Tax incentive for youth employment

27 February 2013

South African Finance Minister Pravin Gordhan, delivering his 2013 Budget Speech in Parliament in Cape Town on Wednesday, proposed an employment tax incentive for young, first-time workers which will use a new graduated formula and replace the contested youth wage subsidy proposal made in last year's Budget.

Delivering his 2013 Budget Speech in Parliament in Cape Town on Wednesday, Gordhan also revealed plans for several tax incentives for the country's Special Economic Zones (SEZs).

The Budget Review says youth employment incentive, which will amount to R500-million in tax relief once implemented, will operate using a graduated tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold.

Protection provided by existing labour legislation, combined with oversight by the South African Revenue Service (Sars) and the Department of Labour, will ensure that employers don't replace older workers in favour of first-time workers just to take advantage of the tax incentive.

Incentives for Special Economic Zones

A similar tax incentive will be made available to eligible workers of all ages within the country's Special Economic Zones (SEZs). This will allow employers to make a tax deduction for employing workers earning less than R60 000 a year.

The Budget Review also contains a proposal that businesses based in SEZs be subject to a 15% corporate tax rate, almost half that of South Africa's current corporate tax rate of 28%.

Added to this, an accelerated depreciation for buildings in these areas, based on the existing tax regime for urban development zones, will encourage SEZ developers to invest more in industrial premises.

The DTI released its draft Special Economic Zones Policy and Bill during 2012 and invited the country's nine provinces to submit proposals for the establishment of Special Economic Zones.

Last week, Limpopo Premier Cassel Mathale announced that the DTI was set to partner with the Limpopo government to establish two SEZs in the province, one focusing on logistics and coal beneficiation, the other on platinum beneficiation.

Source: SAnews.gov.za