Simplify tax laws to stimulate economic growth

Dawie Roodt argues that it was not the government’s intention to weigh down small firms by taxing them heavily or smothering them under tax forms, but this is what is happening, despite some reforms since the first edition in 1999. Read his theory below to find out more about how, in his view, many small firms are required to remit expected VAT collections to SARS before they have received them, compounding the chronic capital shortages already experienced by most small firms.

Tax

Laws Affecting Small Business: Tax was launched by economist Dawie Roodt on 4 October 2022.

Synopsis

Tax and the compliance costs imposed by the various tax laws are a tremendous burden to small firms. They are, in fact, one of the greatest inhibitors of small firm development. Obviously, it has not been the government’s intention to weigh down small firms by taxing them heavily or smothering them under tax forms, but this is what is happening, despite some reforms since the first edition of this entry in 1999.

Taxes are assessed, for example, on profits on goods invoiced but for which the small firms have not yet been paid, with some narrow exceptions. Allowable deductions off taxable profits in respect of equipment purchased are inadequate. In addition, many small firms are required to remit expected VAT collections to the South African Revenue Service before they have received them. These requirements compound the chronic capital shortages already experienced by most small firms.

The tax laws are far too complex for the majority of taxpayers to understand. If it is not possible to simplify all the laws, then a special, simplified Act of Parliament should be adopted that applies to the first part of income or to lower-income taxpayers.

Economic growth in South Africa is being constrained by excessive government spending. Studies show that the high growth needed by this country is not possible whilst government expenditure continues to consume such a large percentage of GDP. A reduction in government spending will make tax reductions possible, and this will lead to increased savings, investment and growth, especially in the small firms sector.

There are two particularly strong arguments for giving special consideration in tax legislation to small firms. The first is the competitive disadvantage suffered by small firms because of the distortion of South Africa’s economic structures over many years. The second is the undoubted social and economic benefits the country will derive from having a stronger small firms sector.

References in this booklet to companies include any close corporations still in existence.

Recommendations

• Reduce government expenditure at all levels to less than 25% of GDP within five years.
• Adopt a new, simplified Income Tax Act within the next two years to govern the taxation of the first part of any taxpayer’s income (say, commencing with R350,000 and adjusted automatically for inflation every year).
• Amend section 12E of the present Income Tax Act to allow small firms to deduct the cost of all capital equipment from their taxable incomes in the year in which the cost is paid, not just the cost of plant or machinery used in manufacturing.
• Allow not only small business corporations to deduct the cost of capital equipment, but also small firms that are sole proprietorships or partnerships.
• Raise the annual gross-income ceiling for this capital-equipment deduction from R20,000,000 to R45,000,000).
• Allow small firms to deduct a debtors allowance from their taxable incomes which is equivalent to the accrued profits on unpaid sales.
• Issue regulations under section 37G of the present Income Tax Act to define the taxable income of small business undertakings consisting of sole proprietors or partnerships of natural persons, solely by reference to amounts actually received.
• Amend section 37G to apply to small business undertakings which are companies.
• Raise the annual turnover ceiling which qualifies a micro business for registration, from R1,000,000 to R2,000,000.
• Grant small firms consisting of natural persons and partnerships of natural persons a tax deduction.
• Increase from R1,000,000 to R2,000,000 the value of “taxable supplies” at which registration for VAT becomes compulsory.
• Increase the threshold below which the payments basis for accounting for VAT by natural persons and unincorporated bodies of natural persons is permitted from the present R2,500,000 per year to R13,500,000, and extend this concession to companies.
• Increase the minimum consideration for a supply of goods or services that a vendor who accounts for VAT on a payment basis must account for on an invoice basis, from R100,000 to R350,000.
• Accept invoices from exempt small firms listed with SARS as VAT invoices when received by VAT-registered larger firms.
• Increase from R3,500,000 to R7,500,000 the amount deductible from the net value of an estate in determining the dutiable amount for estate duty purposes.
• Increase from R500,000 to R1,200,000 the minimum total remuneration paid by an employer to his employees before skills development levy contributions become compulsory.
• Provide for automatic inflation-adjustment of all figures embedded in tax legislation that fix exemptions and levels of income, turnovers, assets, and other measures that determine liability for compliance with particular elements of that legislation.

The case for simplifying tax laws and regulations

South African society at present is still characterised by extreme disparities in wealth, standards of living and levels of education. A minority of the population is largely economically advanced and sophisticated, but the majority is largely poor. Yet despite this, many hundreds of thousands of poor people are running their own businesses as hawkers, taxi operators, spaza shop owners, traditional healers, artisans, small farmers, small manufacturers and so on.

Current tax laws originated at a time when whites were taxed under separate and more complicated laws than those imposed on the black population. In other words, they were designed by, and for, people with relatively high incomes.

As tax rates increased inexorably over the years, wealthy taxpayers found it to be in their interests to hire experts to help them minimise their tax obligations. Thus, a never-ending battle began between sophisticated taxpayers and their expert advisers seeking legal ways to avoid tax, and the state seeking to close loopholes as they became a serious drain on state revenue receipts.

One result of this is that tax laws have become so complicated that almost everyone is baffled by them. The Income Tax Act still contains exceedingly technical and abstruse wording. Even the annual Tax Guide for Small Businesses prepared by the South African Revenue Service (SARS) uses words like ‘render’, ‘utilise’, and ‘accrual’.

All residents who carry on any trade, other than solely as an employee, must register with SARS as a taxpayer. And they must register within 21 days of achieving this affluent state. Pity the poor hawker! Worse still if she employs somebody, for then she must understand, keep records, and submit returns and money for PAYE deductions from the wages she pays.

The Income Tax Act is not the end of it for entrepreneurs. They must also cope and comply with the Value-Added Tax Act, if the total value of taxable supplies they make in a 12-month period exceeds R1,000,000.

The list is not yet complete. Still to come are the Transfer Duty Act, the Customs and Excise Act, and a number of imposts under various labour statutes and provincial and local laws. If it all gets too much and the entrepreneur gives up the ghost, there is the Estate Duty Act, which limits his ability to leave a thriving business to be continued in the next generation by his children.

A second result of the complexity and volume of tax laws and high tax rates is the ever-increasing size of the thriving tax advice industry – mainly comprised of lawyers, accountants, life assurance brokers, and financial advisers. The gross annual fee income of this industry runs to several hundreds of millions of rands. The expert services provided are essential to taxpayers but in the overall picture they do not add wealth to the economy. Nor does the compliance burden placed on entrepreneurs in collecting and paying across not only their own tax liabilities but also the tax they collect from employees and customers. SARS rightly prides itself that its own costs per rand of tax collected are fairly low. But an equally important figure is the cost incurred by the taxpayers in acting as SARS’s collection agents, and the added costs of the tax advice industry.

