Johannesburg - The proposed changes to the politicians’ pension fund to avoid the new fringe benefit taxes are based on a proposal by the minister of finance.
The Independent Commission for the Remuneration of Public Office Bearers wrote a proposal to President Jacob Zuma for changing the rules of the Political Office Bearers Pension Fund (POBPF) so that the politicians - including the president, ministers, MPs, premiers, MECs and MPLs - could dodge the new taxes which start this month and which could cost them up to R22 000 a month more.
“The commission received a submission from the minister of finance, dated December 15, 2015, outlining a proposal to amend the POBPF rules and termination gratuities,” said commission chairman Judge Cagney Musi in his memo, which was gazetted on Monday.
The memo doesn’t name the minister, but Pravin Gordhan’s replacement of Des van Rooyen was announced late on December 13, so writing the proposal appears to have been very near the top of Gordha’s new in-tray. The minister of finance is responsible for Sars, the tax-collection agency.
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“The commissioners were deeply divided,” said Judge Musi. “There were some who held the view that it is unfair and immoral to enact a law and subsequently or simultaneously exempt the lawmakers from its negative effects.
“They felt that the commission was, in effect, requested by the minister of finance to start the process of giving immunity to political office bearers against the negative effects of the amendment act.”
The commission, however, resolved to recommend the change in rules to the president. The National Treasury was not available to comment yesterday.
The proposal calls for the government to reduce its monthly contributions to the pension fund on members’ behalf - which would avoid the fringe benefit tax - while substituting that with a once-off gratuity on retirement, so that the members won’t be prejudiced.
The politicians face heavy tax penalties under the amended tax laws - which they themselves voted into law late last year - because their extremely generous pension arrangement involves a 52.5 percent contribution by the state employer.
Judge Musi’s memo also refers to proposals to reassess the generosity of this arrangement. It was initially planned for anti-apartheid activists-turned-politicians so that they could “catch up” on the Struggle years without such benefits.
“The benefit arrangements are extremely generous and consequently expensive. They are inappropriate for newly appointed public office bearers and complex,” the judge said.
“The arrangements also lead to perverse incentives and decisions by the members which will not suit the state or the people.”
THE STAR