By Ben Ssebuguzi
John F Kennedy once said, “If a free society cannot help the many who are poor, it cannot help the rich.” This fits in exactly in what the National Social Security Fund (NSSF) management is trying to push for in the new proposed amendment contained in the NSSF 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 Shs1m a month.
With the new proposed amendments, the person’s 5% NSSF contribution will be taken out of the Shs1m gross pay before tax which has been the opposite. That means the person will be required to pay tax on Shs950,000 (which is the Shs1m less the 5% NSSF contribution).
This means that the person will be paying less tax, as 30% of Shs950,000 is Shs285,000 as opposed to the Shs300,000 tax he was paying before this change in the law.
Based on this illustration, a person who earns Shs1 million a month will be paying Shs15,000 less in tax per month.
This tax saving of Shs 15,000 is as a result of the Shs50,000 NSSF contribution being exempt from tax. Shs15,000 is the 30% tax saving on the Shs50,000 contribution to NSSF.
Also in the amended law to be, the provident fund will not be paying the tax on 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 increase NSSF customers above the current small number of two million and three hundred customers compared to 19 million people, which is 51% of the population. In simple terms more savings will lead to more investment hence creating more jobs for young people.
Jane Austen once said; people will always live forever when there is annuity to be paid”
Ben Ssebuguzi is a budding economist, entrepreneur and Secretary General of Uganda Poor Youth Movement.