In its treatment of "small" business at the time of Tax Reform, the government of the day chose not to attempt to achieve the ephemeral goal of strict adherence to concepts such as neutrality and horizontal equity. On the contrary, in implementing the "small business deduction" for Canadian-controlled private corporations its stated intention was to provide "direct assistance to small business — but only to incorporated small business. Conventional wisdom justifies such a policy of providing assistance to small business on the theory that in the absence of special tax concessions (or other assistance) for small business imperfections in the capital markets, which are alleged to reduce significantly the funding available to small business, would limit the ability of small business to fulfil what is seen by adherents to this theory to be its traditional entrepreneurial role in the Canadian economy. The thesis proposed herein does not attempt to assess the validity of a policy of providing assistance to small business through fiscal measures (assuming that it does in fact exist) but rather focuses on a potential inefficiency inherent in one aspect of its (apparent) implementation: there is presently no control mechanism to ensure that the funds made available to incorporated small business through the "small business deduction" are used in furtherance of the purported goal of this tax credit, i.e. "direct assistance to small business." It is suggested in this thesis that the restoration of some form of tax on unreasonable accumulations to replace the departed Part V tax would provide appropriate pressure upon the Canadian-controlled private corporation in terms of guiding the tax deferral benefits available through the small business deduction towards their stated object. Such a tax would, of course, have the complementary function of depriving those corporations which failed to reinvest the deferral benefits of same. Chapter one of the thesis introduces the topic and defines its basic parameters. As a means of laying a foundation for exploring the suggestion that a tax on unreasonable accumulations may be desirable, chapter two reviews the relevant statutory context into which such a tax would have to be placed. Chapter three considers aspects of the justification for such a tax. In the interest of learning such lessons as history might offer in this realm, chapters four, five and six examine specific variations on such a tax which have already found expression in legislative form: chapter four dealing with Canadian experiences in this area, chapter five looking at the American example and chapter six reviewing its British manifestation. Chapter seven analysis the possibilities as to the form which a tax on unreasonable accumulations might in fact take were it to be instituted in Canada. Finally, chapter eight contains some conclusions. / Law, Peter A. Allard School of / Graduate

This thesis examines the impact of taxation on small businesses in Canada. It reviews the relevant economic and taxation literature from a historical perspective to provide appropriate background for policy analysis. Other nations' tax systems are also considered. The key elements of the existing system are examined in order to define the present status and to identify the strengths and weaknesses. The learned proposals of various academics, professionals and other parties are reviewed in order to seek new ideas, comments and criticism on the system. The final chapter defines the author's perceived objectives for small business tax policy and identifies some impediments to tax reform. Finally, general and specific recommendations are detailed. The author proposes that the tax definition of "small" be narrowed and that "medium-sized" businesses be given recognition in tax policy. Small business tax policy should recognize as its prime purpose the providing of financial assistance to counteract the natural prejudices that small businesses encounter in the capital markets. To achieve this, the small business tax rate should be lowered and loss provisions should remain liberal. The concept of integration with the personal tax system should attain greater integrity by changing the calculation of Part Two Tax on distributions. Various small business tax measures extant should be scrapped because they are ineffective. Temporary or specific tax incentives should be used sparingly. / Business, Sauder School of / Graduate

No description available.

The promotion of Small, Medium and Micro enterprises (SMMEs) has been identified as key strategy of government for employment creation and income generation. For some time now small business owners had to fend for themselves. Small business was neglected and was in the main ignored by government. Since the 1994 democratic process the challenge for the new order has been to create an enabling environment for the small business sector of the economy. The historical neglect and the consequent policy vacuum has had to be re assessed. To this end the 1995 White Paper on a National Strategy for the development and Promotion of Small Business in South Africa was the first major effort by government to design a policy framework targeting the small business sector. The promulgation of the Small Business Act in 1996 and the establishment of the Ntsika Enterprise Promotion agency under the aegis of the Department of Trade and Industry has attempted to provide direction and facilitate the provision of Non Financial support to the Small Business Sector. Various incentive schemes have been developed and put into operation together with a range of tax incentives to help promote Small Business. Eight years have passed since the promulgation of the Small Business Act and the perception that finance for SMMEs has been the greatest stumbling block to development. However the failure of the vast numbers of micro lending agencies have revealed that low levels of entrepreneurship has led to their demise. The provision of meaningful positive incentives need to be measured and their effectiveness needs to be tested. This study will try and identify the incentives available. / Thesis (M.Com.)-University of KwaZulu-Natal, 2004.

