News Articles and Press & media releases

Employment Tax Incentive Abuse Scheme

Last Updated Aug 2020

Johannesburg, 20 August 2020 – Members of the Recognised Controlling Bodies (RCBs), the South African Institute of Chartered Accountants (SAICA) and the South African Institute of Tax Professionals (SAIT), have in the last 12 months reported various Employment Tax Incentive Schemes (ETI) being marketed to them or their clients. The RCB members have also expressed grave concern as to whether these schemes are within the ambit of the law or at a minimum, abusive tax schemes. In this regard, SAICA and SAIT would like to acknowledge the ethical leadership of our members in raising these concerns.

The alarm regarding these schemes was raised with National Treasury and the South African Revenue Service (SARS) in 2019. However, it appears from the sudden escalation in reports that the promoters of these schemes are using the desperation of businesses in the current economic fallout to increase their gains. As a result, this matter has now been raised again through collaboration with other professional bodies in the RCB Forum, with National Treasury and SARS, for further investigation and intervention.

Although there are variations of this ETI scheme, the gist is as follows:


  • The scheme is marketed to employers and to ‘potential employees’ as participants as a 12-24-month programme where the individuals are:
    • Recruited by a recruitment agency, advertised as specialising in recruitment of unskilled and inexperienced, previously disadvantaged South Africans.
    • ‘Employed’ by participating Employers on a 12-24-month fixed-term contract of employment, but are subcontracted to ABC entity.
    • ‘Trained’ by X College on courses professing to be Sector Education and Training Authority (SETA) accredited courses.
    • Exposed to work-based exercises and activities by ABC Entity, focusing on the development of previously disadvantaged and inexperienced youth. In some instances, the participants may work for the participating Employers for a few months following the ‘training’ programme.
  • The recruitment agency approaches the Employer to recruit individuals (‘employees’) at no recruitment cost to the Employer.
  • The individuals are ‘employed’ by the Employer for a fixed term of 12 - 24 months, for a ‘remuneration’ of R3 500 per month.
  • The Employer contracts X College to train employees recruited by the recruitment agency at a cost of R3 500 per employee per month – i.e. the Employer pays the ‘remuneration’ to X College instead of to the individuals (‘employees’).
  • The Employer chooses a fixed-term training course aligned to its business in conjunction with X College.
  • The Employer subcontracts the individuals to ABC Entity, and ABC Entity ‘utilises’ the individuals at a fixed rate of R2 800 per individual per month.
  • Pro forma employment contracts are created by the recruitment agency and kept ‘on file’ in the event of a SARS query.
  • The participants in the scheme take the view that since the definition of “remuneration” refers to amounts “paid in cash or otherwise and whether or not in respect of services rendered”, the payment of ‘remuneration’ of R3 500, in the form of training, entitles the Employer to claim an ETI allowance of R1 000 per month in respect of each of the individuals ‘employed’.
  • The Employer includes and reports the individuals as ‘employees’ on the payroll, and claims the ETI from SARS on a monthly basis. In essence, these ‘ghost employees’ are used to round trip money between scheme participant (Employer) and the promoter to create the ‘facts/form’ for employment and payment, and then the R1 000 ETI is shared between the participating Employer and scheme promoter.
  • The ‘programme’ described above is also promoted on the basis that it provides an opportunity for employers to claim skills development points for spending on the training of previously disadvantaged people, given that the amended B-BBEE codes require companies to, inter alia, spend 3.5% of payroll on training previously disadvantaged people.
  • X College then provides all documentation required to claim B-BBEE skills development points. In some instances, X College will also require the individuals to make payment towards their own training, which is being organised for them.

Based on our understanding of these schemes, it is our view that it is legally questionable, specifically as it relates to ‘ghost employees’ and definitely undermines the purpose of the ETI incentive, which from the outset was aimed at incentivising a ‘real job’. The negative perception created by these schemes, may also have an impact on the viability of the incentive going forward, prejudicing those employers who are legitimately utilising the incentive, in the manner intended, to create sustainable employment and develop skills.

We are also aware that some of the schemes are justified by way of apparent ‘legal opinions’ concluding on the ‘legality’ of these ETI schemes. However, based on the substance of the structure, we are highly doubtful that it fits within the ETI Act, insofar as the intent behind the design of the incentive is concerned, and with regard to having established an actual employment relationship.

Based on the structure of the ETI schemes, it is apparent that in most instances there is no intention for an actual employment relationship to be created between participating ‘employers’ and ‘employees’. Furthermore, the schemes also seek to undermine our government’s efforts to promote transformation in employment processes, by helping ‘employers’ to generate B-BBEE points by choosing ‘employees’ who fit transformation targets, based on race, gender and physical disabilities.

RCBs have an ethical obligation to properly advise and inform our members but also to release information in the public interest, so that unsuspecting parties are forewarned regarding these tax abusive ETI schemes.

In this regard, we call on employers to exercise vigilance regarding any tax scheme that seeks to undermine the intention of a specific incentive, particularly since the ‘employer’ would carry all the risk in respect of the tax and labour obligations. Tax practitioners should also apply appropriate professional scepticism to any tax structuring arrangements before promoting the scheme as it could also impact their ‘licence to trade’ as a registered tax practitioner should the scheme turn out to be unlawful.

We encourage those employers or advisors approached, not to participate in the above mentioned ETI schemes given the risks associated. Employers and members are encouraged to rather report those involved with a view to make these details available to SARS to further pursue and take action as necessary.

For more information, contact Pieter Faber, Senior Executive: Taxation at SAICA via email; Somaya Khaki, Project Director: Tax at SAICA, via email or Beatrie Gouws, Head of Stakeholder Management and Strategic Development at SAIT, via email


The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants [CAs(SA)], as well as associate general accountants (AGAs(SA)) and accounting technicians (ATs(SA)), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that's why all of the top 100 Global Brands employ Chartered Accountants.

SAICA Media Contacts

Kulani Chauke                                                                        

Project Manager: Corporate Communications                                 

SAICA Brand Division                                                             

011 479 0698/071 266 0019                                                                               

About SAIT

The South African Institute of Tax Professionals (SAIT) is the largest professional tax body in South Africa. SAIT seeks to enhance the tax profession by developing standards in education, compliance, monitoring and performance. The Institute contributes to the development of world class professional practises and people, with 5 professional designations registered with SAQA: General Tax Practitioner, Master Tax Practitioner, Tax Technician, Tax Advisor South Africa, and Transfer Pricing Specialist.

SAIT plays a leading role in developing sound tax policy and shaping fiscal legislation, and actively contributes to the industry, leading through thought leadership and in guiding tax practitioners.

Through SAIT’s international network, and influence as chair of the global Tax Directors Forum, South Africa participates and contributes to the work of the OECD, and the Institute regularly hosts international tax conferences and summits in support of the national developmental agenda.

SAIT Media Contact

Muzikayise Mike Maseko                                                                              

Head of Communications

012 941 0400/060 760 9656