The committee, which is chaired by Judge Dennis Davis, is expected to inquire into the role of the tax system in the promotion of inclusive economic growth, employment creation, development and fiscal sustainability.
(READ MORE: Davis committee to start a new tax review era)
“We’ve looked at it and we’ve found basically two main categories of small business. The subsistence businesses – we’ve said that the existing Sixth Schedule turnover tax system needs to be extended and simplified even further than it is today, to try and keep taxation matters to an absolute minimum,” DTC member Matthew Lester told CNBCafrica.com.
“On entrepreneurs, [where] we talk about small business corporations, we found that the existing tax table that they’re using is not getting the intended results and that most of the benefit is being taken by profitable, small businesses in niche areas of the market.”
A number of incentives have been proposed in the survivalist small business and small business corporation areas, namely, a refundable compliance rebate and Value Added Tax (VAT) compliance on a cash basis.
“What we’ve explained is the new system of working on a compliance tax rebate which is effectively a rebate that goes to all small businesses, irrespective of their profits or losses, to help them with their tax administration costs,” Lester said.
According to the report, some 90 per cent of jobs will be created in small and expanding firms and by 2030, this share of small and medium-sized firms will grow substantially in terms of output.
“The report has gone into what is going on in the taxation of small business. This is specifically because the National Development Plan has great expectations of the role that small business can play in the regaining of South Africa by 2030,” Lester indicated.
(READ MORE: S.Africa’s tax law a challenge for SMMEs)
As a result of this, the DTC report not only takes a look at micro business turnover tax, VAT and incentives relevant to the SME sector but also income tax provisions and general compliance challenges for SMEs.
“The initial findings of the report were released in the Budget Review in February. We are now asking for comment from the public on our recommendations,” said Lester.
“They are then considered by National Treasury and the Minister of Finance, and then we’ll see whether they come into the registration programme where, if they are going to be made law, [it] will be put before Parliament and discussed with public input at that point in time.”
Lester added that the Davis Tax Committee has been asked to look at various key issues by the Ministry of Finance and that further reports will be published in due course.