End taxation on EPF earnings: Employers body

Wednesday, 18 January 2012 00:59 - - {{hitsCtrl.values.hits}}

EFC says if the Govt. is serious about fund returns to employees, it should be exempted; urges holistic look at pension funds and calls for better governance

By Uditha Jayasinghe

As opposition political parties ready to do battle over the proposed amendments to the Employees Provident Fund (EPF) that will be presented in Parliament today, a labour industry expert is calling on the Government to end taxation on pension funds.

Employers Federation of Ceylon President Ravi Pieris told Daily FT that if the Government was serious about upgrading pension funds for workers, then it should first stop taxing the earnings of the EPF and Employees Trust Fund (ETF).

He stressed that tens of millions of rupees were earned by the Government from taxing the earnings of the EPF and thereby reducing the return for the employee.

Recalling that he had presented this idea at the last meeting of the National Labour Advisory Council (NLAC) convened to discuss the proposed amendments to the EPF Act, he noted that more money was being lost to the EPF from taxation than any proposed building fund allocation.

However, he stressed that the wording for the clause enabling EPF money to be used for a 30-storey building to house the EPF and ETF had to be changed so that money would be used only for this project and no other.

“At the meeting it was agreed that the clause containing allusion to a pension plan be removed. At the same time it was agreed that funding from the EPF would be used only for this one project and no other,” he said.

However, the JVP has insisted that they had not received assurance on these two points by the Labour Ministry Secretary to date and would vehemently protest the amendment in Parliament today.

Nonetheless, Pieris pointed out that Sri Lanka needed to take a holistic view of retirement funds and assess how they benefit the pensioner as a whole.

“Sri Lanka has the EPF, ETF, pension and gratuity plan but at the end of the day not only are the employers pressured to meet these demands, the Government taxes all of them. So when a pensioner gets his funds, they are taxed at each point and then taxed again when retirement funds are invested. So the end support system for the pensioner is not given. It would make more sense to streamline all the different pension schemes so that the employee is given a good return and that would reduce the pressure on employers as well.”

Pieris acknowledged that the move to enable loans to be taken from the EPF was a positive move, but insisted that defaulting on loans needed to be managed. It was reported that as many as 68,000 people had defaulted on loans taken from the ETF.