National Treasury and the South African Revenue Service (SARS) have released a revised 2016 Draft Taxation Laws Amendment Bill for public comment. The Employment Tax Incentive (ETI) was set to expire on 31 December 2016, while the learnership tax incentive was to expire on 30 September 2016. The new amendments will extend the deadline for ETI to 28 February 2019, while the learnership tax incentive will be extended to 31 March 2022.
According to Treasury, both incentives have yielded good results. However, despite these claims, the Congress of South African Trade Unions (COSATU) is opposed to the Tax Amendment Bill. In a statement released by COSATU last year, it claimed that workers were against the “unilateral implementation of the anti-worker Taxation Laws Amendment Act of 2013 as amended.”
In COSATU’s view “this bill is meant to coerce and force workers to save by force. There is no government or department that should be allowed to pass laws that are meant to dictate to citizens and workers, how and when they should spend their hard-earned money.”
The trade union plans to make its opposition to the bill vocal yet again, when on 7 October 2016, COSATU and its supporters will take to the street in a legal and protected strike. Among the many issues that COSATU is demanding a resolution to, is “the scrapping of the Taxation Amendment Law.”
Employment tax incentive
During the 2014/2015 tax year over 32,000 employers have claimed the ETI for 686,402 employees. The total value of claims between 1 January 2014, when the incentive officially launched, and 31 March 2016 was R6.06 billion.
“Preliminary research suggests that the incentive has had a positive impact on the number of net new jobs created,” explained Treasury.
Due to the positive results, it was proposed that the incentive be extended until 28 February 2019 to promote more youth employment. In addition, the draft amendment proposes a monetary cap of R20 million on the value of ETI claims per employer per annum. This will assist in more effectively targeting the incentive towards employers who are creating new jobs, while also minimising the total tax revenues forgone.
According to the SARS website, the ETI will reduce the cost for employers of hiring young people through a cost-sharing mechanism with government. The amount of Paye-As-You-Earn (PAYE) that employers need to pay for the qualifying employees will reduce, while the employee’s wage will remaining unaffected.
Learnership Tax Incentive
Between 2009 and 2014 approximately 447,721 learnerships were supported by the learnership tax incentive programme. A review of the programme found that it provides positive support to training and skills development, according to Treasury.
“Currently there are 19,682 registered apprenticeship learning contracts who could benefit from the incentive. It is proposed that the learnership tax incentive is extended from 1 October 2016 for another five years to 31 March 2022, with adjustments to the value of the deductions based on the qualification level of the learner when entering into a learnership agreement to improve targeting of the incentive towards more technical skills,” revealed Treasury.
The new amendments propose increasing the value of the deduction to R40,000 for qualifications up to NQF level 6 and decreased to R20,000 for qualifications equivalent to NQF level 7 or higher.
Public comment on the 2016 Draft Taxation Laws Amendment Bill can be sent to Mmule Majola at mmule.majola@treasury.gov.za and Adele Collins at acollins@sars.gov.za by close of business on 10 October 2016.
