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South African UIF Remuneration Threshold To Go Unchanged

by Lorys Charalambous, Tax-News.com, Cyprus

07 May 2015


South Africa's Minister of Finance, Nhlanhla Nene, has announced a decision not to proceed with the proposal to reduce the remuneration threshold against which contributions to the Unemployment Insurance Fund (UIF) are calculated in the 2015/16 fiscal year.

In his 2015 Budget, Nene proposed to reduce the remuneration threshold against which contributions to the UIF are calculated, from the current monthly amount of ZAR14,872 (USD1,232) to ZAR1,000, for a period of one year.

The proposal was aimed at providing support to the economy by allowing workers and employers to keep ZAR15bn, which would otherwise have gone to UIF. The UIF currently has an accumulated surplus of more than ZAR72bn, which is well in excess of annual expenditures. The proposal was also intended to reduce the rate of accumulation of this surplus and, by leaving monies with both employers and employees, provide a boost to the South African economy.

The decision was taken after detailed engagements with labor and business stakeholders. During the consultations it was noted that implementing the revised threshold could have other impacts.

In particular, it was pointed out that there needs to be further consultations on the implementation of the agreed UIF Amendments Bill to extend benefits to workers who contribute towards the Fund; a general review of earmarked taxes (UIF, Road Accident Fund, and the Skills Development Levy), to address fiscal imbalances that have emerged; and broader social security reform.

The Minister confirmed that the withdrawal of his proposal for the 2015/16 fiscal year will not affect other Budget proposals or the main budget deficit, but will reduce the projected consolidated deficit for the current financial year.

TAGS: individuals | South Africa | Insurance | tax | business | employees | budget | social security | Africa

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