Extension of tax incentive mooted

The government has proposed a five-year extension of the employment tax incentive 2024 to promote employment, particularly of young workers.

The proposal is contained in the draft Taxation Laws Amendment Bill, which has been released by Treasury for public comment. The proposal was mentioned by President Cyril Ramaphosa in his state of the nation address in February, as well as in his programme to stimulate youth employment.

The incentive, which was introduced in January 2014 and was extended for a further two years until February 2019, works as a deduction from PAYE of part of the salary of a worker aged below 30 and earning less than R6,000.

Treasury officials briefed parliament’s finance committee on the tax proposals on Wednesday. The draft bill proposes that an interim report be compiled on the performance of the tax incentive after three years. Consultations on the proposal are taking place in Nedlac.

Treasury acting chief director of economic tax analysis Chris Axelson said the extension was based on a review that indicated the tax had “modest” positive effects on growth rates of youth employment in claiming firms.

“As part of the ongoing monitoring and evaluation of this programme, another round of inputs will be collected from social partners through Nedlac.”