Mukwaya says the tax exemption provision caters for employer’s contributions and employee’s contributions below 30 percent of their income and investment income of NSSF. She also notes members benefits shall be taxed only during payment at 55 years while those who get paid at 60 years and above will not pay taxes on any benefit.
The Gender, Labour and Social Development
Minister, Janat Mukwaya has clashed with Gabriel Ajedra, the General Duties State
Minister in the Finance, Planning and Economic Development Ministry over
certain provisions in the National Social Security Fund Amendment Bill, 2019.
The ministers expressed contrasting views
while appearing before the Gender and Finance Committee of parliament, which is
scrutinizing the Bill.
The Bill seeks to among others make it mandatory
for all workers to register and contribute to NSSF, allow self-employed people
to contribute to NSSF, midterm access to benefits for only voluntary
members and that the NSSF board shall have a role in the appointment of the
Managing Director.
While Mukwaya argues that the Gender Ministry
was mandated by Cabinet to present the Bill to Parliament for the first reading,
which makes the Bill the official position of the government, Ajedra told MPs
that the Finance Ministry has reservations on some provisions.
The most controversial provisions include the proposed
expansion of the of NSSF coverage through mandatory contribution from all firms
that have employees, not a minimum of five workers as provided in the 1985 NSSF
Act, and the proposal to tax benefits of savers who withdraw before attaining
the age of 60 years.
Mukwaya says the tax exemption provision caters for employer’s
contributions and employee’s contributions below 30 percent of their income and
investment income of NSSF. She also
notes members benefits shall be taxed only during payment at 55 years while
those who get paid at 60 years and above will not pay taxes on any benefit.
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She explained that the tax exemption provision will improve
effectiveness of benefits by encouraging additional retirement savings from the
informal and formal sector by deferring taxation on contributions made and
scheme income derived after the enactment of the Bill.
However, Ajedra says that it would be better if the Bill
sticks to the social protection aspects of the provident fund and not financial
components such as taxation, which impact the economy.
He explained to the MPs that NSSF with capital of about Shillings
10 trillion has about 10percent of Uganda's GDP, which therefore requires
discussion on how these monies should be invested, by who and where, with the
aim of increasing benefits to savers.
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Ajedra also told Uganda Radio Network that the proposal to
exempt investment of NSSF and contributions of employers to the scheme will
cause other pension schemes to demand for tax exemptions as well as demand for
amendments to the Pensions Act, 1964.
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However, Mukwaya said that much as Economists like Ajedra and
ministry of finance have the mandate to determine the NSSF investment plan,
there is need to ensure that functions in line with the International Labour Organisation
that was key in the establishment of the fund.
She also said that government should be fair to workers
because when she was minister for Gender in 2006 until 2011, NSSF was able to
invest and put up projects such as Worker’s House.
Mukwaya noted that since the Finance Ministry got
involved in NSSF investments, the fund was seen investing in projects such
as Temangalo, which has to date been a controversial subject.
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MPs led by the Gender Committee chairperson, Alex Ndeezi
wondered why the ministers have failed to harmonize their positions on the Bill.
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The Bulamogi County MP, Kenneth Lubogo and Kyegegwa
Woman MP, Stella Kizza opposed the provision on tax exemption while Workers
Representative, Agnes Kunihira wants the Bill to provide midterm access to all
members not only voluntary savers.
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Mukwaya says the Bill empowers the board to among
other functions, supervise management, introduce new benefits, and advise on
investment of scheme funds including lending to government.
Joan Akello
Freelancer