Abstract
M.Com.
“The hardest thing to understand in the world is the Income Tax”- Einstein
“Abracadabra, thus we learn the more you create, the less you earn. The less you
earn, the more you're given, the less you lead, the more you're driven, the more
destroyed, the more they feed, the more you pay, the more they need, the more you
earn, the less you keep, And now I lay me down to sleep. I pray the Lord my soul to
take, if the tax-collector hasn't got it before I wake." - Ogden Nash
Tax revenue forms the backbone of any country’s economy. Without the collection of
tax revenue, governments would be unable to deliver on, and adhere to, their social
and welfare commitments. In essence a country has the need for all citizens to pay
income tax. In recent years there have been some modifications in our domestic tax
legislation (Katz Commission, 1994:2) to try and fall in line with more international
communities’ tax practices. These modifications have steadily shown an increase in
the number of registered individual taxpayers in South Africa. In particular it is noted
that there has been a steady increase of 5.9 million registered taxpayers in 2010/11
(Statistics South Africa, 2011:2). This is a considerable increase in comparison to the
2008/09 tax years, where there was a reported 5.5 million registered taxpayers
(Statistics South Africa, 2009:2). This seems to indicate that our revenue office is
taking on certain plights of the international tax communities’ tax practices in order to
develop better tax compliance procedures and to further ensure that they have as
many citizens that are liable for income tax, registered for income tax. Unfortunately
as the rate of unemployment in South Africa maintains levels above the 20% mark,
the unemployment rate being a reported 23.30% in 2010 (CIA World Factbook,
2010), there seems to be a shift towards more self-employment when one considers
that being unemployed must then open the possibilities that individuals will tend to
seek self-employment in order to make a livelihood.
It can be further noted from the 2010/11 Tax Statistics publication (Statistics South
Africa, 2011:2) that personal income tax is still the main income tax contributor to the
fiscal – rendering a contribution of 34.3% to the total composition of main sources of
tax revenue collected in South Africa for the 2010/11 tax years. Of the 34.3% of
personal income tax that contributed to the composition of the main sources of tax
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revenue collected, 5.1% is the percentage that reflects sole proprietors’ income
contribution to the South African tax revenue of personal income tax.
The objective of this mini-dissertation was therefore to establish what taxes sole
proprietors are regulated by within the context of the South African tax legislation
framework, and then comparing this to the tax legislation applicable to sole
proprietors in two other developed countries, namely the United Kingdom and
Australia.