A third result of the tax system is that small business owners who cannot handle tax matters themselves, nor afford to hire the expert services to handle it for them, have no choice but to operate in the so-called informal sector. It is not a glamorous or pleasant place to be. Most people prefer to be on the right side of the law whenever it is possible and provided the laws accord with the community sense of justice. When it is not possible, as it is not for many small firm operators, confinement to the informal sector prevents growth, visibility, and security. Only the alternative of unemployment and destitution is worse.

Estimates of the size of the informal sector can vary, as can definitions of exactly what activities should be regarded as contributing to it. Statistics South Africa, in its most-recent published Survey of Employers and the Self-Employed, which aims to collect data about people running businesses not registered for VAT and to produce comprehensive statistical information about informal-sector businesses, estimated that, in the third quarter of 2017, some 1,800,000 persons ran businesses in the informal sector and that 63.5% of them stated that unemployment was the main reason they decided to start an informal business. Without the informal sector, poverty would be an even greater social problem.

It should not be thought that those who are forced to operate their businesses in the informal (or as some prefer to call it, the independent) sector, pay no taxes. They pay plenty in terms of VAT incurred on goods-and-services inputs for their enterprise (unrecoverable by many of them who do not qualify for even voluntary registration as VAT vendors), and in terms of the passed-on effects of corporate income taxes in the prices they pay for goods and services they purchase from large suppliers, and in terms of customs and excise duties and levies, such as those included in petrol prices. Many of them, although legally required to register and submit returns, would fall below the existing tax thresholds. It is not sensible to require registration and returns, let alone taxes, from those whose incomes do not provide them with any decent standard of living anyway. It is also very doubtful whether increasing exemption levels a little would seriously reduce tax collections.

It is generally agreed that a good tax system needs to be characterised by simplicity, certainty, neutrality, and a low cost of administration and collection. The present South African system falls short of all these ideals. It cannot be regarded as either simple or certain when it is not understood by most of the population; it is not neutral when compliance costs for small firms can be ten times the proportionate costs of big corporations Although the administration and collection costs incurred by SARS may be quite low, the huge size of the tax advice industry indicates that the overall costs are extremely high.

A possible solution would be to introduce a dramatically simplified income tax system applicable to, say, the first R350,000 of all taxpayers’ incomes. The existing system would then apply only to those portions of more wealthy taxpayers’ incomes that exceed that amount. Such relatively wealthy taxpayers can reasonably be expected to hire the expertise they need to comply. The rest, the vast majority with incomes below the R350,000 level, would not need to concern themselves with the more complicated, higher-level system. The simplified system should, among other things:

Raise tax thresholds well above poverty threshold levels and not require registration or returns from people below these thresholds.

• Significantly reduce the number of tax bands.
• Simplify or even scrap rebates and certain types of deductions.
• Encourage saving.
• Encourage small firms to plough back profits.
• Allow small firms to calculate taxable incomes on a cash, rather than an accrual, basis.

The aim should be to exempt as many as possible from the requirement to submit any returns at all and, for the rest, to so simplify things that the annual return does not exceed one page in length and the explanatory brochure does not exceed two pages (both to be available in all official languages). Similar drastic simplification must also be considered for VAT levies at the lower end.

Let us not pretend that it is easy to change tax laws. Unless very carefully considered, changes can often have unanticipated and undesired effects. Obviously, precautions will have to be taken to prevent abuse by income-splitting or other means, but these difficulties can be overcome.

The need to simplify the Income Tax Act to “facilitate the carrying on of small business undertakings” was recognised when section 37G was added to the Act in 1995. Under this section, the Minister of Finance has  powers to make regulations varying the Act’s provisions governing the determination of the taxable income of natural persons carrying on business through  small business undertakings, relaxing their duties relating to the submission of returns and payments, and making such other provision as in the Minister’s opinion will facilitate the carrying on of small business undertakings, but no such regulation has yet been issued.)

The case for reducing tax

Taxation is inextricably linked to government spending. Sooner or later, all the money government spends has to be taken from the people by way of taxes of one sort or another. Many studies over many years have shown, however, that if a government takes too much, economic growth declines, especially when the excess is spent on non-core functions. In a study by the Joint Economic Committee of the US Congress, the core functions of government were identified as:

• The protection of individuals and their property.
• The enforcement of contracts.
• The maintenance of a stable monetary regime.
• National defence.
• The provision of infrastructure such as national roads, and sewage and sanitation facilities.
• Environmental protection.

OECD studies confirm the negative relationship between the size of government and economic growth. The higher the level of government spending, the lower the rate of growth of the economy.     

If all our people were already enjoying a comfortable standard of living, we would not have to be so concerned about growth rates. But the fact is that the majority of South Africans are still poverty-stricken. The evidence is compelling that, if we want growth rates of 6% or more, we will have to reduce government spending. Lower spending will facilitate lower taxes. Lower taxes encourage people to work harder and smarter, to innovate, to spend, to save, and to reinvest in the growth of their own businesses. As the small firm sector begins to thrive, unemployment will fall, and so will crime. As more people are employed and more small firms are established and grow, total tax collections will increase even though tax rates remain lower than they are now.

The case for special consideration of the small firm sector

If the effects of the present tax system and the more general structures of the economy were neutral in their impact on businesses regardless of their size, the case for giving any special consideration to small firms would be weakened. In many ways, however, over many years economic structures have been distorted, leaving small firms at a significant competitive disadvantage.

