Stuart Theobald points out that paying 3% of turnover to buy level 3 BEE compliance is inimical to low margin businesses (“A 3% shortcut to BEE compliance — smart incentive or costly loophole?”, October 8). However, replacing BEE charter compliance requirements with a financial levy is flexible and business friendly. It is a move in the right direction.
An even more business friendly approach would be to replace entirely the BEE stick (loss of government contracts, mooted fines, hints of criminal sanctions) with the carrot of tax credits. Let business decide whether or how far to comply with BEE.
Then, to exhort compliance, provide a credit against income tax, based on BEE levels achieved. Level 1 would generate the biggest credit; level 8 the smallest. This approach would recognise that the constitutional provision for empowerment could be interpreted as exhortative — not necessarily mandatory.
Non- or poor compliance need not therefore invite government sanctions in the form of market exclusion, not to mention threats of fines and even jail time. Business would be free to trade and invest without government intervention.
However, non or unduly weak compliance would attract full (say, 40%) income tax. Conversely, fully compliant business would pay, say, only 20% after tax credits. Such an exhortative approach would free business to make purely financial trade-offs.
It would have the additional benefit of curtailing the army of rent-seekers clustered around the current mandatory, punitive empowerment regime.
Willem Cronje
Cape Town
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