Tax That Can Kill
Provisional Tax is a huge threat to self employed persons and small entrepreneurs.
Self-employed persons, craftsmen and small entrepreneurs are facing a threat that may be a matter of life or death for them. This is the new arrangement for paying business taxes in advance, technically the Provisional Tax.
Since a few weeks ago, the Seychelles Revenue Commission (SRC) has begun issuing notices to all businesses that their business tax will have to be paid in advance, as Provisional Tax. This is part of the revision of the tax system in the economic reform programme.
Among those to get the notice were self-employed persons in cottage industries and small businesses such as craft artisans, seamstresses, hairdressers and so on. Such businesses have been assessed to pay between R2500 and R4000 per month. Many of the businesses concerned believe they will not be able to survive.
The measure is unreasonable and unfair. It does not take into account the situation in which the individuals and their businesses operate. The amount of provisional tax they have been asked to pay does not reflect a justifiable assessment of their incomes. Many of these businesses are precarious, surviving from month to month without cash reserves. Their first priority is to pay employee wages, then rent and utilities. Their earnings are often erratic. If they make enough to get by in one month, they may not the next.
Many businesses will feel that the tax burden is too risky and complicates things too much for them. Faced with the uncertainty, they may shed jobs or close.
Some groups of businesses have met to express their difficulties in the face of the tax demands. At a meeting of the Small and Medium-sized Entrepreneurs held last Saturday, the problem was the matter of principal concern. Craft artisans are among those who feel most at risk. Typically, their sales are erratic and often below the level for which they are being assessed. If they are unable to pay in any one month, surcharges will accumulate. Seamstresses, snackmakers, hair-dressers and others face the same predicament.
The Ministry of Finance has made a mistake in not understanding the situation of these small entrepreneurs and should review this scheme to help them survive.
Source: Regar 2-5-10