'Tax reward for BEE compliance'

Johannesburg - Tax incentive schemes are needed to reward black economic empowerment (BEE) compliant companies, Caird Consulting said on Tuesday.

"Treasury, the DTI and the BEE Advisory Council should introduce a scheme that will incentivise companies to not only comply, but to better the targets contained in the numerous BEE scorecards," Caird's BEE compliance partner Paul Janisch said.

The issues facing broad-based BEE was that the rewards for achieving targets were 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," he said.

The "big stick approach' tended to make companies focus more on compliance than transformation, which was needed to benefit those most marginalised.

The most effective method would be to introduce a reduction in corporate tax if certain measured goals were achieved, he said.

"People seldom react just because it is deemed to be lawful," Janisch said.

"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 said under these circumstances the cost of compliance would have to increase.

"It is very doubtful that Sars (SA Revenue Service) 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."

Janisch said it remained to be seen if the promises President Jacob Zuma made in his state of the nation address would 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."

Janisch said while the whole country would benefit in the long term if these goals were met, it was the short term wins that were going to continuously inspire both sectors to keep their eye on the long term goals.

"The B-BBEE (Broad-Based Black Economic Empowerment) 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 said.

- Sapa