Cabinet this week approved the contributory pension funds for select categories of persons as a follow up to the proposal announced in Budget 2011 presented in Parliament in November last year.
On a proposal made by President Mahinda Rajapaksa, in keeping with the 2011 Budget proposals, Cabinet approval was granted to set up three separate contributory pension funds to ensure the wellbeing of the people who reach non-working age, to be implemented on 1 May 2011. They are as follows: Employees’ Pension Benefits Fund, Foreign Employment Pension Benefits Fund and Self-Employment Pension Benefits Fund.
The main features of these funds are as follows:
Employees’ Pension Benefits Fund: This will apply to any employment not covered by the Government Pension Minutes. The employer’s contribution will be 2% of the gross monthly salary of the employee and the employee’s contribution will also be 2% of his gross monthly salary.
Contributions have to be made for a minimum period of 10 years for a pension to be paid at the age of 60 years. Those with less years of service at the time of implementation could make payments to cover the balance period.
Further provisions will be provided in the act to cover the interest of bank employees who have been deprived of their pension rights around 1996, consequent to the State banks being restructured. In such instances, the employer’s contribution will be 5% of the gross monthly salary of the employee and the employee’s contribution will also be 5% of his gross monthly salary.
The minimum pension for a period of 10 years service will be 25% of the Average Salary of the last 10 year period prior to reaching 60 years of age. All claims to pensions will be determined by the Labour Commissioner and any aggrieved person could make an appeal to the Tribunal of Appeal to be set up for the purpose.
Foreign Employment Pension Benefits Fund: The objective of this fund is to recognise the significant contribution made by those in foreign employment to the economy of this country. Any Sri Lankan in foreign employment can opt to join this pension scheme.
The Government will provide Rs. 1,000 million by way of an initial capital and all funds lying to the credit of the Foreign Employment Bureau as at 30 April 2011 will be credited to this fund.
Each employee has to contribute a minimum amount of Rs. 12,000 per annum to this fund. Such contribution could be made in one or more instalments prior to reaching 55 years of age. The pension will be paid at the age of 65 years. Self-Employment Pension Benefits Fund: The objective of this fund is to provide a retirement benefits scheme for those in self-employment. The Government will provide Rs. 1,000 million as an initial capital to this fund.
Any persons in self-employment can be a member and has to contribute a minimum of Rs. 10,000 per annum to this fund. This contribution can be made in one or more instalments. A minimum of 10 years contribution has to be made to be paid a pension at the age of 65 years.
Cabinet nod for lower and simpler taxation
CABINET has approved a host of proposals aimed at simplifying taxation and payment.
The Government said with the introduction of the changes, the number of taxes payable by a person will be reduced, thereby resulting in a simplification of a tax system while also improving the effectiveness of the tax administration.
The overall reform-oriented tax rate revisions are expected to give an impetus to investment through tax savings. Cabinet approval was granted to submit the relevant 15 Bills in Parliament for approval. In keeping with the 2011 Budget proposals, several changes with regard to finance, tax and investment related legislation are to be introduced in the form of amendments to the 14 existing acts and with one new legislation. Some of the proposed amendments to existing acts are as follows:
Value Added Tax (Amendment) Bill: Reduction of the VAT rate on financial services and on certain goods and services from 20% to 12% and introduction of a new VAT suspension scheme for exporters and deemed exporters. Economic Service Charge (Amendment) Bill: Simplification of the rates scheduled and introduction of annual returns in place of quarterly returns.
Stamp Duty (Special Provisions) (Amendment) Bill: To enable transferring of revenue collected by the Inland Revenue Department to the Provincial Councils.
Debits Tax (Amendment) Bill: Removal of the Debits Tax. Finance (Amendment) Bill: Removal of the Social Responsibility Levy and Cellular Mobile Subscribers’ Levy. Excise Ordinance (Amendment) Bill: To permit tapping of palmyrah and kithul trees to encourage related domestic industry.