The Treasury has not accepted a proposal from labour federation Cosatu that state Covid-19 relief be made conditional on companies creating jobs.

Cosatu argued that it was not acceptable for companies receiving Covid-19 relief measures to retrench workers.

But Treasury chief director of economic tax analysis Chris Axelson explained in a briefing to parliament’s two finance committees on Tuesday that if such a condition were to be applied, then financially distressed companies that were forced by the pandemic to retrench workers would not benefit from the relief provided under the expanded employment tax incentive. The same would apply if workers retired or left of their own accord.

Also, obtaining the relief could help companies so that they did not have to retrench as many workers as they would otherwise have had to do.

“Due to the immense financial strain arising as a result of the extended lockdown, it is fair to assume that many if not most employers will not be in a position to create jobs,” Axelson said.

“The placing of such requirements during the Covid-19 pandemic may result in the relief measure not serving its intended purpose of minimising job losses.”

Axelson and other Treasury and SA Revenue Service officials briefed the committees on their response to submissions made in public hearings on the draft Disaster Management Tax Relief Bill and the Disaster Management Tax Administration Bill.

A number of proposals were rejected because they were unaffordable and would affect the fiscal framework that has already been adopted by parliament. These included the extension of the skills development levy payment holiday and more benefits under the expanded employment tax incentive.

The Treasury has, however, agreed to propose to finance minister Tito Mboweni that interest and penalties arising out of excessive employment tax incentive claims for employees earning below R2,000 that were processed prior to changes to the tax formula, be waived.

The Treasury has also provisionally accepted — subject to the approval of Mboweni and parliament — a two-month extension on the existing four-month special tax dispensation for Covid-19 relief funds, including the Solidarity Fund. Treasury chief director of legal tax design Yanga Mputa said this was because SA is expected to reach the peak of the pandemic in the next two months and there would be a continued need for such relief funds.

Axelson also rejected a proposal by PwC that the payment paid under the temporary employer/employee relief scheme (Ters) be treated as remuneration in determining the national minimum wage for employers to qualify for the expanded employment tax incentive.

Doing this, he said, would have constituted an additional incentive for employers. The law says workers paid less than the national minimum wage do not qualify for the expanded employment tax incentive, even if they have received the Ters benefit.


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