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Uganda: Taxes Hurt Pension Fund Investments
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New Vision (Kampala)
25 November 2007
Posted to the web 26 November 2007
Charles Bwogi
Kampala
RETIREMENT fund trustees have asked for tax exemption on pensions and retirement fund investments in order to encourage more saving.
Retirement fund trustees are supposed to protect the interests of members.
"The law provides for a tax exemption on the employee's contribution to the retirement funds. This should be extended to cover the funds' investments as these determine the interest to members, which would in return encourage savings," a participant at the Alexander Forbes financial services seminar for trustees said.
The Uganda Revenue Authority (URA) charges a 30% Corporation Tax on retirement fund investments according to the Provident Fund Act.
URA has also extended taxation to retirement funds' investments in government security such as Treasury bills and bonds, which were initially exempted from taxation, yet a number of pension funds invest in government securities for the security they offer.
The taxation is limiting voluntary pensions and retirement fund top-up schemes to the National Social Security Fund.
Alexander Forbes Financial Services held the seminar to acquaint trustees with internationally-accredited practices.
Craig Bentley, the chief operations manager of Alexander Forbes Financial Services East Africa, said: "Trustees can be sued for mistakes that can lead to losses to the members' funds. That is why they need to familiarise themselves with best practices."
Bentley said trustees are expected to seek advice from experts in areas like fund administration and investment management if they are not well versed with them.
Uganda has the worst performing pension sector in East Africa, a condition that has worsened the scarcity of long-term funds whose main source in a number of economies is pension and retirement funds.
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The country is also yet to get proper regulations and a regulator for the pension sub-sector, an issue that is currently being advocated by the insurance industry.
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