Tax cuts for BEE performance mooted

A few years ago I was invited to speak at a conference in Stellenbosch.  I stayed with David Meintjies, who was the former CEO of UUNET South Africa (which is now MTN Business I think).  I worked for David for a few years so I know him quite well and I know him to be a very intuitive man.  On the way to the airport David suggested that if you want implement BEE properly then offer tax cuts.  Lighbulb moment.

I have blogged about this often and it is a such a valid point.  When you read comments by Ajay Lalu, jungle jim and the like - it's all about punishing companies for non-performance.  So how about actually rewarding companies for a certain performance by way of a tax break.  And this is now more pertinent with Zuma's speech last night - where he is speaking of companies hiring unskilled school-leavers.

This is the scenario that I think might work.

If we look back at Zuma's address to the BEE council - specifically

We have to think creatively about ways in which to increase the extent to which communities, workers, cooperatives and other collective enterprises own and manage existing and new enterprises and increasing their access to economic activities, infrastructure and skills training.

AND

strategies of empowering rural and local communities by enabling [their] access to economic activities, land, infrastructure, ownership and skills. 

If a corporate invests in these types of entities with a view to seeing them generate jobs in those areas in a short period of time, say five years, and they can prove that this happened, then they should be rewarded.  The reward must be a tax incentive - either a reduction in tax or the investment becomes deductable.

This will push up the burden of proof but more corporates will go for this.  In fact what you could do is say - if you achieve a certain BEE score on top of this you'll get the tax break.  Suddenly you'll have corporate South Africa running over themselves to start getting their BEE ducks in a row.

I therefore CALL on (so cheesy) Pravin and Jacob and Rob et al - to consider a new tax structure for high BEE achievers.

Comments

[Mark]

Why not try to get a (so cheesy) social-type movement going around this?

[Paul Janisch]

I find the term CALL immensely cheesy. I want to try and get some business support behind this so I've got a press release that my PR company is going to send out. I'll see how much interest I attract and then if it's not happening I'll try some viral thing. I know that this is not an original idea - Kevin Lester told me that the Brenthurst Foundation contemplated it a few years ago and it was rejected. But then things were very different - we now have a structure and a measurement mechanism that might be able to objectively measure it. I would appreciate any comments or suggestions on this, because I know very little about tax matters.

By the way - I loved your comments on Mick Taylor. He added a real edge to the Stones that they needed very badly. There are three vital John Mayall albums that anyone interested in British blues should listen to - Beano album with Clapton, Hard Road with Green and Crusade with Taylor.

And on the subject of Audience - I only have House on the Hill, but I do remember Chris Prior playing a variety of tracks back in those heady days. I downloaded a 2003-ish concert of them - Howard Werth still has that voice.

Cheers

Paul

[Mark]

Paul, I am launching a new publication called The Good Company. We're trying a new thing: strip out titles like sustainability, empowerment etc, and ask, "what does it take for a company to be responsible in SA?" Makes for interesting reading and thinking because suddenly compliance seems to recede and you start thinking more widely.
We'll be carrying your press release about BEE tax breaks, if that's OK?
Please notify anyone who sees value in advertising is something like this: give me your fax number and I'll fax and advance copy.

[Paul Janisch]

I don't actually have a fax machine. Is it possible for you to email me a scanned copy. I'll certainly talk about it on this blog. And I would be honoured if you use my press release.