The new Employment Tax Incentive Bill has raised a lot of questions. While I put out an overview a few weeks ago, there are some queries that keep coming up. Over the next week, this blog will cover some of them.
Large numbers of unemployed are a problem for any country,
but when young people leave the education system with a very poor chance of
getting a job, their motivation to achieve is impacted from day one.
Statistics indicate that 50% of 15 to 25s are unemployed,
and 29% of 25 to 34 year olds. The ETI
Bill aims at the 18 to 29 year olds who are believed to be around 30% of the
total unemployed which is sitting at approximately 25%.
The concept of introducing a subsidy for employers who take
on young people is not a new one, but there has been significant
resistance. The draft bill was released
in September, and the formal bill was published on November 4th,
2013.
When is it happening?
Treasury has set a “go live” date
of 1st January, 2014.
The bill has a so called “sunset”
clause, i.e. it is in effect for three years only – January 1st,
2014 to 31st December, 2016.
What are the objections and opportunities for abuse?
There is a concern that companies
will terminate existing employees in order to hire people who are eligible for
the incentive
The bill is seen by the
opposition to be a “watered down” version of the Wage bill proposed in 2010
It is also seen as unfair that
people who are already employed will be excluded, leading to the fear that
people will be dismissed and rehired to render them eligible
Response to the objections
Employee’s being displaced are a
cause for the employer to be disqualified from receiving the tax benefit
Treasury has commented that there
is general protection from abuse built into the bill
Which Employers Qualify?
Employers who are registered to
withhold and pay employees tax (Para 15 of the Fourth Schedule of the Income
Tax Act)
Which Employers are Disqualified?
Local, provincial or national
government
Municipal entities
Public entities (Public Finance
Act of 1999), although the Minister of Finance may designate exceptions
Employers who are found to have
displaced employees in order to benefit from the incentive
Employers who do not comply with
the training conditions (as yet unspecified)
Employers who do not meet the
conditions based on the classification of trade (SIC)
Employers who are not in good
standing with SARS on the last day of the month
Are there penalties for non compliance?
Yes
For non-compliance in terms of
wage regulating measures, the claimed sums must be remitted to SARS as a
penalty
Displacement includes a
R30 000 penalty per displaced employee and possible disqualification from
further tax incentives
Which Employees qualify?
Employment date is October 1st,
2013 or later
Employee is between 18 and 29
years old on the first day of the month and not yet 30 on the last day of the
month
Has a South African
Identification Card (Act No 68 of 1997)
Has a formal Asylum Seeker
document (Act No 130 of 1998)
Should a company have an office
in a Special Economic Zone (SEZ), and the employee (of any age) renders the
majority of his/her services in that zone
Special industries, to be
designated by the Minister of Finance in consultation with the Ministers of Labour and Trade and Industry
Which Employees do not qualify?
Domestic workers are specifically
excluded
The employee may not be connected
to the employer (Section 1 of the Income Tax Act)
If there is no minimum wage in
place, an employee earning less than R2 000 is excluded
This is the first section of a three part article.
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