The South African economy has seen an increase in small businesses since 1994. This increase has been caused by an increase in unemployment rate and government interventions to promote small businesses. The government has through the National Treasury introduced various tax legislations to simplify and facilitate the tax processes that small businesses have to comply with. The discussion contained in this treatise seeks to critically analyse the tax implications for small and micro businesses. One of the small business tax legislations, Small Business Corporations, is discussed in chapter 2. The Small Business Corporation legislation provides for two key concessions to qualifying small businesses. The first concession is the progressive tax rates that are lower than normal tax rates at taxable income level below R300 000. The second concession is the special capital allowances that the qualifying small business is entitled to. The tax amnesty for small businesses was introduced in July 2006 to provide an opportunity to small businesses which were not up to date with their tax affairs, to regularise their tax affairs. Small businesses had to meet certain requirements and pay an amnesty levy ranging from 2 to 5 percent of their taxable income. The tax amnesty on small businesses was not as effective as intended, however a slight increase in the South African taxpayer base was achieved. The voluntary disclosure programme has recently been introduced in November 2010, to provide an opportunity for all businesses to voluntarily disclose their previous defaults without being subjected to criminal prosecution and penalties. The government further attempted to simplify the tax compliance process by introducing turnover tax legislation. The turnover tax provides for a single tax system that does away with the need to account for normal tax, capital gains tax, secondary tax on companies and value added tax. The turnover tax system is optional to qualifying small businesses. The turnover tax is calculated by simply applying a tax rate to taxable turnover. Small businesses need carefully consider whether turnover tax will be beneficial to them. It is not advisable for small businesses that are making losses to adopt turnover tax. Another small business tax legislation that promises to be effective is the venture capital incentive. This legislation provides for deduction of expenditure actually incurred in the acquisition of shares by qualifying businesses. It appears that, given the challenges that small businesses still face, the government still has a lot more to do to simplify the tax process for small businesses.

Thesis (MAcc)--Stellenbosch University, 2012. / ENGLISH ABSTRACT: The comparative study of tax incentive legislation in South Africa, Australia and Canada for small businesses confirmed that tax incentives in South Africa are on par with those of said developed countries. The study compared tax incentives for income tax, capital gains tax and sales tax after the operation of the specific taxes was researched and the tax incentives identified. It is concluded in the study that there are tax incentives legislated in Australia and Canada that may enhance current South African tax incentives or which may be introduced as new tax incentives. These incentives may facilitate and stimulate economic growth and development in the country. / AFRIKAANSE OPSOMMING: Die vergelykende studie van belastingvergunnings vir klein besighede in Suid-Afrika, Australië en Kanada het bevestig dat belastingvergunnings in Suid-Afrika op standaard is met dié van ontwikkelde lande. Die studie het inkomstebelasting, kapitaalwinsbelasting en verkoopsbelasting vergelyk nadat die werking van die gespesifiseerde belastings nagevors en die belastingvergunnings van toepassing geïdentifiseer is. In die studie word daar tot die gevolgtrekking gekom dat daar belastingvergunnings in Australië en Kanada is wat of die huidige belastingvergunnings in Suid-Afrika kan uitbrei of as nuwe belastingvergunnings in Suid-Afrika geimplementeer kan word. Die gewysigde en nuwe belastingvergunnings mag moontlik bydra tot verdere groei en ontwikkeling in Suid-Afrika.

