Dr. Moses H Lubinga, Senior Economist: Trade Research,NAMC
Ever since President Cyril Ramaphosa declared a national state of disaster, various measures have been put in place to enable businesses cope with crisis of Covid-19 at hand. On 23rd April 2020 the National Treasury, through the Minister of Finance announced a second two sets of tax measures envisaged to provide around R70 billion worth of support. This support will be either through reductions in taxes otherwise payable or through deferrals of tax payments for tax compliant businesses. These tax measures come with an expectation that tax compliant businesses shall be able to have good cash flows, thereby providing an incentive for businesses to retain their lower-income employees. Despite the fact that the tax measures are good instruments through which to provide financial relief to farmers and agribusinesses during the Covid-19 crisis, they (tax measures) directly favour the formal sector of the economy with a minimal impact on the informal segment. For instance, the informal segment in the agricultural sector indirectly enhances capacity development through on job training as field supervisors regularly guide those who require further guidance to improve upon whatsoever task they are doing. And by the end of the day, those individuals become well versed and practically knowledgeable in farming and other agribusiness related activities.
In agriculture, there are many agribusinesses and farmers that are not tax-registered because their businesses are characterised by functions generating income below thresholds required to pay taxes, despite the fact they actually employ a number of casual or seasonal labourers. Take an example of emerging vegetable farmers that employ many seasonal and casual labourers, thereby contributing to economic growth. During this pandemic, these emerging farmers are equally affected but there is no direct way through which they are going to benefit from the tax measures to enable them to sustain their small businesses while retaining their casual/seasonal laborers. The key point for policymakers is that when financial relief measures are designed, tax compliance should not be the only qualifying criteria for business to be eligible for support. Many businesses are not tax registered because their income is below the required tax threshold but their role in creating jobs is critical for economic growth and sustainability of livelihoods. Possibly, a specific amount of money should be ring fenced to cater for such categories of agribusinesses and emerging farmers who do not necessarily pay taxes but can provide proof that they are employing casual/seasonal labourers.
Article by: Dr. Moses H Lubinga, Senior Economist: Trade Research,
National Agricultural Marketing Council
Disclaimer: The views and opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of Mzansi Agriculture Talk or its members.