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No jobs lost over tax incentive scheme

Wednesday, 09 September 2015   (0 Comments)
Posted by: Author: Karl Gernetzky
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Author: Karl Gernetzky (BDlive)

Midway through the Employment Tax Incentive Act’s three-year run, the Treasury has received no reports of job losses resulting from the scheme, it says.

As of the end of February this year, 31,825 employers claimed a total of R2.8bn under the incentive scheme, with an estimated 216,000 people employed, the Treasury says.

The act was highly contentious, with the Congress of South African Trade Unions (Cosatu), violently opposing it and the scheme in its previous form — the youth wage subsidy.

SA has the highest unemployment rate of all middle-income countries, with a youth unemployment rate of 50% — double the average rate.

About 60% of the 5.2-million unemployed in SA are between 15 and 34 years old and 60% of them do not have a matric certificate. The tax incentive was implemented in January last year to incentivise business to employ young people.

The act reduces the cost to employers of hiring young people, with government paying half of the costs, and employers benefiting from a reduction in the pay-as-you-earn employee tax.

These payments were due at the end of May, but the Treasury says there is a time lag before this data is available for policy analysis.

The scheme runs until December next year.

"National Treasury remains committed to a full review of the programme, prior to its sunset on December 31 2016," says Treasury spokeswoman Phumza Macanda.

"To date, we have not received any reports of job losses due to the incentive programme, but we would encourage any aggrieved workers to approach the Commission for Conciliation, Mediation and Arbitration if they believe that they have been dismissed unfairly."

Cosatu opposed the incentive on suspicion that employers would use the scheme to lay off older, more highly paid workers when government offered to subsidise the employment of young people.

Matthew Parks, a parliamentary co-ordinator for Cosatu, says that because confidentiality clauses governing tax agreements extend to the government, the figures presented by the Treasury to Parliament and the National Economic Development and Labour Council remain "guesstimates" based on payments made and the maximum claimable amount.

"The red flag for us is that almost all the subsidy payments seem to have gone to labour brokers … which have high staff turnover rates," he says.

This is a sector in which Cosatu unions find it difficult to organise.

Despite the fact that there are programmes to train and support shop stewards in the sector, they are often volunteers who face dismissal as soon as they begin organising employees into unions.

"Basically, this de-facto subsidy may be taken up in large numbers. Unfortunately, Treasury has no idea what the displacement effect is yet," says Parks.

Cosatu is supportive of efforts to address SA’s joblessness, but the scheme could have addressed problems with displacement through, for example, removing the age clause or targeting specific sectors such as textiles or agriculture, he says.

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