• Laws were made (and still are) on the assumption that all citizens are equally well educated and equally fluent in English and whatever other official language is used to communicate the laws, being usually Afrikaans in the case of taxation laws.
• Many laws create barriers to entry into business, so that those on the inside are protected from new competition from those still on the outside.
• Many laws are enacted on the basis that ‘one size fits all’, i.e., with an implicit assumption that the costs of complying with them will be proportionately similar regardless of the size of the entity concerned. In practice, the compliance costs for small firms can be ten times greater, per unit of sales or per unit of profit, than the comparable costs for their larger competitors.
• Once legal action goes beyond the very limited jurisdiction of the small claims courts, justice through court action is largely confined to those with more wealth. It is not uncommon for small firms to abandon valid claims against affluent suppliers and customers because of their inability to pay for the necessary legal assistance.
• The small firms sector is poorly organised and has neither the money nor the time to match the sophisticated and continuous lobbying efforts of organised labour and of the corporate world. In many cases the rent-seekers triumph over the interests of small firm owners.
• Past state spending on infrastructure was biased towards the interests of a minority portion of the population. As a result, many black small firm owners still operate in areas poorly serviced with electricity, water, sewerage, banks, courts, roads, and all the other services that ease the establishment of a thriving business.
• Until recent times, black entrepreneurs were severely limited in terms of the education offered to them, the businesses they were permitted to run, the staff they could employ, and the places where they could operate. They were also largely denied the opportunity to acquire freehold or any other mortgageable titles to properties.

There is therefore a case for offsetting the structural disadvantages imposed on small firms with some countervailing benefits, if equality of opportunity to compete is to be achieved. A restructuring of the tax system is a good place to begin this process.

The case is strengthened by the undoubted economic and social benefits that South Africa would derive from having a much stronger small firms sector. This sector, in all the economically successful countries of the world, is the main generator of new, wealth-creating and sustainable jobs. It is also the source of most of the useful inventions and innovations. It is essential if South Africa is to become globally competitive, and it is essential if competitive business opportunities are to be redistributed to those entrepreneurs previously suppressed and disadvantaged.

It is accordingly cause for alarm that the deductions and allowances which the tax statutes confer on small firms are too narrow in scope or have shrunk due to bracket creep.

REDUCE STATE EXPENDITURE

RECOMMENDATION 1

Reduce government expenditure at all levels to less than 25% of GDP within five years.

The government must set itself the target of reducing state expenditure to less than 25% of GDP over the next five years. This will involve identifying its core functions and abandoning expenditure on peripheral matters. It will also involve rigorous scrutiny of all expenditure to ensure that the desired results are being achieved at the lowest cost.

Considerations

As has already been acknowledged, tax reform is not easy and cannot be achieved overnight. Still less can government expenditure be reduced in a single ‘big bang’ approach. However, if every journey begins with a single step, the time to take that first step is now.

This recommendation is not intended as a criticism of the present government – its commitment to the restoration of fiscal rectitude is commendable. But government spending is still too high to permit rapid economic growth.

REDUCE THE COMPLEXITY OF TAX LEGISLATION

RECOMMENDATION 2

Adopt a new, simplified Income Tax Act within the next two years to govern the taxation of the first part of any taxpayer’s income (say, commencing with R350,000 and adjusted automatically for inflation every year).

A new, simplified Income Tax Act must be prepared and introduced within the next two years to govern the taxation of, say, the first R350,000 of any taxpayer’s taxable income. The existing Act can be left in place to deal with those portions of incomes that exceed R350,000, though even here simplification will be highly desirable. Matters to be investigated and considered include the appropriate level of income to which the simplified Act should apply and the possibility of:

• Having no more than two tax brackets within this level of income;
• Devising a tax return consisting of one page and an explanatory brochure of no more than two pages – both to be available in all official languages;
• Establishing a reasonable threshold, certainly higher than that of basic subsistence living, below which no tax is payable, nor returns required;
• Indexing, and adjusting automatically, all thresholds and any other monetary amounts, such as tax brackets, to changes in the consumer price index (see Recommendation 11);
• Allowing small firms to have the option of being taxed on a cash basis, including the purchase or sale of plant and equipment (see Recommendations 3 and 4);
• Establishing Small Claims Courts for areas where they do not yet exist, if any, and widening their jurisdiction to cover disputes between taxpayers and SARS (to supplement hearings by a Tax Board appointed in terms of Section 108 of the Tax Administration Act, 2011);
• Incorporating a clause in the Act requiring SARS to explain to first offenders in the official language of their choice where they have been remiss and what they must do to correct matters and exempting such offenders from penalties or interest in respect of the offence;
• Requiring free assistance to be provided by SARS to all who are illiterate, in a language readily understood by the taxpayer, as well as the holding of regular SARS clinics and workshops at venues reasonably accessible (no more than an hour’s travelling time) to all taxpayers; and
• Permitting individuals to deduct from their taxable incomes limited amounts invested as equity capital in non-controlling, arms-length stakes in small firms, in order to create a small venture capital market.

It is unjust to have laws of such complexity that they are inaccessible to the citizens whose lives and livelihoods are profoundly affected by them. It should be possible to have a brief, simple, and straightforward set of laws applicable to taxpayers earning less than a specified income. The objective should be to have laws that can be easily understood by those to whom they apply. Individuals with taxable income above R350,000 could remain subject to the existing laws in respect of income above that amount, or alternatively, continue to be taxed under the existing laws.

The simplified income tax laws should be stripped down to the bare essentials. This would mean determining in the simplest possible manner to calculate taxable income and tax payable. Any taxpayer wishing to claim an expense that falls outside the ambit of these laws could have the option of choosing to be taxed under the existing laws.

Simplified tax laws, if they were to be accompanied by simple procedures and requirements, would save taxpayers huge amounts in administrative costs, professional fees, and other compliance costs. They would also relieve SARS of a considerable part of its administrative burden.

A number of government policy statements, for example the “1997 Green Paper on Public Sector Procurement Reform in South Africa”, state that small firm owners will not benefit from government initiatives unless they are complying with identified laws, including labour and tax laws. The 2020 draft Public Procurement Bill stipulates that a public institution may only contract with bidders who are tax compliant. Such conditions should be held in abeyance until laws, including tax laws, have been fully simplified to the point where ordinary people can realistically be expected to understand and comply with them.

Considerations

The rule of law requires that laws should be general in nature and apply equally to everybody. Friedrich Hayek maintained that if a distinction is made between one group or class of people and another, for example between men and women, and the distinction is favoured by the majority both inside and outside the group, there is a strong presumption that it serves the ends of both. However, if the distinction is favoured by only those within the group, it is privilege, whilst if it is favoured by only those outside the group, it is discrimination.

Adopting simplified tax laws for lower-income taxpayers and small firms would consequently not be discriminatory if such a process had the general approval of the majority of people who continued to be taxed under the existing laws. Support for the proposed reform may be obtained from high-earning taxpayers and large firms if:

1. The fundamental principles upon which the simplified law is based are substantially the same as those used in the formulation of the present tax laws.

2. Any special dispensation granted to low-income individuals and small firms is intended to remove or reduce disadvantages they suffer under existing legislation.

