One of the reasons why the Zimbabwean economy is really struggling is the fact that most youths are not employed. Most formal employers only go for those with experience and given the situation in Zimbabwe that tends to preclude those who are below the age of 30. In fact, the bulk of those who are under the age of 30 have never been formally employed. Now the Zimbabwean government under ZIMRA is seeking to change that. They will be offering tax credits to companies that employ those under the age of 30 years.
Now here is something to note. The Zimbabwean government, like most governments around the world often offers various incentives to businesses in order to induce them to employ vulnerable and underrepresented groups. This is nothing new. For example:
- If you employ someone who is considered disabled at law (that is mentally or physically) you will get a tax credit of US$900.00 per year or $75.00 per month
- You will get the same credit if you employ an elderly person i.e. someone over the retirement age of 65 years
- The same credit accrues if you employ someone who is legally blind
Now the penultimate rule above can create problems that will probably be now resolved by this new youth tax credit provision. As already said, most companies tend to prefer those with experience and the elderly are considered preferable for certain jobs such as office work. Before your tax credit was introduced, the tax credit that would come to a company as a result of employing the elder (again who also happen to be experienced) was just icing on the cake. Not only would you be retaining an experienced employee, you were also paying less tax because of it.
How the new tax incentive works?
The company gets a tax incentive of $1 500 ZWL per employee below the age of 30 that it hires. That’s a little underwhelming and nothing compared to the elderly tax incentive to be honest. Considering how much of the wealth in this country is concentrated in the hands of the elderly surely the government can do better. You should also note that the tax credit is capped at $180 000ZWL. This means that you will stop receiving any additional credit as soon as you employ more than 120 employees that are below the age of 30. At black market rates that is a mere US$850 as an incentive for you to employ 120 probably inexperienced individuals. To be honest that is not much of an incentive especially if you are a company that requires an experienced workforce and have to train these employees. You will probably end wiping whatever tax savings you were going to enjoy just training one of those individuals.
That’s not all there are other restrictions that make the tax incentive even less attractive. Those under-30s have to work for you for a period of 12 months before you can use them to claim tax credits. The credits will not apply to you if you have made revenue of at least US$1 million in the given year. Now this one is even more bizarre. How many companies do you know that can employ 120 youths and still for some reason have an annual turnover of less than $1 million? This just defeats the whole purpose of the incentive as it means large companies will probably not benefit from it so have no incentive to employ the young and inexperienced.
The government has to know that the tendency to employ potbellied retirees in the name of experience we are seeing at most big companies will come back to hurt the economy. At some point, those people will have to retire or be forced out due to mortality. At such a point, there will be a labour crisis as there would be a massive shortage of experienced workers in the job market. It will be something similar to the social crisis we are seeing in countries like Germany that are top-heavy in terms of demographic structure. There will be critical labour shortages and it will be all because we failed to do proper manpower planning at a national level.
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