The global economy is still recovering from the effects of the sub-prime crisis. The economic downturn has created international tax policies that seem to encourage debt funding. Some commentators are of the view that debt and equity should have a uniform tax treatment. South Africa has not escaped the aftermath of the economic meltdown and had three credit downgrades since the second half of 2009. The first objective of this treatise was to determine whether loan funding still has a role to play in a SME environment. This was considered in the context of interest-free or low-interest rate loans advanced by companies to shareholders or other connected persons and interest-bearing loans due by companies that in substance clearly have equity features. The primary enquiry pertaining to debit loans is whether the debt arose by virtue of any share held in the company. It is submitted that a causal connection is required between any share in that company and the advance made. Where a company parts with funds for no quid pro quo a deemed dividend in specie is triggered. Conversely, where a loan was made on commercial grounds the company will not be in breach, even if the loan is interest-free. A loan that lacks a reasonable redemption period is more akin to equity and to this extent a deemed dividend will be triggered where a loan owing by a company to a shareholder or other connected person is not redeemable within 30 years. There is ambiguity with regards to the inception of the 30-year period for pre-existing loan agreements. Taking the contra fiscum rule into account, it is submitted that the 30-year period should only commence from the effective date due to the impracticalities involved and because the concept of an ‘instrument’ did not previously exist. It is submitted that shareholder and other connected person loans are not by default equity, to the extent that the transaction is on commercial grounds and in substance a loan. It is further submitted that loan funding still has a role to play in a SME environment and that South Africa has no need for uniform tax rules pertaining to debt and equity, due to the anti-avoidance provisions highlighted above. The poor state of the local economy prompted Treasury to introduce new debt relief rules to assist distressed debtors. The second objective of this treatise was to analyse whether the new rules will provide tangible relief to distressed debtors as this was one of the short comings of the previous system. It is submitted that the new ordering rules delay the incurrence of an immediate tax as trading stock held and not disposed of, the base cost of an asset or the balance of an assessed capital loss is first reduced compared to the old rules where it instantly triggered a recoupment or a deemed disposal for CGT purposes. Tangible relief is provided to distressed debtors as a tax debt reduced has no normal tax consequences. This provides an opportunity for companies under business rescue because SARS rank on par with concurrent creditors. As a result, the tax debt reduced is likely to be higher under business rescue than liquidation.