3. The simplified laws can be seen as a possible precursor to the simplification of all tax laws.

Professor Hayek also said that the requirement that the rules of true law should be general does not mean that special rules may not apply to different classes of people if they refer to properties that only some people possess. A distinction can be made between people based on their levels of income or the size of their firms but it must be recognised that such a distinction is arbitrary. However, arbitrary distinctions are made throughout the existing tax laws and some groups, such as small firms, believe that they are disadvantaged by those laws and that they have a legitimate claim to relief.

ALLOW ACCELERATED DEPRECIATION ON ALL CAPITAL EQUIPMENT

RECOMMENDATION 3

(a) Amend section 12E of the present Income Tax Act to allow small firms to deduct the cost of all capital equipment from their taxable incomes in the year in which the cost is paid, not just the cost of plant or machinery used in manufacturing.

(b) Allow not only small business corporations to deduct the cost of capital equipment, but also small firms that are sole proprietorships or partnerships.

(c) Raise the annual gross-income ceiling for this capital-equipment deduction from R20,000,000 to R45,000,000).

The provision allowing the cost of plant or machinery used “directly in a process of manufacture” carried on by a “small business corporation” to be deducted in the year that the asset is brought into use should be amended to cover all capital equipment. Small firms, like any others, buy and use capital equipment other than just manufacturing equipment.

When a depreciation allowance on capital equipment in any year is lower than cash paid out for their purchase, small firms suffer cash flow problems, and these problems are exacerbated when the payments on equipment are large in relation to the total cash flow of their businesses. Allowing small firms to match depreciation allowances with cash paid for any capital equipment would remove a major problem for them without unduly affecting government tax receipts. The total taxable income of the small firm over the life of the equipment would be the same. The accelerated depreciation would merely take into account the reality that many small firms have to pay cash for equipment and are unable to arrange their affairs, as larger firms can do, so as to synchronise the payment of the purchase price of equipment with tax deductions.

The provision, which allows small business corporations to deduct the cost in the year that the asset is brought into use, should be extended to include sole proprietorships or partnerships. Not all small businesses are companies.

The R20,000,000 annual gross income ceiling of a “small business corporation” who may make use of this deduction has not been altered since 2007 and should be increased appropriately.

Considerations

Accounting theory requires that depreciation or wear and tear should be provided for out of profits in amounts that will result in the writing off of assets over the periods of their expected useful lives. A part of the theory, which has been made redundant by inflation, consisted of the concept that the amounts provided would ensure the availability of funds for the replacement of the assets when that became necessary. Now, replacement costs of equipment, with the possible exception of computers, are always higher than the costs of earlier purchases, and additional funds have to be found to cover the extra amounts. The method used in calculating taxable profit does not take these effects of inflation into account, and an entirely new approach to taxation would be required to provide a more equitable alternative. 

DETERMINE INCOME FROM CREDIT SALES ON THE CASH RECEIVED BASIS

RECOMMENDATION 4

(a) Allow small firms to deduct a debtors allowance from their taxable incomes which is equivalent to the accrued profits on unpaid sales.

(b) Issue regulations under section 37G of the present Income Tax Act to define the taxable income of small business undertakings consisting of sole proprietors or partnerships of natural persons, solely by reference to amounts actually received.

(c) Amend section 37G to apply to small business undertakings which are companies.

(d) Raise the annual turnover ceiling which qualifies a micro business for registration, from R1,000,000 to R2,000,000.

Having to pay income tax on profits that have not yet been received causes hardship for small firms. Debts owing to them usually increase year by year with the result that the total amount of taxes paid on accrued income also steadily increases, draining the capital available to the firm.

In its simplest form, the calculation of the debtors allowance would consist of applying the average gross profit percentage achieved by the firm on all sales during the year to the amount by which total debtors (debtors being sales invoiced but not yet paid) at year-end have increased relative to the previous year. The figure resulting from this calculation would be equivalent to the profit on unpaid sales for the tax year. Deducting the figure from the taxable income of the small firm would have the effect of subjecting to income tax only those profits which have actually been received. This is similar to the dispensation granted to natural persons to pay over only VAT received and not VAT invoiced but not yet received.

The principle involved in this recommendation is also recognised in section 24(2) of the Income Tax Act which allows, in respect of the unpaid portion of the profits on instalment sales, a deduction which is reasonable in the special circumstances of the trade of the taxpayer.

An alternative to this recommendation would be to tax small firms on taxable income determined entirely on the cash basis. This would mean taking into account only amounts actually received and paid during the tax year. This alternative is accommodated, to some extent, in section 48A read with the Sixth Schedule of the Income Tax Act, which levy on registered micro businesses a turnover tax on amounts actually received. 

Regulations should be issued to implement section 37G of the Act which authorises the Minister of Finance to make regulations to facilitate compliance with the Act by natural persons carrying on business through small business undertakings as sole proprietors or in partnership with other natural persons, by determining the taxable income of a small business undertaking by reference only to amounts actually received, as well as providing for exemption from, or extension of time limits for, submission of returns or payments. As mentioned earlier, the section was inserted in the Act in 1995 but has never been used.

Section 37G should also be amended to apply to small business undertakings which are companies.

The Act’s provisions which levy a turnover tax on registered micro businesses were inserted in the Act in 2008, and the R1,000,000 annual turnover ceiling below which a micro business qualifies for registration has not been increased. It is appropriate to increase the ceiling to R2,000,000.

Considerations

Small firm owners are usually too busy working to band together and ask for special dispensations. They also cannot afford to pay tax lawyers and accountants to intercede on their behalf. The result is that, in an Income Tax Act containing a long list of special deductions and allowances for manufacturers, hotel keepers, farmers, carmakers, airlines, and a host of other categories of taxpayers, the allowances that apply specifically to small firms are either too narrow or have shrunk in scope due to bracket creep. Yet small firms can argue strongly that, given a greater measure of relief, their sector would probably do more than any other to increase economic growth and create jobs. Allowing wider and updated deductions will go some way to alleviating income-tax-related small-firm cash-flow problems.

GRANT TAX RELIEF TO SMALL FIRMS OWNED BY INDIVIDUALS AND PARTNERSHIPS

RECOMMENDATION 5

Grant small firms consisting of natural persons and partnerships of natural persons a tax deduction.

Lower tax rates for companies provides a precedent for extending the tax relief to include small firms consisting of individuals, partnerships, and trusts. Government’s assumed purpose in reducing the company tax rate was to encourage investment and bring about higher economic growth.

