John F. Kennedy once said, “If a free society cannot help the many who are poor, it cannot help the rich”. This fits exactly in what NSSF management is trying to push in the new proposed amendment contained in the National Social Security Bill, 2019.
Currently, the saver is paying tax twice on the income that you contribute to the pension fund and on your return on investment when the provident fund invests your savings.
Let’s assume that Eric is employed and earns Shs 1m a month. With the new proposed amendments, the person’s 5% NSSF contribution will be taken out of the Shs 1m gross pay before tax which has been the opposite. That means the person will be required to pay tax on Shs 950,000 (which is the Shs 1m less the 5% NSSF contribution). This means that the person will be paying less tax, as 30% of Shs 950,000 is Shs 285,000 as opposed to the Shs 300,000 tax he was paying before the change in the law. Based on this illustration, a person who earns Shs 1 million a month will be paying Shs 15,000 less in tax per month. This tax saving of Shs 15,000 is as a result of the Shs 50,000 NSSF contribution being exempt from tax. Shs 15,000 is the 30% tax saving on the Shs 50,000 contribution to NSSF.
Also in the amended law to be, the provident fund will not be paying URA for return on investment hence giving room for people’s savings to grow and accumulate for their retirement. Tax deductions will only be made when someone decides to withdraw their savings before the mandatory age of 60 years and above.
This proposal is better than the 20% Covid-19 payout which was going to drain the economy compared to this one which will add value to NSSF customers above the current small number of two million and three hundred customers compared to 19 million people, a 51% of the population.
In simple terms more savings will lead to more investment hence more jobs creation.
Jane Austen once said; people will always live forever when there is annuity to be paid”.
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Ben Ssebuguzi is a budding economist, entrepreneur and Secretary General of Uganda poor youth Movement
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