Tax compliance could save your business

Melitta Ngalonkulu: The 2020 budget speech, delivered by finance minister Tito Mboweni revealed opportunities for local, small and medium enterprises despite a difficult economic environment.

Nadine Chetty, co-founder of Ecomm Accounting Solutions and Intuit QuickBooks Trainer is here to give us the key takeaways from the budget speech.

Nadine is there new hope for small businesses in this budget speech?

Nadine Chetty: Yes, I definitely think there is a bit of hope. Going forward, the finance minister really showed that we are going to be cutting down on some expenditures focusing on education and certain sectors, in this country, which has really big potential to grow. So I think there is quite large a growth phase as going to go through as well as a lot of hope.

Key points

Melitta Ngalonulu: What would you say are the key takeaways from this budget speech?

Nadine Chetty: So, my key takeaways from this budget speech would be that the finance minister is trying to focus too, on the small businesses. He actually mentioned that small businesses will ignite our economy and that’s completely correct. In the private sector, we have so many different types of small businesses who are creating jobs, growing the economy, getting production out. With that, we are going to help grow the economy.

I think one of the toughest things that we are experiencing is electricity consumption and production. So as we have the Eskom issue, our small businesses are going to suffer, meaning they’re not always going to have the capacity to buy a generator or solar panel for instance, and that’s going to maybe push them back when it comes to operating, and it could actually reduce their income, actually shrink the economy if everybody is affected in this way.

So I’m hoping that we can sort out the electricity issue, and that would be really helpful for the small business owner. As I, I know from experience that a lot of us small business owners are actually going through this trouble where they actually are closing their doors when the experiencing load shedding.

Benefits of tax relief

Melitta Ngalonulu: And the tax relief. How do you think that entrepreneurs will actually benefit from this?

Nadine Chetty: So, it’s great that we haven’t increased the vat rate and the proposals look in dropping the corporate tax rate from 28%. We’re not exactly sure where they will drop it and when this will happen.

But if our economy, is stable enough and we start gaining enough revenue to support our expenditures, lessening the tax rate can really benefit the small business owner, as corporate taxes can be quite harsh.

Especially If you are already paying your pay-as-you-earn  (PAYE) vat. And then on top of that, it is going to be your corporate taxes. So relief is going to be great. We already see some improvements in the personal income tax.

There is some relief there where you’re going to start paying from, I think the amount of R6,925 a month. So if you an under that, you’re not going to be paying tax. And I think there are a lot of youth around us earning in that tax bracket, especially if you’re straight out of university, you in a job that you want to learn.

I think that’s a really good advantage to also grow the economy and grow these youth so they not afraid to go to work. They can get jobs easier. And I think with coming with the tax relief and them not increasing it, we are going to experience a lot more knock-on compliance. Sars is going to be on the lookout for all these small businesses, making sure they’re compliant and if they’re not compliant they are going to go after them and issue heavy penalties and make sure the compliance comes into place.

Because ultimately we need to collect as much revenue as we need to. And because we have so many large, small businesses around, that is the biggest place to collect the tax revenue. So I think if we can get your compliance up to date, that would be a great thing.

Melitta Ngalonkulu: So you would say that to jumping on these opportunities or rather jumping on to tax compliance will be of benefit for the businesses?

Nadine Chetty: Yes, definitely. it’s not a great thing to do. No business wants to fork out its money, but it is something that needs to happen for our economy to stabilize and grow. And with doing this, there is software like QuickBooks for example. That help with your compliance-related issue. So it’s not so much of a hassle to go through this minefield of compliance, that’s more business experience. But if you use software like QuickBooks Online, you’ve got your tax books done for you online. You can track what your salaries are for your staff, you can track if you’re running profits and then you can almost push away some money for those at 28% of corporate tax that you’re going to pay at the end of the year.