Studying how firms and individuals respond to tax policy changes is key to assess their trade-off between equity and efficiency. Among individuals, taxpayers at the top of the income distribution have received special attention in the Public Economics literature. Progressive tax systems disproportionately rely on high income individuals to raise revenues, making them susceptible to strategies adopted by these taxpayers to reduce their tax liability. In the first two chapters of this dissertation, I provide new empirical evidence on the characteristics of high income individuals that can inform the design of tax policies. Chapter 1, focusing on the UK, shows that migrants have become more prevalent among high income individuals, thus altering the composition of individuals in the top 1 percent. Chapter 2, focusing on Italy, provides evidence of long term persistence in economic status among present-day descendants of noble dynasties. These chapters shed light on the characteristics of high income taxpayers and their path to the top of the distribution in these two countries. Understanding the composition of individuals at the top of the income distribution is key for analyzing their response to tax policies and for informing the trade-off between equity and efficiency. Firms too are a central part of the tax system of developed countries. They remit payment of the vast majority of government revenues, either fulfilling their own tax liabilities or on behalf of third parties. As a result, governments implement enforcement strategies to reduce evasion while minimizing their costs. In Chapter 3, I analyze one of these government interventions aimed at curbing tax evasion of Value Added Tax (VAT) in Italy and I provide evidence on a new margin of response adopted by businesses. As the government shifted the responsibility to remit VAT from the seller to the buyer for a subset of transactions in the economy, it altered the distribution of costs between the two sides of the transaction. I show that smaller firms face the largest increase in costs and, thus, exhibit higher exit rates, leading to higher market concentration. Chapter 1, which is joint work with Arun Advani, Felix Koenig, and Andy Summers, studies the contribution of migrants to the rise in UK top incomes.Using administrative data on the universe of UK taxpayers we show that migrants are over-represented at the top of the income distribution, with migrants twice as prevalent in the top 0.1 percent as anywhere in the bottom 97 percent. These high incomes are predominantly from labor, rather than capital, and migrants are concentrated in only a handful of industries, predominantly finance. Finally, we calculate the contribution of migrants and natives to the observed growth in the UK top 1 percent income share over the past 20 years. We find that almost all (92 percent) of the observed growth can be attributed to migration. Chapter 2 documents that present-day descendants of aristocratic dynasties enjoy high economic status in Italy, several decades or centuries after their ancestors received a title. Over this period of time, Italy experienced wars, annexations, political reforms, and a structural transformation of the economy. Yet, the income distribution of noble taxpayers living in Milan in 2005 is shifted to the right relative to the one of all other taxpayers. On average, noble descendants obtain 41,125 Euros (or 1.77 times) more, controlling for observables. Moreover, aristocrats are three times more likely to be involved in firms, either as shareholders or company officials. Chapter 3 analyzes how firms and markets adapt to a reform of the collection of Value Added Tax (VAT), combining a new administrative dataset on firm-to-firm links from Italy and a quasi-experimental research design. The reform shifted the responsibility to remit payments of VAT from sellers to “trusted" buyers, such as government entities and large firms. I present three main findings. First, firm-to-firm links subject to the new rules are more likely to become inactive after the introduction of the new rules. Second, I find that the reform was costly for the average firm. Firms more exposed to the reform experienced lower sales and higher exit rates, relative to the counterfactual. Third, I document that the burden of the reform was not evenly distributed across firms. Small firms were hit hardest, while large firms did not appear to be negatively affected. As a result, I show that markets more exposed to the reform became more concentrated.

This study discusses South Africa’s tax incentives for small businesses and identifies shortcomings and areas of concern within the tax incentive regimes. A comparison of small business tax incentives provided by Australia, India, and the United Kingdom is made with South Africa’s small business tax incentives to identify similarities and differences, and new lessons are learned from the approaches of other countries. As a result of the comparison with the tax dispensations available to small businesses in other countries, the study recommends additional tax incentives that could be implemented by South Africa. Only those tax incentives that are available in other countries but not in South Africa that were deemed worthwhile were recommended to be introduced in the Republic. Recommendations were also made based on the gaps identified in South Africa’s small business tax incentives. / Taxation / M. Phil. (Accounting Sciences)

This study compared the turnover tax and small business corporation tax systems in South Africa as applicable to micro and small businesses. Misinformed perceptions of the turnover tax system were the motivation for this study. A three phase approach was adopted to conduct this study, the phases being literature review, in-depth face-to-face interviews and quantitative analysis of financial statements which are referred to as case studies. The tax liability was calculated for each of the thirty cases and thereafter a comparative analysis was performed to establish the most beneficial tax system for each case study. The findings for year one revealed that the small business corporation tax system was the most beneficial tax system for fifteen of the thirty cases and turnover tax for the other fifteen cases. Over an average of five years, fourteen cases benefited from the small business corporation tax system and sixteen from turnover tax. There were a number of significant reasons why the above mentioned tax systems were appropriate for each of the thirty cases, one of which being, the type of business or industry where the case is located. The information obtained from this study could inform small and micro businesses about the most appropriate and beneficial tax system for their businesses. In addition the information emanating from this study could be used by tax practitioners to advise their clients on the most appropriate tax system for their businesses. Lastly, the results of this study could contribute to the debate around legislation for small and micro businesses. / Taxation / M. Com. (Accounting)