South African firms should be given tax cuts designed to increase employment for a period of five years, says official opposition Democratic Alliance leader Tony Leon.
In his regular Friday internet column, Leon says employers should for this period be given tax deductions of 150% of the first R2 000 per month of new employees’ salaries.
“At a cost of about R1,8-billion to the state in the first year, this tax cut could finance the creation of half-a-million new jobs.”
Referring to this week’s Medium Term Budget Policy Statement, Leon said the finance minister had resisted such proposals “largely because they would put money in the hands of ordinary workers and entrepreneurs instead of the state”.
Today, the government has discouraged entrepreneurship by introducing new regulations and levies “and by tying small firms to industry-wide labour agreements that they cannot afford to honour”.
Leon argued that Minister of Finance Trevor Manuel is wishing to expand the role of the state at a time when many of the municipalities are unable to collect debts and spend funds allocated to them.
Leon said Manuel has devoted more than 60% of the state budget on local and provincial government.
“Half of all municipalities are dysfunctional, councils have failed to collect R40-billion in arrears and billions of rand are left unspent in provincial coffers each year.”
Leon said corporate taxes make South Africa uncompetitive — and discourage business from investing in new workers.
Corporate tax should be cut from 29% to 25%, which would cost about R11-billion this year, using up only a third of Manuel’s R30-billion “revenue over-run” bonus. And even this cost would have been more than covered, in the medium term, by growth in the tax base as a whole. — I-Net Bridge