‘No tax on social security benefits under new law’

01Feb 2018
Felister Peter
The Guardian
‘No tax on social security benefits under new law’

THE benefits of public and private sector retirees will not be subjected to income tax under the bill proposing that Tanzania have only two social security schemes, the government confirmed yesterday.

Tabling the bill, which seeks the establishment of The Public Service Social Security Fund Act, 2017, Minister of State in the Prime Minister’s Office (Policy, Parliament, Labour, Employment, Youth and the Disabled) Jenista Mhagama said contributions and benefits payable under the scheme would not attract income tax.

The proposed piece of legislation is meant to see the Public Service Retirement Benefit Act repealed and replaced by The Public Service Social Security Scheme. It was tabled in the National Assembly yesterday.

Under the proposed arrangement, all the five social security funds now in place in the country will be merged – with civil servants served by a single fund and those in the private sector by the National Social Security Fund (NSSF).

The five social security funds are currently regulated by the Social Security Regulatory Authority (SSRA). These are NSSF, PPF Pension Fund, Public Service Pension Fund (PSPF), Local Authorities Pension Fund (LAPF), and Government Employees Provident Fund (GEPF).

The minister said that experts and various stakeholders alike have for years recommended that the funds be merged into at most only two – one for the public sector and the other for private sector.

“They argue that the running of the five social security funds calls for needlessly high costs. Cutting the number to two will reduce the funds’ operational cost from the current 19 per cent to 9 per cent, which is recommended by SSRA,” she said, noting the new scenario would see the social security schemes come up with new benefits – including one relating to unemployment.

The minister gave the benefits proposed as retirement pension benefit, survivors’ benefit, invalidity benefit, maternity benefit, unemployment benefit, sickness benefit, death grants and funeral grants.

She said members would also be allowed to use part of the benefits they would be entitled to as collateral for housing mortgages.

Mhagama further explained that the social security funds would henceforth be paying all beneficiaries their due promptly, regardless of whether an employer had delayed or defaulted on the remittance of contributions.

“Retirees must get all their benefits on time even if employers have not remitted all the contributions. It will be upon the social security schemes to follow up the matter with employers,” she noted.

Peter Serukamba, Chairman of the Parliamentary Standing Committee on Gender, Health and Community Development, said the government’s merger idea was commendable “as the five social security funds’ operational costs have reached a staggering 235.8bn/- a year”.

“Each of the funds had its own board of trustees with not less than nine members, all entitled to payments of various fees and other expenses totalling 1.67bn/- annually,” he said, adding that the total number of board members was 45.

The Kigoma North legislator said running costs varied from one fund to another, with financial year 2014/2015 seeing LAPF spent 1.8bn/- as GEPF spent only 0.3bn/- – a difference of 1.5bn/- (83.3 per cent).

Serukamba said the funds were spending hefty amounts of money on advertisements mainly owing to competition, with each spending some 1bn/- on advertisements in the 2016/2017 financial year alone.

Esther Bulaya, Shadow Minister of State in the Prime Minister’s Office (Policy, Parliament, Labour, Employment, Youth and the Disabled), meanwhile advised the government to explore possibility of ensuring that more informal sector players are also covered by social security schemes.

She submitted that almost 20 million Tanzanians are working in the informal sector, while number reached by social security funds had risen to 2,464,399 in 2016 from 2,132,350 in 2015.

“We have only remembered those in the formal sector. But it is important that these services also reach Tanzanians in the informal sector,” she noted.

Shinyanga Urban legislator Steven Masele advised the government to remove the sickness benefit and instead come up with a plan to enable retirees to access such services through the National Health Insurance Fund.

Contributing to debate on the bill, Buyungu MP Kasuku Bilago insisted that it was crucial for the two funds proposed to continue offering the education benefit just as is the practice with some of the funds now in place.

Top Stories