However, small firms comprising individuals, partnerships, and trusts are at a competitive disadvantage as a result of the special tax dispensation granted to companies. Shortage of capital tends to be a greater constraint on the growth of small firms, especially in their first years of operation, than on larger firms. Reducing the rate of tax charged to small firms of individuals, partnerships, and trusts could consequently bring about more rapid growth and create more jobs than the granting of similar relief to large firms.   .          

Considerations

Critics of this recommendation will maintain that it is unfair to grant small firms a competitive advantage. This criticism would be valid if all firms were presently competing on level terms. Some of the factors currently militating against small firms are:

1. Companies pay income tax at a rate of 28% on their taxable incomes compared to the top marginal rate of 45% paid by individuals. Many companies own large businesses.

2. In high-tax regimes, small firms have greater difficulty than large firms in increasing their investable funds. Investors expect much lower rates of return from large firms than from small firms and most would never consider investing in small firms because of the greater risk. Small firms consequently have to rely almost exclusively on generating their own capital out of after-tax profits. If there was no income tax, small firms would, on average, grow comparatively much more rapidly than large firms.

3. Several factors weigh against the ability of small firms to borrow money to expand their businesses. Firstly, because of the large amounts of money the government borrows, lending to private borrowers is less attractive and considered to be a higher risk than if government was borrowing less or not at all. Secondly, because lenders can earn reliable interest from lending to government and large firms, they are less inclined to lend to small high-risk firms. Thirdly, because of limits which the National Credit Act places on the rate of interest that can be charged on loans to small businesses (see the entry on “Finance” in this series), small firms cannot compensate lenders for risk by paying higher interest rates. Finally, small loans are unattractive to lenders as the administrative costs of making such loans are proportionately much higher than the costs of making large loans.

Government needs to take all these matters into account in considering the legitimacy of granting small firms operated by individuals and partnerships the above-mentioned tax relief. In particular, it would have to evaluate the potential economic growth and demand for labour that could emanate from this part of the small business sector. 

INCREASE THE TURNOVER FIGURE AT WHICH VAT REGISTRATION BECOMES COMPULSORY

RECOMMENDATION 6

Increase from R1,000,000 to R2,000,000 the value of “taxable supplies” at which registration for VAT becomes compulsory.

The VAT Act currently applies to businesses making taxable supplies (that is, goods and services defined as being subject to VAT) exceeding R1,000,0000 per annum. This converts to R85,000 per month, which is the turnover of a fairly small business. It is unreasonable to expect owners of small firms with modest turnovers to comply with the VAT Act when even highly paid executives of large businesses have difficulty in understanding the complexities of the Act. Compliance becomes especially difficult if the owner of a firm is not fluent in a language used on VAT forms or the SARS website, or worse still, is illiterate.

The figure of R1,000,0000 has not been adjusted for inflation since it was set in 2008. This means, in real terms, that smaller and smaller firms are being required to register for VAT, imposing an unwarranted administrative burden on the firms and unnecessarily increasing VAT collection costs. Since that threshold was set in 2008, the consumer price index (CPI) has just about doubled and a threshold of R2,000,000 would be more appropriate to keep it the same in real terms and to be more realistic.

Small firms can naturally hire accountants to do the complicated calculations and complete the returns that have to be submitted. However, when a small firm is already hard pressed to make a profit, the added cost of hiring professionals to complete tax returns can add significantly to its difficulties.

Considerations

The Department of Finance will claim that the fiscus will lose a substantial amount of revenue if the VAT on value added by small firms with turnovers of more than R1,000,000 but less than R2,000,000 is excluded. What has to be taken into account is that a small firm that is not registered for VAT will pay VAT on all its purchases and government will lose only the VAT on the value added. Also to be taken into account is the cost of collecting VAT from the small firms.

For example, a firm with a turnover of R120,000 per month, VAT excluded, making an average gross profit of 20% on sales, would be liable for VAT at 15 % of R18,000 less at least R14,400 in respect of input VAT on taxable supplies purchased. The VAT on value added in this example would therefore be less than R3,600 whilst the cost to the firm of keeping all the records and submitting the VAT returns could quite easily exceed this amount. After taking into account the cost to SARS of collecting the VAT and monitoring compliance of small firms with taxable supplies of less than R2,000,000 per annum, it is dubious whether government gains any benefit from their registration.

ALLOW ALL SMALL FIRMS TO ACCOUNT FOR VAT ON THE PAYMENTS BASIS, EXTEND THE THRESHOLD, AND INCREASE THE AMOUNT OF CONSIDERATION FOR SUPPLIES WHICH VENDORS THAT ACCOUNT FOR VAT ON A PAYMENTS BASIS MUST ACCOUNT FOR ON AN INVOICE BASIS

RECOMMENDATION 7

(a) Increase the threshold below which the payments basis for accounting for VAT by natural persons and unincorporated bodies of natural persons is permitted from the present R2,500,000 per year to R13,500,000, and extend this concession to companies.

(b) Increase the minimum consideration for a supply of goods or services which a vendor that accounts for VAT on a payment basis must account for on an invoice basis, from R100,000 to R350,000.

As inflation erodes the purchasing power of the rand, the turnovers of firms increase even without any increase in the physical volume of sales. If a threshold such as the present R2,500,000 is not adjusted for inflation, smaller and smaller firms lose the right to use the payments basis for accounting for VAT. As the CPI has increased fivefold since this threshold was established in 1992, an upward adjustment to R13,500,000 is required in order to keep the threshold the same in real terms. Thereafter, the threshold should be automatically adjusted for inflation (See Recommendation 11).

Small firms, whatever type of legal personality they may have, suffer financial hardship when they are required to pay VAT before they have received payment from their customers. The VAT Act currently allows only natural persons to account for VAT on a payments basis, that is, on amounts actually received and paid. Yet small companies have similar difficulties to those experienced by individuals, and compelling them to account for VAT on the accrual basis deprives them of capital with which to run their businesses. Tax laws should be even-handed in dealing with taxpayers, whether they are individuals or legal entities. The dispensation should therefore be based on the size of firms and not their legal personalities.

The VAT Act stipulates that a vendor who accounts for VAT on a payments basis must account on an invoice basis for the VAT payable in respect of any supply of movable goods or services for which the consideration is R100,000 or more.

Since that R100,000 minimum consideration was fixed in 1997, the CPI has increased three and a half times, so an upward adjustment to R350,000 is required in order to keep that minimum consideration the same in real terms. Thereafter that floor should be automatically adjusted for inflation (See Recommendation 11).

