Tax incentives to employ young people and for people employed in the special
economic zones (SEZs) are on the cards.

Tabling his 2013 Budget in the National Assembly on Wednesday, Finance Minister Pravin Gordhan said a revised youth employment incentive would be tabled in the National Assembly, together with a proposed employment incentive for SEZs.

Addressing a media briefing before he tabled the budget, Gordhan explained that it would include a tax break for employers, who would “get some money back through the PAYE system”.

According to the 2013 Budget Review, the number of youths without jobs remains exceptionally high, with more than 40 percent of those under the age of 30 unemployed.

Low levels of demand, lack of experience and a lack of appropriate skills and networks were among the reasons young people struggled to find work.

To date, interventions to encourage the private sector to hire younger workers had proven inadequate.

The national development plan (NDP) suggested a range of policies to help young people find work.

According to the budget document, government’s existing approach to increasing employment focused on training, skills development, labour market activation, and short-term public employment.

Programmes in support of these objectives included sector education and training authorities, further education and training colleges, small enterprise support, the Industrial Policy Action Plan, the expanded public works programme, and the community work programme.

To complement existing programmes, a youth employment tax incentive, aimed at encouraging firms to employ young work seekers, would be tabled for consideration by Parliament.

The administratively simple incentive would create a graduated tax incentive at the entry-level wage, falling to zero when earnings reached the personal income tax threshold.

The introduction of this tax incentive, which took into account the concerns of organised labour, would help young people enter the labour market, gain valuable experience, and access career opportunities.

Protection provided by existing labour legislation, combined with oversight by the SA Revenue Service and the labour department, would avoid displacement.

This issue had been at the heart of labour movement opposition to the plan, which was first mooted by Gordhan three years ago as a “youth wage subsidy”.

On Wednesday, the minister refused to comment on the protracted political battle over the measures, saying only that labour had valid concerns which were “clearly expressed” and clearly received.

Gordhan side-stepped a question on whether the incentive had come to replace the subsidy as initially proposed by him.

“The incentive is a further development of the idea that there needs to be cost-sharing — that is the key word. How by sharing costs do we encourage employers in South Africa to employ more young people, and by doing so how do we give young people their first exposure to work?

“That is the main objective, not the politics around this issue.”

A similar tax incentive would be made available to eligible workers of all ages within SEZs, the review stated.

According to the review, these included that in certain SEZs, a 15 percent corporate income tax rate would be authorised for businesses in such areas, as well as an employment incentive allowing a tax deduction for employing workers earning less than R60,000 a year.

Also, an accelerated depreciation allowance for buildings in these areas, based on the existing regime for urban development zones, to encourage developers to invest more in industrial premises.

Gordhan said the SEZs programme, announced last year, had received funding to build world-class industrial parks.

“I am in discussion with [Trade and Industry] Minister [Rob] Davies on specific tax incentives to enhance this initiative,” he said.