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No cause for alarm! NSSF MD Byarugaba clarifies on proposal to tax members’ savings

NSSF Managing Director, Mr Richard Byarugaba said that NSSF income is taxed when earned and the members’ Benefits are exempted from tax. (FILE PHOTO)

KAMPALA – The Managing Director of the National Social Security Fund (NSSF), Mr Richard Byarugaba, has moved to calm the storm arising out of a proposal by the government to tax NSSF savings.

The NSSF (Amendment) Bill, 2019, which was moved by Minister of State for Youth and Children Affairs Florence Nakiwala Florence for its first reading in Parliament on Tuesday, has been publicly criticized by NSSF members, with many questioning the changes in Section 38 of the Bill on tax.

But Mr Byarugaba, in a statement issued on Wednesday afternoon, said the Fund welcomes and supports the Bill. He explained that under Uganda’s current tax regime on pensions and retirement benefits, a member’s contribution is taxed at the deduction of payroll, NSSF income is taxed when earned and the members’ Benefits are exempted from tax.

“So all member accrued benefits will have been taxed by the time they are paid,” Mr Byarugaba said.

However, he explained that when the NSSF Amendment Bill, 2019, becomes law, member contributions will not be taxed, and NSSF income earned will not be taxed.

“However member Benefits will be taxed at the point of withdrawal. Should a member attain the age of 60 years their Age Benefit will not be taxed. Other benefits that will not attract tax a. include the Invalidity and Survivors Benefits,” he said.

The NSSF MD added that under the new tax regime, a member will have more money compared to the current tax regime.

“The Government too will have earned more tax revenues under the new tax regime than it would have collected under the current one. In conclusion, the proposed amendments are progressive and address the concerns of the members and the country at large,” Mr Byarugaba said.

He also said NSSF welcomes the decision by government to retain NSSF as the Basic National Scheme, entrusted with management of mandatory social security contributions for the entire country.

According to Minister Nakiwala, the National Social Security Fund ( Amendment) Bill, 2019 aims to enable workers in the formal and informal sectors to make voluntary contributions to the National Social Security Fund and in addition, seeks to enhance the spectrum of benefits available to workers and to improve management of the National Social Security Fund.

According to Minister of Gender Labour and Social Development Janat Mukwaya, the current law was enacted in 1985 and does not adequately address emerging challenges in the management of social security in Uganda.

She states that the proposal to amend the NSSF Act particularly arises from the need to streamline the management of the Fund to expand the scope of social security coverage and benefits.

“The Act in its current state does not make express provision for the representation of workers, employers and other stakeholders on the board of directors. The appointment of the Managing Director and Deputy Managing Director by the Minister without the role of the board undermines the ability of the board to supervise them.”

The bill will go through a first, second and third reading in Parliament. The President will then have to assent, before it becomes law.

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