Considerations

Allowing small firms to account for VAT on the payments basis merely postpones the accounting until the firm has paid for its purchases or has been paid for its sales. The alternative method of accounting requires the firm to act as tax collector for the fiscus and also to make cash advances to it for VAT the firm will recover only later. The pressure on the cash flows of small businesses could therefore be greatly reduced by raising the “payments basis” threshold to R13,500,000 at the cost to the fiscus of a brief delay in receiving VAT payments.

The fiscus may be legitimately concerned that, if the payments basis is extended to companies, a few owners of firms may attempt to split their activities between a multitude of companies in order to qualify. However, it is harsh to refuse to allow the great majority of legitimate small firms that are owned by companies to account for VAT on the payments basis merely because of the activities of some individuals. Potential abuse could be prevented by appropriately worded legislation.

A VAT vendor who accounts on a payments basis must account on an invoice basis for VAT payable on a supply of movables or services for a consideration of R100,000 or more. If that amount is not adjusted for inflation, small firms will progressively lose the right to account on a payments basis as the real value of affected supplies declines.

RECOGNISE INVOICES FROM EXEMPT SMALL FIRMS AS VAT INVOICES

RECOMMENDATION 8

Accept invoices from exempt small firms listed with SARS as VAT invoices when received by VAT-registered larger firms.

At present many VAT-registered firms refuse to buy anything from exempt small firms. The exempt small firm will have paid VAT on its inputs, and will not be able to recover it from VAT-registered buyers – so the loss to the revenue will be no more than VAT on the value added by the small firm.

Considerations

To partially offset this, SARS will have a list of participating exempt small firms and will be able to monitor them to ensure that they register for VAT as soon as they reach the threshold.

INCREASE THE ESTATE DUTY EXEMPTION

RECOMMENDATION 9

Increase from R3,500,000 to R7,500,000 the amount deductible from the net value of an estate in determining the dutiable amount for estate duty purposes.

The present deductible amount of R3,500,000 has been unchanged since 2007 and the real value has been diminishing steadily. Since that amount was fixed, the CPI has more than doubled, and an increase to R7,500,000 is appropriate to keep the deduction the same in real terms.

Estate duty has a very disruptive effect on family businesses and special provisions are necessary to make it easier for them to be continued by the next generation. One possibility would be to allow, in these circumstances, for the valuation of family businesses at something below market value. Another possibility would be to permit the duty to be paid over an extended period, say five years.

An estate that consists chiefly of the assets in a business is very different from an estate consisting of easily liquidated investments such as quoted shares or interest-earning deposits with financial institutions. For instance, a family firm could be seriously harmed and its continued existence jeopardised if the family is compelled to sell or borrow against business assets in order to pay estate duty.

Considerations

Duty on deceased estates is the subject of much debate. Proponents of this form of taxation rely on sociological arguments to justify its imposition. The general thrust of the arguments is that the state, or the community, has a claim upon the assets of the deceased because of past benefits the individual derived from the state.

Opponents of the tax, on the other hand, argue that the tax is unjust because it amounts to double taxation. They argue that the deceased persons will have paid income and other taxes during their lifetimes at the highest marginal rates on much of the value of the assets in the estate. They also argue that there is no justification for the government to take property that it had no claim upon while the individual was alive; that there is no logical reason why death should confer upon the state such a claim.

However, this recommendation does not require a resolution of the philosophical or economic arguments regarding the merits or demerits of the imposition of estate duty. It relies solely on the fact that inflation has eroded the value of the rand and that, contrary to the original intentions of the legislators, smaller and smaller estates are being subjected to estate duty.

INCREASE THE MINIMUM TOTAL REMUNERATION PAID BY AN EMPLOYER FOR SKILLS DEVELOPMENT LEVIES TO BE COMPULSORY

RECOMMENDATION 10

Increase from R500,000 to R1,200,000 the minimum total remuneration paid by an employer to his employees before skills development levy contributions become compulsory.

The Skills Development Levies Act is administered by SARS, which collects the levies in accordance with tax administration laws.

The Skills Development Levies Act obliges every employer whose total remuneration payable to all his employees annually is R500,000 or more to register as a levy contributor and pay to SARS a skills development levy of one percent of the total remuneration he pays each month to his employees.

That R500,000 annual threshold was fixed in 2005, and since then the CPI has more than doubled, so an upward adjustment to R1,200,000 is required in order to keep that threshold the same in real terms. Thereafter the threshold should be automatically adjusted for inflation (See Recommendation 11).

Considerations

It may be thought that skills development levies are effectively applied to train firms’ employees in appropriate skills.

The bulk of levy funds collected goes to the relevant Sector Education and Training Authority (SETA), of 21 SETAs established for different economic sectors by the Minister of Higher Education and Training. The SETA must disburse the funds to occupational-skills-development providers or back to employers as grants for approved training purposes. Levy funds may also pay for the SETA’s own administration costs within limits.

Twenty percent of levies collected are allocated to a National Skills Fund to finance skills development projects identified as national priorities.

In practice, skills development levies collected are not effectively used. The International Labour Organisation found recently that the perception in most South African employers’ and workers’ organisations is that the levies are just another form of taxation, particularly among small firms. SETAs pay out less in grants than it collects as levies. Because the R500,000 annual remuneration threshold has not been adjusted for 16 years, there has been a steady increase in levy revenue due to inflation as more and more small firms become contributors. Many SETAs have accumulated large unspent surpluses.

If this levy system is not scrapped entirely, at the least an adjustment in the R500,000 threshold to R1,200,000 would be an appropriate increase for inflation.

INFLATION-ADJUSTMENT OF FIGURES INCORPORATED IN LEGISLATION

RECOMMENDATION 11

Provide for automatic inflation-adjustment of all figures embedded in tax legislation that fix exemptions and levels of income, turnovers, assets, and other measures that determine liability for compliance with particular elements of that legislation.

The price index rose almost threefold during the past 20 years. This means that on average anything that cost R1 two decades ago now costs nearly R3. It also means that any figures that are included in tax legislation are soon out of date.

For instance, the threshold limit for the payments basis for accounting for VAT was increased to R2.5 million in 1992. Since then, the CPI has increased fivefold, hence the recommendation that the threshold be increased to R13.5 million (see Recommendation 7).

