Is turnover tax a benefit or a burden : an exploratory study of micro business owners

SARS introduced a presumptive tax system namely turnover tax for micro business owners in March 2009. The aim of turnover tax is to reduce the tax burden, thereby encouraging entrepreneurship and creating an environment where small businesses can survive and grow (SARS, 2009:2).
The advantages of the turnover tax system includes relieve of the administrative tax compliance burden on micro business owners. Micro businesses earning high profit margins will also be liable for less tax than would have been payable on the standard income system.
There are several drawbacks to the turnover tax system. Firstly, this system does not favour businesses running at a loss or earning lower profits. Secondly, a micro business that is registered for turnover tax will not be permitted to be registered for VAT as well (SARS, 2009:3). The micro business owner would be liable for VAT deregistration costs. Another negative consequence of deregistering for VAT is that the business will no longer be able to produce VAT invoices. The business may lose valuable clients as a result thereof.
The micro business owner has to carefully consider the influence that turnover tax can have on the bottom line of the business before registering for it.

Breedt, E 2010, Is turnover tax a benefit or a burden : an exploratory study of micro business owners, MCom dissertation, University of Pretoria, Pretoria, viewed yymmdd < >


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