Yasmeen Suliman, KPMG tax director, has called for more concrete ideas on how to put the proposed job subsidy into place without compromising existing jobs.
Another step that Suliman urged Finance Minister Pravin Gordhan to adopt was more tax benefits (such as enhanced allowances) for on-the-job training, as opposed to the more formal learnerships.
Thirdly, Suliman called for a tax holiday for companies, local and foreign, that expand existing or install new manufacturing facilities that create more than 200 jobs.
“Many commentators agree that in order for South Africa to grow its economy and reduce social ills, job creation and skills development must be prioritised,” she added.
“Currently the only tax benefit for employing more people and developing skills lies in learnership allowances. While leanerships do provide some good tax benefits it is arguable whether they are sufficient to encourage employment and skills development,” Suliman said.
“Some of the drawbacks of learnerships is that the process to register and train a learner is onerous, the tax benefit is only be useful to employers should the employer be in a tax paying position, and the cash impact of the benefit is only felt much later when provisional tax payments are due. If the employer is not an income tax payer or is in an assessed loss position, there is no immediate cash benefit.”
In the last two Budget Speeches, Gordhan made an announcement that a job subsidy will be introduced to encourage the employment of youth and unemployed, Suliman said.
In 2011 he mentioned that the subsidy would be administered through the PAYE system.
“While details of the subsidy were not made available at that time, it was envisaged that there would be a more immediate cash flow benefit to employers who employed more people,” she said.
“However, the problem is that announcements in the Budget Speeches did not culminate in any amendments to legislation that would give effect to the subsidy in practice,” Suliman said.
“It is understood that trade unions were opposed to the idea of a job subsidy on the basis that their membership would be prejudiced and there was a fear that older employees would be retrenched so that they could be replaced with younger employees that did qualify for the subsidy,” she added.
“One would think that any legislation that would have given effect to the subsidy would also have contained anti-avoidance rules that prevented the retrenchment of other employees - as an example, the subsidy could have only been paid to employers who could show that the absolute numbers of people they employed had increased, and who could demonstrate that they had not retrenched any existing employees.”