The R3.5 million that is deductible from the net value of an estate in determining the dutiable amount has remained unchanged since 2007. In the 14-plus years since that deductible amount was established, the CPI has more than doubled, hence the recommendation that the figure be increased to R7.5 million (see Recommendation 9).

If the tax legislation is to remain equitable it is essential that thresholds and exemptions be automatically adjusted annually. The problem manifests itself very clearly in so-called bracket-creep which imposes steadily increasing marginal rates of tax on taxpayers even if their incomes remain static in real terms. However, there are many other similar instances that do not receive the same amount of publicity as bracket-creep. Legislation should be introduced that requires new threshold and exemption figures, adjusted by the same percentage as the increase in the CPI, to be published annually in the Government Gazette.

Considerations

A great deal of thought obviously goes into the establishment of exemption levels and thresholds at the time legislation is written. However, the effect of subsequent inflation has received insufficient attention. For example, when Parliament in 1992 approved a R2.5 million threshold for accounting for VAT on the payments basis it must have had a certain size of firm in mind. Establishing a turnover threshold was merely the most practical way of setting the upper limit on the size of firm that was to be allowed to use the payments basis. It should therefore be a matter of concern to the legislators that the provision has been so eroded by inflation that it now applies to firms that are only one-fifth the size of those they originally had in mind.

SELECT SOURCES                              

Statutes and other legislative measures                        

Constitution, 1996—

s 217 (procurement)—

(1) (organs of state, and institutions identified in legislation, must contract for goods or services i.a.w. fair, equitable, transparent, competitive, cost-effective system)

(2) (organs of state, institutions may implement procurement policy providing for)—

(categories of preference when allocating contracts), and

(protection or advancement of persons disadvantaged by unfair discrimination)

(3) (legislation must prescribe framework in which such policy must be implemented)

Preferential Procurement Policy Framework Act, 2000 (framework for implementing procurement policy contemplated in Constitution s 217)—

s 1 (definitions)—(“organ of state” includes national or provincial departments and municipalities, constitutional institutions defined in Public Finance Management Act, and institutions defined in Constitution as “organ of state” and recognised by Minister by Gazette notice as institutions to which Act applies)

s 5 (Minister may make regulations to achieve Act’s objects)

Govt Notice R32 of 20 Jan 2017 (preferential procurement regulations)—

reg 1 (definitions)—(“designated group” includes—

(black designated groups, black people, women, disabled) and

(“small enterprises” defined in National Small Enterprise Act, 1996)

reg 9 (subcontracting)—(if contract above R30m and feasible to subcontract, organ of state must require successful tenderer to)—

(1) (subcontract to advance designated groups (including small enterprises))

(2) (subcontract 30% of contract value to black-owned small enterprises),

Income Tax Act, 1962 as amended—

s 1(1) (definitions)—

“small business funding entity” (an entity approved by Commissioner i.t.o. s 30C)

“small, medium or micro-sized enterprise” (means any)—

micro business), or

(small business corporation)

s 5 (normal tax and rates thereof)—

(1) (normal tax shall be paid i.r.o. the annual taxable income received by or accrued to or in favour of)—

(a) (persons other than companies, during the year of assessment ending the last day of February); and

(b) (a company, during its financial year)

(2)(a) (Minister may announce in the national annual budget that, w.e.f. a date announced, rates of tax chargeable i.r.o taxable income will be altered to extent announced)

(b) (that alteration comes into effect on that date and continues to applies for 12 months subject to Parliament passing legislation giving effect to it)

s 10(1) (exemptions from normal tax)—

(zJ) (amounts received by or accrued to registered micro business from carrying on business, other than investment income or remuneration)

s 12E (small business corporations may deduct the cost of manufacturing plant or machinery in the year it is brought into use)—

(4)(a) “small business corporation” means private company, etc., whose shareholders in year of assessment are all natural persons, and—

(i) its gross income for year of assessment does not exceed R20 000 000),

s 24 (credit agreements and debtors allowance)

s 37G (small business undertakings)—

(1) (Minister may make regulations to facilitate compliance with Act by natural persons carrying on business through small business undertakings as sole proprietors or in partnership with other natural persons)

(2) (regulations may)—

(a) (prescribe what shall constitute a small business undertaking, having regard to its nature, turnover, taxable income or profit, number of employees, nature and extent of other income derived by proprietor or partners, and any other feature which in Minister’s opinion indicates that undertaking should be regarded as small business undertaking)

(b) (provide for variation of any provision of Act relating to the determination of taxable income derived from a small business undertaking, including)—

(i) (determining taxable income only w.r.t. amounts actually received)

(iv) (any other provision which, other than timing of receipt or accrual of income or incurral of expenditure, will not result in material variation in determination of undertaking’s taxable income over time)

(c) (provide for exemption from, or extension of time limits in, provisions of Act relating to submission of documents, accounts, returns or payments)

(d) (make such other provision as in Minister’s opinion will facilitate carrying on of small business undertakings)

s 48A (turnover tax payable by registered micro business on taxable turnover)

s 48B (rates of turnover tax fixed annually by Parliament)

Sixth Schedule (turnover tax payable by registered micro businesses)—

par 2(1) “micro business” (person or company (or cooperative or CC) qualifies as micro business if turnover does not exceed R1 000 000 in year of assessment)

par 5 “taxable turnover” (all cash receipts, not of a capital nature, by registered micro business from carrying on business activities in year of assessment)

pars 6, 7 (inclusions in, exclusions from taxable turnover)

par 8 (persons qualifying as micro business may elect to be registered)

s 66 (notice by Commissioner requiring returns for assessment of normal tax)

s 67 (registration as taxpayer),

Draft Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2021—

s 1 (fixing of tax rates)—

(1) (rates of normal tax i.t.o. s 5(2) of Income Tax Act 1962 are in Sched 1 inter alia pars 1, 3, 5)

(2) (rate of turnover tax i.t.o. s 48B of that Act of registered micro business is in Sched 1 par 8)

Sched I (tax rates)—

par 1 (natural persons, for year of assessment commencing on or after 1 Mar 2021:

