South Africa's Finance Minister Trevor Manuel's 2006 Budget speech clearly had growth as its central target and not only are businesses being encouraged to grow, but also to spend money on learnerships and research and development.

Small businesses, often touted as being the main driver of job growth, are set to receive an injection after Manuel announced that a number of monetary threshold adjustments that will take place in the year ahead.

Currently, job creation is moving ahead with some 350 000 new jobs a year, or 1 500 new jobs a day.

For companies with tax years that end on April 1, or later, the annual turnover threshold to qualify as a small-business corporation moves from R6-million to R14-million. In addition, the taxable income threshold for the lower ten per cent will be increased from R250 000 to R300 000 and the small business income-tax exemption will be increased from R35 000 to R40 000.

One-time capital-gains tax relief will move up from R500 000 to R750 000 after the first of March and the asset-value threshold for immediate depreciation will increase from R2 000 to R5 000. These measures are set to cost the fiscus some R400-million.

Over and above this, a tax amnesty for small businesses, with a turnover of less than R5-million and that have not previously been tax compliant, will also be offered by the South African Revenue Service.

Manuel explained in his speech that one of the reasons for this is to offer those “who have been historically marginalised an opportunity to regularise their tax status”.

Taxes and penalties will be waived for years of assessment ending on or before March 31, 2004, which is subject to a non disclosure penalty of ten per cent on 2005's taxable income.

The first phase of the amnesty will take place between August 2006 and May 2007, and will focus on the taxi industry.

Later in the year, a second phase will extend the amnesty to other small businesses.

Regional service and joint service council levies will fall away in July this year, costing municipalities some R7-billion, which is being added back to local government's equitable share in 2006/7 and R24-billion is being added back over the medium-term expenditure framework to compensate for this removal of revenue..

This relief, however, should aid in job creation.

Also aiming to aid job creation, the learnership allowance - introduced in 2002 - will be extended for a further five years in view of its contribution to encouraging on-the-job training and skills development.

In addition, the allowances will be increased in value at a cost to the fiscus of R80-million.

“A more favourable allowance will be introduced with effect from July 2006 for the additional expenses associated with employing disabled persons as learners,” said Manuel.

Encouraging further investment in technology and innovation, the deduction for current research-and-development expenditure will be increased from 100% to 150%, and a “more favorable regime” for depreciation of research-and-development capital expenditure is proposed.

From March next year, a simplified set of rules for the tax treatment of bursaries and scholarships provided by employers will be introduced.

Meanwhile, Manuel hinted at one of the Accelerated and Shared Growth Initiatives' priorities when he said that an enhanced learnership allowance for the business process-outsourcing sector is under consideration.