Johannesburg, 24 February 2021 – The Employment Tax Incentive (ETI) was introduced in 2014 and aimed at encouraging employers to employ younger people, between the ages of 18 and 29 years old, by offering an incentive in the form of a reduction in overall employees’ tax due on a monthly basis, provided certain requirements have been met, as set out in the ETI Act, 2013, writes Somaya Khaki, SAICA Project Director for Tax.
The incentive is available for the first two years in which the employer employs qualifying individuals with a monthly remuneration of less than R6500, subject to certain limitations.
Members of SAICA have, more than a year ago, reported various ETI Schemes being marketed to them or their clients, expressing concern as to whether these schemes were within the ambit of the law or at a minimum, abusive tax schemes. Their concern focussed on the fact that thousands of vulnerable youths who were supposed to be properly employed and paid a salary were in fact being exploited to enrich a few.
During the COVID-19 lockdown, it appeared from the sudden escalation in reports that the promoters of these schemes were using the distress of businesses in the current economic fallout to increase their gains. This resulted in an increase in reports from members who were concerned as to the morality of such schemes, the majority of which used training institutions to claim the ETI for students rather than employees.
SAICA, together with various other Recognised Controlling Bodies, took up the matter in 2020 with various engagements with their members, employers, and stakeholders such as SARS.
We are pleased to note that in order to counter this abuse, it is proposed that, effective 1 March 2021, the definition of an “employee” be changed in the ETI Act to specify that work must be performed in terms of an employment contract that adheres to record-keeping provisions in accordance with the Basic Conditions of Employment Act, 1997.
We would like to thank those SAICA members who took an ethical stand in this regard, despite resistance from certain sectors. We hope that this change will ensure that the incentive is used to serve the correct purpose and benefit the vulnerable youth in our society.
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.
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