The South African Chamber of Commerce and Industry (Sacci) welcomed government’s promise in the 2013 Budget to negotiate tax incentives for businesses in certain South African special economic zones (SEZs).

The National Treasury proposed a 15% corporate income tax rate for these SEZs.

In Budget documents, tabled in Parliament by Finance Minister Pravin Gordhan on Wednesday, he indicated that he would authorise tax incentives in the SEZs after consultation with Trade and Industry Minister Dr Rob Davies.

The incentives included a tax deduction for employing workers earning less than R60 000/y, as well as an accelerated depreciation allowance for buildings in these areas, which would be based on the existing regime for urban development zones, to encourage investment in industrial premises.

Sacci also praised the creation of the Small Enterprise Financing Agency and the simplification of tax requirements for small and medium-sized enterprises. Government also proposed that the R14-million turnover threshold for small business corporations be increased to R20-million and that the graduated tax structure for such corporations be revised.

The current nontaxable income threshold of below R63 556/y, would be increased to below R67 111/y in 2013/14.

Similarly, the next bracket of R63 557/y to R350 000/y, where small businesses currently had to pay 7% in yearly taxes, would move up to between R67 112/y and R365 000/y.

The last bracket, which applied to small businesses that earned more than R350 000/y and currently had to pay 28% of their yearly income to the tax man, would be split in two. Businesses earning between R365 001/y and R550 001/y would have to pay 21% in yearly taxes, while those earning more than R550 000/y would pay 28%.

However, Sacci was concerned that details on the funding model of the National Health Insurance (NHI) remained outstanding, as well at the announcement that the NHI could be funded by higher taxes.

The industry body further indicated that there were no definite timelines on the investigation into tax policy reviews as stated in the State of the Nation address and the Budget.

Sacci warned that the cost of the increase in the fuel levy and the new carbon tax would increase the cost of doing business and have a particularly negative impact on SMEs, which were already facing severe sustainability challenges.

“The Budget speech was an important signal that constructive dialogue between government and the South African business community is necessary to support business confidence. The fiscal space has decidedly narrowed over the past year and the need for collaboration between social partners is more important than ever,” CEO Neren Rau said.

The Manufacturing Circle also welcomed the R5.3-billion allocated in the 2013 Budget for industrial incentives, the renewed momentum behind the employment incentives for youth and SEZs and tax relief for small businesses.

The National Treasury proposed the introduction of a youth employment tax incentive to assist South Africa’s young work seekers to gain valuable work experience and access to employment.

The Manufacturing Circle also indicated that it would support the National Treasury in engagements on promoting mortgage lending and small business financing, as this would stimulate manufacturing demand and investment in the sector.

It further said that, for manufacturers, the biggest disappointment was the Budget speech’s silence on the impact of electricity cost increases on the competitiveness of South African manufacturers and measures to assist them.

Concern was also expressed over the detrimental impact of the rapid, bunched-up administered-price increases seen over the last decade on the ability of manufacturers to remain competitive, and grow and create jobs.

The impending carbon tax proposal and the significant increase in the fuel levy were also points of unease.

“While the former needs to be very carefully implemented not to further undermine the competitiveness of domestic manufacturers, the reasons for the latter must be clarified.

“In respect of both these taxes, the Manufacturing Circle would support ring-fencing to ensure resultant revenue does not ‘disappear’ into the fiscus but is reserved for specific purposes that would support competitiveness and infrastructure development and maintenance,” the industry body said in a statement.

The Building Industry Bargaining Council (BIBC) was enthusiastic about Gordhan’s announcement of government’s plan to spend R827-billion on infrastructure, over the next three years. 

The council warned, however, that making an allocation for spending was only part of the solution and that government’s inadequate history of spending infrastructure budgets needed to improve.

While the BIBC was pleased with the announcement of individual income tax relief of R7-billion, it indicated that the increase in the fuel levy would negatively impact on the building and construction industry as a whole.

BIBC secretary Arnold Williams stated that the recovery of the local building industry was largely dependent on government’s approved infrastructure upgrades, provided that the tendering processes were transparent and that only socially responsible contractors, compliant with all laws, were awarded tenders.

“It is important to take into account that this will lead to substantial job creation in our sector, which is desperately needed,” he said.