Hon Deputy Speaker, hon Ministers and Deputy Ministers, and hon members of this august House, I think it is important for me to put the record straight in relation to the issue that was raised by the hon member from the EFF. Contrary to what the EFF said when they raised the issue of transfer pricing and profit shifting, we asked the hon member of the EFF for concrete views, rather than repeating the same old tired generalities. He said nothing, and we asked him to put the matter in writing and bring that within 10 days. I can say in this House that since we requested that, the hon member has never come to the meetings and I think we cannot allow him to mislead this House.
The ANC government has prioritised entrepreneurship and the advancement of small, medium and micro enterprises as a catalyst for achieving economic growth and development. Key to this has been the implementation of SMME- related policies, to ensure that adequate financial and nonfinancial assistance is provided to the sector, for its long-term prosperity and that of the country as a whole.
Through the commitment of the ANC government to enhancing SMME support, a dedicated department has been established to strengthen support for the small business sector. This commitment is in line with the National Development Plan, that small business is expected to play a vital role, thereby creating 90% of the 11 million jobs by 2030. To achieve the NDP objectives, partnership between government and other organisations is of utmost importance.
Most developing economies have strong informal sectors that draw people into economic activity. South Africa's informal sector has challenges, given the country's size and the level of development, which has been acknowledged by government. Moreover, the broader business environment is characterised by market concentration and relatively high profit margins.
The ANC government remains committed to creating an environment that supports both informal traders and entrepreneurs who seek to develop small businesses into larger enterprises. Red tape and bureaucracy are hindrances to doing business, especially for small and medium-sized firms, and this Amendment Bill aims to streamline the regulatory regime. The proposed reforms would reduce compliance costs and facilitate access to equity finance. The central questions in the debate are, firstly, how the changes to the Taxation Laws Amendment Bill will enhance small, medium and micro enterprises, both in making them sustainable and in enhancing job creation. In addition, how will the Amendment Bill enhance the growth of the SMME sector, which is key to the amendments that are being proposed?
With the creation of the Small Business Development Ministry, which deals with co-operatives, taxation in the Amendment Bill seeks to facilitate progress in the sector and lift any hindrances. The role of small and medium-sized enterprises in job creation and contributing to economic growth in South Africa has been recognised over a number of years. Most small businesses in the country operate, amongst others, in agriculture, trade, transport, tourism and the construction industry.
While small businesses in developed countries contribute around 50% of the gross domestic product, and those in Asia around 40%, in South Africa small businesses contribute only 30% of the GDP. They also contribute 70% to 80% in employment, but less than 4% in export earnings.
The main reasons that prevent small businesses from progressing include, amongst others, the economic environment, the labour regulations, the poor education levels, a lack of management and work skills, a lack of access to working capital and the low outlays for research and development.
A number of measures have been identified in the National Development Plan to promote and support the development of the small business sector. This includes the fact that public-private procurement needs to be improved to provide support to the small business sector. Then there is improved access to equity and debt financing by financial institutions - in this regard development finance institutions have of late begun to focus on servicing this sector. Furthermore, a review of the regulatory environment, including compliance issues such as business regulations, tax, labour regulations and local government regulations is needed, and in this regard the Tax Laws Amendment Bill has begun to address issues that are raised in the NDP. Finally, the assessment of the NDP is that a potential of 90% of new jobs can be created by SMMEs over the next 20 years.
The 2014 Tax Laws Amendment Bill proposes tax relief to small businesses of between R1 million and R20 million. What hon George from the DA was saying is misleading, because small businesses are being considered in this amendment.
This is in line with the recommendation by the Tax Review Committee, which suggested that this tax regime should be retained, but that the requirements should be simplified and the thresholds and tax rates be adjusted. As noted in the 2014 Budget, the Tax Review Committee proposed that turnover of up to R335 000 should be taxed at zero tax rate and the maximum rate be adjusted from the current 6% to 5%.
The Tax Review Committee further concluded that the lower tax rates for small business corporations are not effective. They do little to support the objective of small business growth and do not address tax compliance costs. The current regime provides tax relief for 50 000 businesses and to professions, and not for the originally intended beneficiaries. The ANC government has supported the reduced tax rate regime with an annual refundable tax compliance rebate.
Informed by the Davis Tax Committee, the Amendment Bill incentivises income tax compliance by small business corporations. In terms of the amendment, small business corporations are entitled to a cash rebate of R15 000 on their tax liability where a fixed rate of 28% is used as an income tax rate rather than the current graduated scale.
Payments for the development of SMMEs are to be exempted from income tax. For SMMEs to qualify for exemption they will have to meet the requirements for a micro enterprise. During his 2014 Budget speech, the then Minister of Finance, hon Pravin Gordhan, announced that there would be increased support and tax relief for entrepreneurs and small businesses. These announcements were as a result of the appointment by the Minister of the Davis Tax Committee, under Judge Davis, in July 2013.
The Davis Tax Committee report makes the important point that it is not the task of Sars to build up the SMME sector; it should rather be an instrument that can assist the SMME sector in its obligation to be tax compliant. The report refrains from recommending a blanket tax exemption to small businesses, as it would undermine the objectives of the new Tax Administration Act and potentially result in substantial abuse.
The Amendment Bill aligns itself with the national drive to increase funding in research and development as part of growing the economy. On the revision of the research and development incentive, the definition of "research and development" has been amended to include the costs of clinical trials and the multisource pharmaceutical products as tax- deductible.
As I conclude, hon Speaker ... [Time expired.] Thank you hon Speaker. The ANC supports these amendments.