26 Sep

South African Treasury aims to extend tax incentives

The Treasury has proposed a two-year extension of the employment tax incentive and a five-year extension of the learnership tax incentive, both of which, it says, have yielded positive results.

The proposals are contained in the latest draft of the Taxation Laws Amendment Bill, released for public comment on Sunday.

The employment tax incentive was due to expire at the end of December and the learnership tax incentive at the end of September. The Treasury has proposed that they be extended to end February 2019 and end March 2022, respectively.

Take-up of the employment tax incentive, aimed at encouraging youth employment, has been strong, with more than 32,000 employers claiming the incentive for 686,402 employees in the 2014-15 tax year. The total value of claims between January 1 2014, when the incentive was introduced, and March 31 2016 was R6bn, substantially exceeding Treasury projections.

“Preliminary research suggests that the incentive has had a positive impact on the number of net new jobs created,” the Treasury said. However, researchers have expressed doubt about this success, with early research by the University of Cape Town’s Southern Africa Labour and Development Research Unit in 2015 questioning whether the incentive had created any new jobs.

Labour federation Cosatu is strongly opposed to the incentive, which subsidises the wages of any new employee between the ages of 18 and 29 who earns R6,000 a month or less. The draft bill proposed by the Treasury will introduce a monetary cap of R20m on the value of employment tax incentive claims per employer per annum in order, the Treasury said, “to more effectively target the incentive towards those employers that are creating new jobs, and to also mitigate the total tax revenues forgone”.

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