COVID-19: Parliament Amends Income Tax Act to allow tier-three pension withdrawals

COVID-19: Parliament Amends Income Tax Act to allow tier-three pension withdrawals

Parliament has amended the Income Tax (Amendment) Act 2015 to exempt persons on third-tier provident funds and personal pension schemes from paying such tax.

The new development will cost the government 639 million Ghana cedis in fiscal terms if all funds are withdrawn under the given circumstances.

The amendment is to cushion individuals who may have lost their job or capital as a result of the pandemic.

The house also approved a request to waive taxes on personal emoluments of health workers for April, May, and June and additional allowance for frontline health personnel for March, April, May, and June 2020.

Speaking on the floor of parliament, the Deputy Minister of Finance, Abena Osei Asare outlined the rationale behind the government's decision to the Members of Parliament.

“Mr. Speaker, the COVID-19 pandemic has resulted in some economic challenges for businesses. Some sectors of the economy have suffered losses which may lead to some employees being laid off permanently and the folding up of businesses of some self-employed businesses. Such persons may require funds to sustain themselves.

“One ready source of funds will be contributions to the third - tier provident funds and personal pension schemes. Mr. Speaker, withdrawals from the third-tier and personal pension schemes before retirement are however subject to tax if they are withdrawn before 10 years by contributors in the formal sector and before five years by contributors in the informal sector. Mr. Speaker, the government has decided to exempt such withdrawals from tax for employees who lose their jobs permanently or whose businesses collapse due to the COVID-19 pandemic. Exemptions will be equivalent to 15 percent to the withdrawals”.

 

Request for SSNIT Contributors

Addressing the members of parliament today, the Ranking Member on Parliament’s Finance Committee, Cassiel Ato Forson requested that such kind gesture should be extended to SSNIT contributors to attain some relief amidst the Coronavirus pandemic.

“There is something all of us must understand and find a clever way to make sure this happens. Mr. Speaker, as we speak, the government owes SSNIT some money. The government can decide to pay SSNIT and ask SSNIT to be able to take up that mandate. Government alone as a state can’t take up the responsibility of paying the wages and salaries of private-sector workers. It can’t.

“There are several ways the government can engineer and do this. One of the ways for us to encourage SSNIT to take up the burden of contributors is by paying some lump sum to contributors in times like these when businesses are struggling. It will be prudent for all of us to reconsider and debate this and encourage asset to come to before us with an amendment law to enable pensioners and contributors to withdraw some monies to support their businesses.”

 

Former President Mahama in a digital conversation to address Ghanaians called for some relief package for SSNIT contributors amidst the coronavirus pandemic.