Taxable income

0 to R216 200

R216 201 to R337 800

R337 801 to R467 500

R467 501 to R613 600

R613 601 to R782 200

R782 201 to R1 656 600

R1 656 601 and above

Rate of tax

18% of taxable income

R38 916 plus 26% of taxable income above R216 200

R70 532 plus 31% of taxable income above R337 800

R110 739 plus 36% of taxable income above R467 500

R163 335 plus 39% of taxable income above R613 600

R229 089 plus 41% of taxable income above R782 200

R587 593 of taxable income above R1 656 600)

par 3 (companies, for year of assessment ending on or after 1 Apr 2021—28% of taxable income)

par 5 (small business corporations (s 12E), year ending on or after 1 Apr 2021—

Taxable income

0 to R87 300

R87 301 to R365 000

R365 001 to R550 000

R550 001 and above

Rate of tax

0% of taxable income

7% of taxable income above R87 300

R19 439 + 21% of taxable income above R365000

R58 289 + 28% of taxable income above R550 000)par 8 (registered micro businesses, year commencing on or after 1 Mar 2021—

Taxable turnover

0 to R335 000

R335 001 to R500 000

R500 001 to R750 000

R750 001 and above

Rate of tax as percentage of taxable turnover

0%

1% of taxable turnover above R335 000

R1 650 + 2% of taxable turnover above R500 000

R6 650 + 3% of taxable turnover above R750 000)

Value-Added Tax Act, 1991 as amended—

s 7 (imposition of tax)—

(1)(a) (value-added tax is levied and paid for benefit of National Revenue Fund on supply by vendor of goods or services in course or furtherance of enterprise carried on by vendor, at rate of 14 % on value of supply)

(4) (If Minister in national annual budget announces alteration of VAT rate, alteration is effective from date determined in announcement, and applies for 12 months subject to Parliament passing legislation in that period giving effect to alteration)

s 15 (accounting basis) (Commissioner may, on application by vendor who is natural person or unincorporated body of natural persons, direct vendor to account for tax payable on payments basis, if vendor’s taxable supplies in any 12-month tax period have not exceeded R2 500 000, or are unlikely to in any 12-month period)

s 16 (calculation of tax payable) —

(2) (no deduction of input tax i.r.o. supply of goods or services shall be made, unless—

(a) a tax invoice i.r.t. the supply has been provided and is held by the vendor making that deduction when any return i.r.o. that supply is furnished)

s 23(1)(a) (person carrying on an enterprise becomes liable to be registered when total value of taxable supplies made by that person in last 12 months in the course of carrying on all enterprises exceeds R1 million)

Small Business Tax Amnesty and Amendment of Taxation Laws Act, 2006

Companies Act, 2008—

s 1 (definitions) “small business corporation”

Estate Duty Act, 1955—

s 2 (levy of estate duty on dutiable amount of estate)

s 3 (what constitutes estate)

s 4 (net value of estate)

s 4A(1) (dutiable amount of estate determined by deducting R3 500 000 from estate’s net value)

s 5 (determination of value of property)

Tax Administration Act, 2011—

s 25 (submission of return)

s 169 (tax due or payable i.t.o. a tax Act is debt to SARS for National Revenue Fund)

s 170 (evidence as to assessment)

Govt Notice 419 of 14 May 2021 (Gazette 44571) (Commissioner requires persons specified to submit returns for 2021 year of assessment)—

Sched par 2(e) (every natural person who is)—

(i) (resident and carried on any trade)

(ii) (not resident and carried on any trade in Republic)

Gen N 94 of 2020 (Gazette 43030 of 19 Feb) (publication of draft Public Procurement Bill, 2020 for comment)

Official reports, announcements

Green paper on public sector procurement reform, Ministries of Finance, Public Works,Apr 1997, par 3.5.5 (affirmative small, medium, micro enterprise participation programme should in long term ensure that emerging businesses contribute to tax base)

Survey of Employers and the Self-employed 2017 (statistical release P0276), Statistics South Africa, Mar 2019

Financial statistics of consolidated general government 2019 (Statistics South Africa, statistical release P9119.4, 26 Nov 2020)

Tax Chronology of South Africa: 1979–2021 (Apr 2021), South African Reserve Bank

Tax Guide for Small Businesses 2019/2020, SARS

Taxation in South Africa 2020, SARS

Comprehensive guide to the ITR12 return for individuals, South African Revenue Service, 1 Jul 2021 (IT-AE-36-G05, rev 25, 114 pp)

Consumer Price Index history: headline index numbers (1980–2021), Statistics South Africa

Budget Speech, 2018 (21 Feb 2018), Min of Finance (M. Gigaba)—

(VAT increase from 14 % to 15 % as from 2018/19 financial year (w.e.f. 1 Apr 2018))

Media

Creamer Media’s Engineering News, 28 Sep 2016, “PPPFA to be repealed” A Kilian (Preferential Procurement Policy Framework Act’s preference points system too rigid to reshape business ownership, and Act to be replaced by Public Procurement Act)

Creamer Media’s Engineering News, 21 Feb 2018, “Public procurement aligned to more stringent regulations as Bill goes to Cabinet”, M van Wyngaardt (Procurement Bill to replace existing regulations would have gone to Cabinet next month for gazetting for public comment but is delayed by changes in government)

Bizcommunity, 22 Feb 2018, “#Budget2018: Public Procurement Bill to give women and youth in business a leg up” (K Magubane) (government to review “evergreen contracts” where big companies get permanent state business creating entry barriers for small firms)

eNCA, 17 Feb 2018, “Ramaphosa restored dignity to Parliament: Kathrada Foundation”

Commentaries

Income Tax in South Africa, D Clegg et al—

Chap 3 (taxes levied)—

par 3.2 (normal tax)

par 3.9 (taxation of micro businesses)

Chap 4 (determination of taxable income)—

par 4.4 (taxable income)

par 4.12 (received by or accrued to)

Chap 24 (special provisions)—

par 24.13 (small business undertakings),

Silke on South African Income Tax, A P de Koker et al—

Chap 2 (receipts and accruals)—

2.1 (‘received by or accrued to’)

2.2 (benefit to taxpayer)

2.4 (doubtful if Commissioner has power to assess on receipts only)

Thinktanks, etc.

Free Market Foundation, 13 Jan 2004, “South Africa should adopt a Flat Tax” (E Davie)

U.S. News & World Report, 12 Apr 2010, “Eliminate Tax Brackets and Complicated Forms with a Flat Tax” (D Mitchell)

Free Market Foundation, 31 Jul 2012, “Tip for Pravin: SA should adopt flat tax” (J Urbach)

OECD Economics Dept Working Paper No. 1344 (2016), Fournier, J.-M. and Johansson, Å, “The effect of the size and the mix of public spending on growth and inequality”

OECD Economics Dept Working Paper No. 1230 (2015), Fall, F. and J.-M. Fournier, “Macroeconomic Uncertainties, Prudent Debt Targets and Fiscal Rules”

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