visit the Xero website.

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