17 Dec 2023

Government has found it worthwhile to allow for total exemption from income tax, the whole of the enhanced withdrawals that are allowed under the Retirement Funds Act 2022.

Answering a question without notice in Parliament, Minister of Finance, Ms Peggy Serame said as such the amendment of the Income Tax Act, which was under consideration would impact positively retiring members of pension funds or Batswana.

“In this regard, publishing of the Bill which has already been drafted will be fast-tracked so that it can be tabled at the earliest opportunity,” she said. The object of the Bill, Ms Serame said was to amend the Income Tax Act to increase the tax-free threshold applicable to pension fund commutable amounts from 33.33 per cent to 50 per cent. 

The Bill, she said also sought  to increase the tax-free threshold applicable to gratuity and severance payments from 33.33 per cent to 50 per cent. It will also increase the tax-free threshold applicable to retrenchment packages from 33.33 per cent to 50 per cent. 

This includes allowing deferred pension members to access their pension funds to settle medical bills tax-free and allowing 50 per cent exemption to deferred pension amounts accessed by members to settle loans, she said.

Ms Serame said the ministry was aware of the outcry by Batswana due to exempting, in part, the amounts allowable for withdrawals under the Retirement Funds Act 2022 hence the decision to amend the Income Tax Act to align it with the Retirement Funds Act 2022. On whether consideration would be made exempting pension income from taxation, she said the ministry was currently holistically reviewing taxation laws and would consider exempting pension income from income tax.

She further noted that consultancy on the Botswana Pension System was undertaken through the Non-Bank Financial Institutions Regulatory Authority to assess the effectiveness and adequacy of the system.

“It looked at ways to better inform the response to the public outcry,” she said.

She said the report which was under consideration by the ministry, was received in July and some of the recommendations require  engagement with other ministries.

Tati West MP, Mr Simon Moabi had asked the minister if she would consider amending the Income Tax Act to allow for exemption from tax for the enhanced withdrawal provisions under the Retirement Funds Act, 2022.

He also wanted to know if the minister was aware that Batswana did not get the full benefits for the improved encashment as long as the provisions for the Income Tax remain unchanged since part of the amounts withdrawn were used to pay income tax.

He further enquired about the study that the minister had promised to undertake to enhance withdrawals for other pensioners than deferred ones as is currently the case. ENDS