The National Treasury discussion paper on retirement-fund reform fails to deal with the “most pressing problem” facing retirement funds in South Africa, namely excessively high taxation, says the official opposition deputy finance spokesperson, Pierre Rabie.
Rabie said the paper — released last week — makes no mention of the negative impact of the current 18% tax on retirement funds “which acts as a serious brake on South Africa’s domestic savings rate”.
“The tax was introduced in 1996 as a temporary measure and has, to date, taken almost R40-billion out of the pockets of ordinary members of pension and provident funds. Next year, it will take another R5-billion from our domestic savings,” he noted.
Rabie called for the urgent publication of the tax proposals that Minister of Finance Trevor Manuel claimed, in this year’s Budget Speech, will be reported on by “a team from the National Treasury and South African Revenue Service”.
“The review into this area of tax policy has been going on for years — government needs to finalise consultations with the industry and table the relevant legislation to provide certainty to the market and increase domestic savings.
“It is absurd for the Treasury to siphon funds from retirement savings in an environment where our domestic savings rate has declined from 25% of GDP [gross domestic product] 20 years ago to under 16% of GDP today,” he said. — I-Net Bridge