South Africa's tech startup industry to take a hit due to Section 12J tax change

Jamie McKane

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South Africa's tech startup industry to take a hit due to Section 12J tax change

National Treasury’s decision to stop its Section 12J tax benefits is bad news for the South African tech start-up environment and will make it more difficult for new tech businesses to access funding.

This is the view of Clive Butkow, CEO at Kalon Venture Partners, which operates under Section 12J of the Income Tax Act.
 

Hamster

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Aaaand 5, 6, 7, 8 *clap*

A one step forward, a two steps back. *clap*

A one step forward, a two steps back. *clap*

We prefer taxes, SME's can suck dick. *clap*

Again! A one step forward, a two steps back. *clap*
 

Swa

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And instead of closing the loopholes they make things more difficult. So much for the commitment to small enterprises.
 

Johand

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Glad they closed it. It became a tax dodge scheme for the rich. I doubt it could have been salvaged in its current form - "closing loopholes" would probably have created all other kind of drama. Better shut it down by not renewing it and replace it with something better.

Every single 12J scheme I looked at was structured around tax avoidance and most of them real estate. So good riddance.
 

Swa

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Glad they closed it. It became a tax dodge scheme for the rich. I doubt it could have been salvaged in its current form - "closing loopholes" would probably have created all other kind of drama. Better shut it down by not renewing it and replace it with something better.

Every single 12J scheme I looked at was structured around tax avoidance and most of them real estate. So good riddance.
The issue is the ANC won't replace it as it's their nature to only destroy. I would not have a problem if they stopped it in order to support something better that can't be taken disadvantage of. Now unfortunately a lot of legitimate businesses and entrepreneurs will suffer.
 

neoprema

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Africa doesn't want your colonial style tech startups. You must go to America or Europe and make billions.

Then sell it back to Africa for far more than they would ever have paid and with less jobs provided.
 

hj007

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Shortsighted. Its better to get high income people to at least invest here rather than making them invest offshore. It's worth the tax loss amd builds a vc ecosystem.
 

Johand

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The issue is the ANC won't replace it as it's their nature to only destroy. I would not have a problem if they stopped it in order to support something better that can't be taken disadvantage of. Now unfortunately a lot of legitimate businesses and entrepreneurs will suffer.
Want to make it about politics when it is not. Everytime somebody can't think for themselves they blame it on the ANC because they are an easy target. This has nothing to do with politics.

Fact is that Section 12J has been used to avoid tax on companies that did not need the incentive, and it did not create the jobs that were promised. Money is better spent elsewhere. It is the nature of these incentives that they come and go and adjust to reality.

And BTW your argument is flawed because the 12J was created by the ANC government!
 

gboy

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I have been saying this for a long time, as an entrepreneur I have looked at these 12J VCs and they do not bother to give you the time of day, if there is even a small element of risk, witch is not what the spirit of this program was about. If you look how VCs work in other parts of the world, this is just a tax scheme.
 

Swa

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Want to make it about politics when it is not. Everytime somebody can't think for themselves they blame it on the ANC because they are an easy target. This has nothing to do with politics.

Fact is that Section 12J has been used to avoid tax on companies that did not need the incentive, and it did not create the jobs that were promised. Money is better spent elsewhere. It is the nature of these incentives that they come and go and adjust to reality.

And BTW your argument is flawed because the 12J was created by the ANC government!
Perhaps because it is always about the ANC. We keep getting promises of making it easier for startups and smes. Yet nothing materialises and it's always more hurdles and red tape. And it does not come as a surprise that this comes just as South Africa has a tax shortfall. So it's not really about people using it to dodge tax because a competent government that spends their tax money well would not care if it helps a few small startups contribute to the economy.

And really what does risk have to do with it? I see no reason why people should only invest in risky endeavours to get a tax break.
 
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