ETI needs revision to ease the admin burden

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Supporting the ETI programme is a no brainer as our youth unemployment is in the range of 52%, but the South African Revenue Service (Sars) needs to review some of these burdensome conditions, particularly as the ETI has been extended to 28th February 2019.

For instance, the prescribed guidelines in the Act don’t appear to take the actual work and business environment realities into account, mostly related to the inflexibility of many payroll systems.

Some of the issues

• Some payroll systems can’t automatically exclude employees when they turn 29.11 years, resulting in claims being made for employees who do not qualify.
• The value of the remuneration must be based on 160 ordinary hours per month, excluding overtime and unpaid hours. This means that if less than 160 hours are worked, the system must gross up the remuneration to 160 hours per month to calculate the value of the ETI which must then be grossed down on the same basis.

  Therefore the hours worked must be recorded and tracked to make the correct claim calculation. The calculation needs to be rules-based to avoid manual intervention. This adds complexity with system programming and, as a result, is often managed manually.

• Employers must ensure that they adhere to the qualifying period of 24 months claim for each employee. The 24 months need not be consecutive. Here again it is critical to have systems in place to manage this as non-adherence will be penalised.
• One of the ETI requirements is that an employer must remain tax compliant for all registered taxes to be able to claim the tax incentive. If at any stage the employer is found to be non-compliant, all ETI previously claimed may be subject to reversal. The implications are that interest and penalties are imposed on arrear taxes. To rectify the process can take up to 21 working days as there is no ETI dedicated contact at Sars. To avoid this situation, the payroll department must be proactive and add an additional control function in their already busy schedules. A monthly statement of account must be requested from Sars (or can be obtained from e-filing through the person who is accountable for this in the company). This must be reviewed and any abnormal item reflected must immediately be raised as a query and rectified to ensure that the ETI claim is processed by Sars.

Sars has issued a Draft Binding General Ruling on the ETI Act 28 of 2013, aimed at resolving these issues, for which comments must be submitted by 24 July 2017.