So it really gives us more business owner tools to manage its cash flow when it comes to paying these taxes over to SARS. In my opinion, using these technologies and using an advisor like an accountant together really helps you to the small business owner to manage their payable taxes, whether it be monthly, bi-monthly or yearly, so they can have better cash flow and also make sure that they’re paying SARS on time.

Ignite your innovation

Melitta Ngalonulu: How would you advise entrepreneurs to actually be innovative during this current year?

Nadine Chetty: They would need to see which sectors the government has given money to these different sectors. So agriculture is one, training is another, public transportation. So use those sectors where funding is being placed, create innovative business ideas. Even if you’re a start-up, find something which the market is lacking and get your skills up in that sector and really succeed because I think there’s a lot of growth available for the small business owner.

I think there’s also going to be innovation funds that are going to be set in place. It’s going to be small business development funds, that’s on the table, but it’s not decided yet. But these are in place to support the small business owner. You really need to be innovative to think of what the country lacking is, whether it be electricity consumption. Because as we know now that the finance minister has given municipalities in good standing, the ability to purchase in electricity from independent electricity producers.

So I think there are a really wide gap and a wide variety of areas and sectors and markets for the small business owner to play in.

Adapting to the fourth industrial revolution, using technology, creating the fintech companies, creating stuff around the technology sector is going to be something where we can not only utilize in South Africa but also expand our product range to the continent, as now we know that there’s a free trade agreement in our African continent. So I think we have a huge space to play in.

Take advantage

Melitta Ngalonkulu: The minister had mentioned that 2.2 billion Rand will be transferred to the Small Enterprise Development Agency. So how do you advise that entrepreneurs take advantage of this opportunity?

Nadine Chetty: So, I think because we’ve got this investment now, it’s actually a huge opportunity for small business owners. They need to speak to their accountants, speak to their advisors, speak to people, having an open conversation saying, ‘I have this idea but I need some assistance with funding, can you help me? ‘

And, there’s a lot of places now that are offering funding for small business owners and this fund that they’ve created is specifically moulded for the small business owner. We’ve got the small business owner in mind when this fund was created. And not only have they given us a fund, but they both have made it easier for small businesses to start doing business in this country. So you know, as, our finance minister said, that we’ve got this portal called the biz portal where you can do your Companies and Intellectual Property Commission (CIPC) registration, your SARS, registration, your UIF; I think you can actually even open a bank account there.

So would you, having all that at your fingertips starting businesses in South Africa is not going to be much easier—you’re going to have more access to funding.

One thing I’m going to stress on is that, if you’re going to have access to the funding and if you’re going to apply for the funding that’s available to you, you have to be SARS compliance. If you are not SARS compliant, no funder will look at you. No investment firm will look at you.

This fund that has been created will only assist you if they can see that you are continuously SARS compliance. So I think, compliance is my biggest stress point here. Small businesses; even though you’re small, you really have to on managing your compliance.

Melitta Ngalonulu: The minister also mentioned an innovation fund which will be capitalized with R1.2 billion over the next three years, as well as an industrial business incentive, which is worth R18.5 billion. Do you think that the minister thoroughly explained the process in which entrepreneurs can go about accessing these funds?

Nadine Chetty: I don’t think he specifically went into details on how we can access this funding, but I think they will be more information coming out in the months to come on where we can go, how you can access this.

But I do think it’s going to be through the Department of Trade and Industry (DTI) plus probably because that is where all our funding occurs and we’re all businesses are run through.

But I do think they’re going to advise accountants, they’re going to advise people in the business industry or equipped to advise small business owners on ways that they can access this funding and incentives.

At the end of the day, the small business owner needs to know how to run his business and make money. But it’s your accountant’s job or your advisor’s job to assist you in finding these extra funding and these extra incentives to utilize in your business to assist you and help you grow.

Melitta Ngalonkulu: That was Nadine Chetty, co-founder of Ecomm Accounting Solutions and Intuit QuickBooks Trainer.