Govt. has no moral right to tax retirement funds
It is extremely sad to note that the Employers Federation of Ceylon, CCC, trade unions, and the Joint Opposition (JO) have not taken any action on several clauses in the Inland Revenue Bill which are extremely harmful to private sector workers.
The bill is imposing a 14 per cent (increased from 10 per cent) tax on retirement funds such as EPF, ETF and other pension funds. While these funds have no government contributions at all, we believe that this tax is highly unethical and even more importantly highly unfair on private sector workers.
Irrespective of the fact that this tax has been in operation during the previous government it needs to be removed. Last year, the then Finance Minister said “why are you bothered. We are taxing our funds”. We are not surprised as these words came from the then FM whose credentials are now known to the public. These are private sector funds and the government has no moral right to tax retirement funds which are not a burden to anyone.
In addition, the bill proposes to tax gratuity (continuing a past practice) and ETF payments (new tax) at retirement. Irrespective of the amount, these are the only retirement funds available to private sector workers at old age. The government is not going to provide a pension as in western countries. Although current interest rates are high, it is unlikely they will remain at current levels in the next several decades, and it is important for retirees to get all their funds at retirement.
If the government is not clear on the need to refrain from taxing retirement benefits, they need to understand that the retirees would need to fund their housing, utility, food, health, hospital, clothing expenses and more out of these funds, the only income in retirement. However, be happy that at each point they would be paying import tax (35 per cent), VAT (15 per cent), Cess (100 per cent) to the government.
It is even more unfair and inequitable as according to the bill, public sector pensions are to be tax free while you are taxing private sector retirement benefits.
In such a situation what moral right does the government, the President, PM and the Finance Minister and IMF have to impose taxes and claim part of retirement benefits of private sector workers.
We strongly urge the government and the JO to take steps to amend the bill before submission to Parliament or during the debate to remove taxes on retirement funds, on gratuity and ETF on retirement.
J. De Silva
Colombo 6