I want to do this - BEE tax breaks. Join me in my crusade

There is a skill to sending out a press release.  You need to write a decent one, have a good mailing list and choose the perfect moment.  I did none of the three, well I wrote the basis of the press release, everything else was done by Lesley-Ann van Niftrik of Image Communications.  This is how it worked

1. I sent her a press release about tax breaks for BEE
2. She shortened it and made it press-friendly
3. She sent it out
4. It was published in many publications
5. Just in time for Pravin's budget speech

And now onto the coverage - Iafrica.com, Business Report, Fin24, Times Live and I believe that Business Day made mention of it.  I also was interviewed by Jacaranda in both English and Afrikaans nog al.

Thanks Lesley-Ann - the coverage was overwhelming.

Back to the press release

I am serious about this.  We've got to change the way we go about this transformation thing. I mentioned to Mark that I want to try and get some big hitters behind me on this before I go on a social-media thing.  I'll start lobbying my friends.

I spoke to Kevin about it and he says it's been contemplated before

If you go back to the "Brenthurst Initiative" on BEE prepared by Bain on mandate from the Oppenheimers, you'll see that this wont be the first time that tax incentives for BEE has been considered. At that time, the response from the then Governor of the Reserve Bank and Trevor was very clear. Tax rebates and other tax incentives can only be offered for programs that actually guarantee socio-economic benefits (i.e. Learnerships)_, but high levels of BEE compliance while desirable for political reasons, will not necessarily be accompanied by substantial socio-economic benefit. You cant rob the treasury of funds required for education, health and policing in favor of rewards for compliance with a regulatory model that does not necessarily add value to the economy. My view is that you have no hope. If however you are looking for tax breaks based on job creation or implementing business strategies that result in the establishment of new industries and industrial capacity, then I am in. Only the US still persists with open ended tax breaks, generally designed to seduce particular electoral demographics. Tax breaks are a disaster because once the lawyers and consultants are let loose on qualification criteria, it becomes a free-for-all where ordinary tax funded social programs inevitably suffer most           

And it seems he's interested in helping.  This is about quantifiable development.  It'll cost more money to measure but it will achieve results.

Anyway - here is the original press release.

Joburg 15 February, 2010

The issues facing broad-based BEE is that the rewards for achieving these targets are not realistic.   At present a company is only rewarded with a BEE score for complying - and there is no guarantee that public or private sector business will follow as a result.”

“This big stick approach tends to make companies focus more on compliance than transformation, which is needed in order to benefit those most marginalised,” says Caird’s BEE compliance partner, Paul Janisch.  “The answer would be for Treasury, the DTI and the BEE Advisory Council to introduce a scheme that will incentivise companies to not only comply, but to better the targets contained in the numerous BEE scorecards.  Clearly, the most effective method would be to introduce a reduction in corporate tax if certain measured goals are achieved.”

“This motivation goes to the very core of human nature. People seldom react just because it is deemed to be lawful,” he says, “They do it because there are either positive or negative consequences involved.  Rewarding a company by reducing their tax liability because they have successfully employed and skilled a number of previously unemployable youth would have a lasting benefit all round.” 

Janisch acknowledges that under these circumstances the cost of compliance will have to increase. It is very doubtful that SARS will simply take a company’s word for their BEE performance.  But this will ensure that the verification industry becomes more professional, substantially reducing the risk of ‘fronting’.

It remains to be seen if the promises President Jacob Zuma made in his State of the Nation will materialise. Many of the socio-economic plans that he highlighted will only work if there is a reasonable commitment from both the public and private sectors.  And whilst the whole country will benefit in the long term if these goals are met, it’s the short term wins that are going to continuously inspire both sectors to keep their eye on the long term goals.

“The B-BBEE Advisory Council is a new body that has been tasked to ensure that BEE is implemented across the economy.  By taking a stronger approach we might actually see the fruits of Zuma’s socio-economic goals coming into effect,”  he says.

For more information, contact Paul Janisch, CEO of Caird at 083 2271375. Email

Ends

Editor’s note
Paul is a regular contributor to numerous publications on the subject of BEE.  He has spoken about the subject at numerous conferences and on national radio and television.  His book “Broad based BEE for small business” was published in December 2005. 

Issued by:    Lesley-Ann van Niftrik, Image Communications, Tel. 011 880 1340, Mobile: 083 378 2902, e-mail:
On behalf of:        Paul Janisch, CEO of Caird, Mobile:  083 2271375

Comments

[Mark]

Hi Paul

I have tweeted this, and have sent the idea to a few well placed friends who can add weight. Just one thought: is there a possibility of adding into the idea the creation of "green" jobs. I think there's quite a bit of interest and money that will follow the idea of sustainability jobs.

Came across Jacob Mabena who manufactures wind energy turbines recently. Now this is the direction I would like to see.

I do take issue with one of the points Kevin makes. The idea of tax breaks robbing Treasury and so on. If empowerment does what it is supposed to do, that is make the economy more inclusive and help it grow, then the tax blow can potentially be mitigated by greater economic growth, at least to an extent, surely? And what of the other benefits of a softly nhumming empowerment performance, what price them?

[Mark]

BTW: Didn't Gordhan follow your prescription to an extent already, by offering a tax rebate/subsidy for businesses that employed young people?