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Presidency in race to placate Cosatu on tax

Monday, 08 February 2016   (0 Comments)
Posted by: Author: Linda Ensor
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Author: Linda Ensor (BDlive)

The Presidency is working with government departments to find the "quickest possible legal route" to attend to the concerns of the Congress of South African Trade Unions about the compulsory annuitisation provisions of the Tax Laws Amendment Act.

It may consider postponing the March 1 implementation date, but this would require that an amendment to the law be rushed through Parliament and signed off by President Jacob Zuma.

A meeting on Saturday between Minister in the Presidency for Planning, Monitoring and Evaluation Jeff Radebe and Cosatu leaders was arranged to find a way out of the stalemate, which threatens to have Cosatu members out on the streets in protest.

The law will require workers to invest two-thirds of their provident fund savings in an annuity when they retire. Provident funds have in the past allowed members to take the entire amount as a lump sum.

"Both government and Cosatu agreed that a solution should be expedited to resolve the impasse," the Presidency said in a statement. "It was also agreed that the affected parties should be given enough time to discuss the matter with a view to reaching consensus."

Cosatu president Sdumo Dlamini, who has described the issue as a "do-or-die matter" for workers, would not be drawn on the statement, except to say that the discussions had been productive and would resume in the next few days. He confirmed that a postponement of the implementation date of the offending provision was one of the options on the table.

A postponement would be the quickest route to resolving the dispute in the short term. The 2013 law was due for implementation in March last year, but was delayed because of Cosatu opposition.

A consensus solution would be helpful for the ruling party, which needs the support of Cosatu in this year’s local government elections. The federation has warned that it would withdraw its support for the African National Congress (ANC) if the law is implemented. A solution would also shore up support for the ANC’s beleaguered president and give more stature to Cosatu within the tripartite alliance.

Parliament’s standing committee on finance agreed to an implementation date of March 1 this year, believing that compulsory annuitisation is in the long-term interests of retired workers, some of whom are left dependent on state pensions after spending their lump-sum payouts. Earlier consultations with Cosatu failed to reach consensus. Public hearings on the bill also took place.

A postponement of the implementation date would be a victory for Cosatu even though the law was not expected to have any material effect on workers in the short term. The compulsory two-thirds annuitisation rule will kick in once provident fund savings have reached R247,500, which will take place for the majority of workers only in about five to 10 years.

Secondly, all savings accumulated until the implementation date would be excluded from the annuitisation rule.

The Treasury has pointed out that the new law would benefit workers with provident funds by extending tax deductions currently enjoyed only by pension fund members. This would mean a higher take-home pay for workers with taxable incomes.

The law allows for a 27.5% tax deduction up to a maximum of R350,000 per annum on condition that two-thirds of the retirement savings are annuitised.

This article first appeared on



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