A quarter of the labour force in South Africa is currently unemployed. The majority of the unemployed are between the ages of 18 and 29 years. The causes of these poor employment statistics has been widely debated, however, the cost of unskilled South African labour is a common thread. One of the solutions to improve the statistics is to implement tax incentives to reduce the cost of labour, which would theoretically increase the demand of the labour. Countries such as the United States of America have implemented some form of tax incentive to promote job creation over the years. South Africa has, however, not used this alternative to deal with unemployment. The problem had escalated to such a state that the Government announced in 2011 that it would spend R5 billion on job creation and announced that the funds would be spent through the implementation of a youth wage subsidy. Current studies on policy choices to promote job creation in South Africa discuss the possible tax incentives which could be implemented. However, these studies have not evaluated the successes of these incentives in other countries and whether it would be possible to apply them to a South African context. The proposed youth wage subsidy has not been analysed in terms of the incentives implemented in other countries to determine whether or not they would be successful in South Africa. The aim of the study was to determine if there was a gap in the tax legislation with regard to motivating job creation and how this gap could best be filled. This was achieved by firstly, analysing the key causes of unemployment in South Africa, and secondly, determining whether any of the current tax legislation measures deal with those causes. Two tax incentives implemented in the United States of America were analysed for their successes and failures in order to determine what South Africa needs to do if it was to implement any similar incentives. Finally, the National Treasury’s discussion paper on its proposed youth wage subsidy was analysed against the findings identified above to determine whether the subsidy is viable in the South African labour market. AFRIKAANS : ’n Kwart van die arbeidsmag in Suid-Afrika is tans werkloos met die meeste werkloses tussen die ouderdom van 18 en 29 jaar. Daar word reeds geruime tyd geredeneer oor die oorsaak van die swak arbeidstatistieke, tog is daar ooreenstemming dat die koste van ongeskoolde arbeid in Suid-Afrika ’n bydraende faktor is. Belastingaansporings wat die koste van arbeid verminder en dus teoreties die vraag na arbeid verhoog, kan moontlik die swak arbeidstatistieke verbeter. Lande soos die Verenigde State van Amerika het met verloop van jare sekere belastingaansporings ingestel om werkskepping te bevorder. Suid-Afrika het egter nog nie dié alternatief gebruik om die probleem van werkloosheid aan te pak nie. Die probleem het sulke afmetings aangeneem dat die regering in 2011 bekend gemaak het dat hy R5 biljoen aan werkskepping sal bestee in die vorm van die implementering van ’n jeugloonsubsidie. Huidige… Advisors/Committee Members: Du Preez, Hanneke (advisor).

A quarter of the labour force in South Africa is currently unemployed. The majority of the unemployed are between the ages of 18 and 29 years. The causes of these poor employment statistics has been widely debated, however, the cost of unskilled South African labour is a common thread. One of the solutions to improve the statistics is to implement tax incentives to reduce the cost of labour, which would theoretically increase the demand of the labour. Countries such as the United States of America have implemented some form of tax incentive to promote job creation over the years. South Africa has, however, not used this alternative to deal with unemployment. The problem had escalated to such a state that the Government announced in 2011 that it would spend R5 billion on job creation and announced that the funds would be spent through the implementation of a youth wage subsidy. Current studies on policy choices to promote job creation in South Africa discuss the possible tax incentives which could be implemented. However, these studies have not evaluated the successes of these incentives in other countries and whether it would be possible to apply them to a South African context. The proposed youth wage subsidy has not been analysed in terms of the incentives implemented in other countries to determine whether or not they would be successful in South Africa. The aim of the study was to determine if there was a gap in the tax legislation with regard to motivating job creation and how this gap could best be filled. This was achieved by firstly, analysing the key causes of unemployment in South Africa, and secondly, determining whether any of the current tax legislation measures deal with those causes. Two tax incentives implemented in the United States of America were analysed for their successes and failures in order to determine what South Africa needs to do if it was to implement any similar incentives. Finally, the National Treasury’s discussion paper on its proposed youth wage subsidy was analysed against the findings identified above to determine whether the subsidy is viable in the South African labour market. AFRIKAANS : ’n Kwart van die arbeidsmag in Suid-Afrika is tans werkloos met die meeste werkloses tussen die ouderdom van 18 en 29 jaar. Daar word reeds geruime tyd geredeneer oor die oorsaak van die swak arbeidstatistieke, tog is daar ooreenstemming dat die koste van ongeskoolde arbeid in Suid-Afrika ’n bydraende faktor is. Belastingaansporings wat die koste van arbeid verminder en dus teoreties die vraag na arbeid verhoog, kan moontlik die swak arbeidstatistieke verbeter. Lande soos die Verenigde State van Amerika het met verloop van jare sekere belastingaansporings ingestel om werkskepping te bevorder. Suid-Afrika het egter nog nie dié alternatief gebruik om die probleem van werkloosheid aan te pak nie. Die probleem het sulke afmetings aangeneem dat die regering in 2011 bekend gemaak het dat hy R5 biljoen aan werkskepping sal bestee in die vorm van die implementering van ’n jeugloonsubsidie. Huidige… Advisors/Committee Members: Du Preez, Hanneke (advisor).