Seth Terkper justifies 20% tax on pensions
Conceding that the new tax law Act 896, 2015 has taken to unconventional means in order to raise revenue, he blamed high rates of tax evasion for the posture.
One of the taxes that has been heavily criticised under the new tax law is the 20% tax on employee retirement benefits and allowances.
Mr. Terkper in response to the public disapproval of the tax said, “It’s a thorny one because you are exiting. But remember that as you make your social security contributions, they are exempt from tax even though it is part of your income.”
Mr. Terkper however agreed that people who earn more pension emoluments must be made to pay while those who earn less are exempted.
“Perhaps we will have to exempt a certain level of income on the pension so that those who are fortunate enough to make fat pensions they may pay a little tax,” Mr Terkper said.
Mr. Terkper was addressing the gathering at the Stanbic Bank-Daily Graphic Executive Breakfast Meeting which was centred on the new tax law and its implications for the economy and businesses.
Addressing the argument as to whether allowances should be taxed, the Finance Minister said,
“What is the difference between two chief Executives? One with a salary of a 1000 and allowances of 5000, totalling 6000 and the second executive with allowances of a 1000 and salary of 5000, if we were to exclude allowances one would go away with 5000 even though the total remuneration is 6000 for all of them”.
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