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Business Tax Amnesty Fails To Boost South African Tax Base

by Glen Shapiro,, New York

01 November 2007

The South African Revenue Service (SARS) has received more than 353,000 small business tax amnesty applications, it has emerged. However, a minimal 22% of those were from new taxpayers.

This amnesty, which ran between August 1st 2006 and June 30th 2007, gave small businesses with an annual revenue of R10m or less a chance to regularise their tax affairs.

This news came after Finance Minister, Trevor Manuel, delivered his medium-term budget policy statement to Parliament earlier on in the week, outlining both political and fiscal proposals.

The so-called "mini budget" has been accused of concentrating too heavily on policy, and not enough on issues such as future spending and tax plans.

Speaking to the allAfrica news service with regard to the newly released business tax amnesty figures, associate tax director at Ernst & Young, David French, observed that the amnesty's main agenda was to grow the tax base by introducing new registrants, and the news that there were only 22% of new registrants "is certainly not a spectacular increase".

In his medium-term budget policy statement, delivered on Tuesday, Mr Manuel stated that:

"This year, we project to collect about R8.5 billion more than budgeted, mainly due to higher inflation and related salary increases. We expect that over the medium term, main budget revenue will be about 27½ percent of GDP."

He added:

"We reaffirm the principle that cyclical revenues should not be used to provide permanent tax relief. However, proceeds from better administration and tax compliance, and the broadening of the tax base may be used to lower the tax burden, as we have done in the past."

SARs is reportedly expected to step up its pursuit of tax evaders large and small following the somwhat disappointing amnesty results.

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