Business wants tax incentive extension

COMPANIES are likely to hire many more young people if the proposed Employment Tax Incentive takes effect next year.

There is widespread agreement that the scheme should be extended beyond its two-year lifespan, according to two leading business organisations.

The enabling legislation tabled in parliament is aimed at encouraging companies to employ first-time workers between the ages of 18 and 29 by offering them a significant tax rebate.

The scheme was put forward by the Treasury three years ago as a Youth Wage Subsidy, but was delayed in the face of fierce opposition by Cosatu, which fears it will displace existing employees and lead to lower wages. It has now been repackaged with a few modifications.

A South African Chamber of Commerce and Industry (Sacci) survey released on Wednesday found that 88% of 35 companies which responded — ranging from multinationals to small enterprises — would be interested in taking up the incentive.

The other 12% said they had no need for more staff.

There would be an increase of at least 16% in the 1 000-odd jobs already offered by these com- panies, the survey showed. More than 90% of the respondents believed that the incentive should be extended beyond the proposed two years.

“There is a lot of interest in business to take up this tax incentive,” said Sacci’s policy consultant Pietman Roos.

“It should be made available in the services, tourism, and manufacturing sectors.”

Intended to take effect at the start of next year, the two-year scheme will be open to any private sector company, but will only apply to industries designated by Finance Minister Pravin Gordhan.

Business Unity SA said it would make submissions to government on expanding it across the economy.

“Busa believes that this will encourage employment and, if properly implemented, will prove to be effective,” said Raymond Parsons, the business group’s special policy adviser.

The bill will offer a tax rebate of 50% for companies that employ new labour market entrants between the ages of 18 and 29, and earning less than R2 000 a month.

There will be a rebate of R1 000 for employees earning between R2 000 and R4 000 a month. In the second year, the rebates will all be halved.