Busa argues against limit on employment tax incentive
CAPE TOWN — Business Unity SA (Busa) says while it backs the Treasury’s proposed two-year extension of the employment tax incentive, it does not support the proposal to cap it at R20m per employer.
The business organisation believes that there should be no cap at all, saying that limiting the benefit in this way would undermine the scheme’s effectiveness in promoting youth employment.
Research commissioned by the business grouping attested to the effectiveness of the incentive, which the Treasury says benefited about 686,400 employees in the 2014-15 tax year.
The Treasury announced on Sunday its proposal to extend the incentive by two years and the learnership tax incentive by five years. The employment tax incentive was due to expire at the end of December and the Treasury has proposed that it run until the end of February 2019. It is available for any new employee aged between 18 and 29 who earns R6,000 a month or less.
The Treasury justified the need for a R20m cap per employer so that the incentive could be “more effectively targeted towards those employers that are creating new jobs and to also mitigate the total tax revenues foregone”. The total value of claims for the incentive between January 1 2014, when it was introduced, and March 31 2016 was R6bn, far above Treasury projections.
Tanya Cohen, the representative of Busa on the task team that was set up by the National Economic Development and Labour Council (Nedlac) to look into the incentive, saw no reason for a monetary cap that she said would simply limit the number of jobs benefiting from the incentive “when every job counts”.
Busa CEO Khanyisile Kweyama said research had shown that firms that accessed the employment tax incentive had grown employment on average by 15%, whereas those that had not, had grown employment only by 2.8%.
In relation to youth employment, firms accessing the incentive grew youth employment by 13.7%, whereas the result for those not accessing, it was minus 17.3%.
Initial results from econometric reports had further indicated that workers employed in terms of the incentive scheme were paid higher wages on average and had more secure employment.
Busa said research conducted by Singizi Consulting, a labour market research organisation, into the effect of the employment tax incentive showed that firms of all sizes had responded positively to it by hiring more younger workers.