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Parliament has amended the Income Tax (Amendment) Act 2015 to exempt withdrawals from third-tier provident funds and personal pension schemes from tax.
This is to cushion individuals who have lost their jobs or capital due to the Coronavirus pandemic.
This amendment in fiscal terms will amount to 639 million Ghana cedis if all funds are withdrawn under the given circumstances.
The house also approved a request to waive taxes on personal emoluments of health workers for April, May, and June and additional allowance for frontline health personnel for March, April, May, and June 2020.
A Deputy Minister of Finance, Abena Osei Asare briefed the house on government’s rationale for these policy decisions.
“Mr. Speaker, the COVID-19 pandemic has resulted in some economic challenges for businesses. Some sectors of the economy have suffered losses which may lead to some employees being laid off permanently and the folding up of businesses of some self-employed businesses. Such persons may require funds to sustain themselves.
“One ready source of funds will be contributions to the third tier provident funds and personal pension schemes. Mr. Speaker, withdrawals from the third-tier and personal pension schemes before retirement are however subject to tax if they are withdrawn before 10 years by contributors in the formal sector and before five years by contributors in the informal sector. Mr. Speaker, the government has decided to exempt such withdrawals from tax for employees who lose their jobs permanently or whose businesses collapse due to the COVID-19 pandemic. Exemptions will be equivalent to 15 percent to the withdrawals”.
Ato Forson disagrees but Ranking Member on Parliament’s Finance Committee, Cassiel Ato Forson says the government should extend a similar gesture to SSNIT contributors to attain some relief amidst the Coronavirus pandemic.
“There is something all of us must understand and find a clever way to make sure this happens. Mr. Speaker, as we speak, the government owes SSNIT some money. The government can decide to pay SSNIT and ask SSNIT to be able to take up that mandate. Government alone as a state can’t take up the responsibility of paying the wages and salaries of private-sector workers. It can’t.
“There are several ways the government can engineer and do this. One of the ways for us to encourage SSNIT to take up the burden of contributors is by paying some lump sum to contributors in times like these when businesses are struggling. It will be prudent for all of us to reconsider and debate this and encourage asset to come to before us with an amendment law to enable pensioners and contributors to withdraw some monies to support their businesses”, he added.
The Social Security and National Insurance Trust (SSNIT) poured water on the National Democratic Congress flagbearer, John Mahama’s request for the trust to support contributors with some money because of the hardship brought on by the novel coronavirus pandemic.
Mr. Mahama said SSNIT contributions are not only meant for pensioners but also work as a form of insurance to cushion members from difficult times such as COVID-19 hence his call.
“Social security contributions are essentially an insurance scheme made not just for pensions in old age before we die. They are also made to help contributors in times of adversities such as this. Not all will come out and queue for food, but as has been done in other countries like St. Lucia, I think a token payment to all contributors of a certain token sum over three months would have afforded many the assurance of feeding their families during this abnormal times,” he said.
But SSNIT in a statement noted that such support as suggested by Mr. Mahama would be illegal.
“…The benefits His Excellency is suggesting that we pay do not exist in law. To do so will constitute an illegality and a contravention of the provisions of the National Pensions Act, 2008, Act 766.”
SSNIT also stated that “the Trust is a creature of law emanating from the National Pensions Act, 2008, Act 766 which governs the administration of SSNIT and all other pension schemes in the country”.
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