Eight reasons why NUMSA remain opposed to Tax Incentive Bill

When we launched the fight against the wage subsidy and the Employment Tax Incentive Bill, this was not about just selfishly protecting our jobs and conditions of employment or those of our members.
We had principled objections to the legislation. Although government has attempted to deal with our concerns and that some of the consequences in the implementation of the statute may not occur in our sectors, as NUMSA we have EIGHT reasons why we remain opposed to the Employment Tax Incentive Act and we are moving forward with our Section 77 notice for a socio-economic strike.
Reason 1: The Act asks the working class to subsidise employers.
As the Act says no incentive will be paid in respect of employees who earn more than R72 000 per annum; i.e. R6 000 a month.
The bulk of qualifying employees pay no income tax as the current tax threshold (2013) is R67 111. What this means is that the incentive that the employers will withhold as a subsidy will not come from the qualifying employees as many are exempted from paying Pay As You Earn (PAYE).
The people whose tax will be withheld as a subsidy to the employer are those who earn more than R67 111 per annum. This includes workers (blue and white collar) who earn more than the tax threshold. It is them who will subsidise the capitalist class.
Reason 2: The philosophy of the Act is that ‘handouts’ to the poor are bad     but good for the bourgeoisie!
As stated in our submission the philosophy of the Employment Tax Incentive Act is that grants to the poor are bad but good for capitalists. The government is prepared to forego revenue to entice the capitalist class to create jobs.
This is the same capitalist class that speaks about how social grants create dependency and are unsustainable. The Act is being implemented by a government that has thus far refused to implement the Basic Income Grant.
The Secretary-General of the ANC Gwede Mantashe is also being disingenuous in his criticism that as union we accept incentives for the capitalist class in the automotive industry through the Automotive Production and Development Programme (APDP) that replaced the Motor Industry Development Programme (MIDP) in January 2013, but refuse subsidisation of unemployed people.
As indicated under Reason 1 it is not all incentives that NUMSA is opposed but the schemes where the working class is forced to subsidise capitalists. The APDP works differently from the employment tax incentive scheme.
Yes, through the duty-free import credits the state foregoes some revenue for the fiscus but this is different from asking the working class to subsidise capitalists. The incentive scheme in the Act uses PAYE and avoids touching profits.
Mantashe also conveniently forgets that the APDP, through NUMSA’s intervention has other components such Vehicle Assembly Allowance (VAA) and Production Incentive (PI) that promote local production and local assembly.
Our support for APDP and opposition to the Employment Tax Incentive Act is not double speak or opportunism. Our support for the MIDP and now APDP is premised on our overall objectives of job creation, localisation and creation of decent jobs.
Reason 3: The Act is based on the assumption it is ‘high’ wages that are  causing unemployment and not the refusal of the capitalists to invest that leads to joblessness.
As indicated in our submission to Parliament, the idea behind the Employment Tax Incentive Act is that it is ‘high’ wages that are the cause of unemployment; which is why we must subsidise wages. Unfortunately, even the World Bank no longer believes this.
In its 2013 Development Report, the Bank argues that youth wage subsidies have not worked. The Bank’s summary of the situation is that “aggregate employment effects are hence low at best” in cases where there has been implementation of youth wage subsidies.
The unfortunate part about Employment Tax Incentive Act is that its architects are silent about the “investment strike” by the private sector that has been going on in South Africa for a while. Even from within capitalist circles there is cynicism about private sector investment in South Africa.
Although private sector fixed investment driven by stronger investments in mining, agriculture and manufacturing grew in the second quarter of 2013 to 4.4% from 2.4% in the first quarter of the same year, ABSA Capital’s Quarterly Perspectives concluded that; “we remain bearish about the outlook for private fixed investment.
The same Quarterly Perspectives confessed that the growth “may have been driven by pre-emptive buying of capital goods in anticipation of higher prices stemming from the weakness of the exchange rate and a sudden drive to mechanise as a means of displacing difficult labour. We doubt that private sector investment will grow at a significantly faster pace in the current environment…”
It is this problem of the capitalist class’ refusal to invest that the designers of the employment tax incentive scheme refuse to tackle head on. It is this avoidance of the real problem that leads them to false solutions such as the tax incentive scheme.
Reason 4: Even sectors with agreements are not immune from abuse.
The drafters of the Act do not seem to know the distinction between ACTUALS and MINIMA. Although Section 4 is there it is not watertight for abuse.  We know from our experience, the challenges of differences between actuals and minima.
In these situations and in the implementation of the Employment Tax Incentive Act, eligible employers can bring in qualifying employees and pay them minima in the agreements. The implications for a two-tiered labour market therefore remain with one group of workers on actuals and subsidised workers on minima.
Reason 5: The dangers of displacement are not totally eliminated
Comrades must remember that displacement in terms of the Act is partially covered in Section 5(2) where an employer will be deemed to have displaced a worker if the “order of court or otherwise, reveals that the dismissal of that employee constitutes an automatically unfair dismissal”.
What this means is that the worker must wait for the Labour Court to decide that the dismissal was caused by discrimination on the basis of age and we know how long this takes. This is before an employer decides to take the matter on appeal. But more serious is that in the case of SEZs and industries that the Minister may designate, there is no age limit. So we cannot use age as the basis of an “automatically unfair dismissal case.
As we said nothing prevents employers, especially larger ones, from creatively reorganising work at a workplace so that subsidised workers are not placed in a unit where the dismissal takes place. Further the burden of proof would rest with the worker to prove not only an unfair dismissal but also that it was aimed at accessing the incentive.
Although, there is a new penalty of R30 000 in the final Act should an employee be displaced, the automatic disqualification for receiving the subsidy in respect of other employees has been removed.  Instead the Minister of Finance has the discretion to impose individual disqualifications. This discretionary disqualification, the Minister will do taking into consideration:
• the number of employees that have been displaced • the effects of disqualification may have directly or indirectly on the employees of the employer.
The disqualification is not automatic! A fraudster employer may not be disqualified if the Minister feels that the effects of the disqualification may directly or indirectly have an impact on employees of the employer.
Reason 6: There are still no mandatory training provisions in the Act.
Although there is some talk about regulations for training, these are very weak. The key word to watch in Section 3(c)(iii)(aa) is that “MAY”; which is a very weak commitment. The Minister may or may not prescribe regulations requiring training or skills development.
The operation of the Act is not contingent and dependent on the enactment of these regulations.  So the Minister may delay or impose this condition for limited sectors only, noting that it was a conscious choice of Treasury to exclude mandatory skills training.
Reason 7: The Minister of Finance still has wide ranging powers.
Except the consultation with the Minister of Labour on the training regulations that may be prescribed, the Minister of Finance still retains too much power.
The Minister does not have to consult with other Ministers or stakeholders when designating industries for qualifying employees and eligible employers. Nor is there any provision for criteria that would guide the Minister’s decision.
Reason 8: The Act bypassed NEDLAC.
As NUMSA we still maintain our view that the Act should have been tabled in NEDLAC as it is a socio-economic policy. This is what the NEDLAC Act requires. This was also the commitment in the Youth Employment Accord.
NUMSA gets certificate to strike for false Youth Jobs