CAPITOL HILL, Monrovia -- The House of Representatives ordered a joint committee investigation Tuesday into the taxation of retirement and severance benefits, giving lawmakers one week to report after a hearing left conflicting accounts of how Liberia's tax and pension laws actually treat the money retirees take home.
The probe, assigned to the Committees on Public Accounts and Expenditure and on State-Owned Enterprises, followed a communication from Grand Bassa County District #4 Representative Alfred Flomo, who raised complaints from retirees, particularly former employees of the Liberia Agricultural Company, over what they described as excessive tax deductions from their severance benefits.
"My understanding is that retirees at LAC have not been treated fairly," Flomo told plenary. "Some of those retirees worked for 25 years or 30 years, and at the end of their service, their severance benefits are calculated. After paying taxes for all those years, 25 percent of their gross severance is again deducted as tax."
Flomo said many retirees have blamed their employers for the deductions, believing the companies are responsible for withholding the money.
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"I called the institutions here to provide clarity because this is not only affecting LAC. It affects workers across the country. You go to Firestone and it is the same practice," he said.
Appearing before lawmakers, Deputy Minister for Fiscal Affairs Anthony Myers said the Ministry of Finance and Development Planning and the Liberia Revenue Authority are implementing the provisions of the Liberia Revenue Code of 2000, as amended.
Myers cited Section 201 of the Revenue Code, which classifies payments received under pension, retirement or annuity arrangements as taxable income. He noted, however, that the law also provides specific categories of income that are exempt from taxation, including sickness and disability benefits, certain inheritances, specified non-cash employment benefits, tax-exempt government obligations and gains from the sale of personal-use property.
He also rejected assertions that retirees are automatically subjected to a 25 percent tax rate.
According to Myers, Liberia's personal income tax system is based on four income brackets. Annual income up to L$70,000 is exempt from taxation. Income between L$70,001 and L$200,000 attracts a maximum tax rate of five percent, income between L$200,001 and L$800,000 is taxed at a maximum rate of 15 percent, while annual income above L$800,000 falls within the highest bracket of 25 percent.
"The applicable rate depends on the taxpayer's income bracket," Myers told lawmakers, explaining that withholding taxes are deducted by employers in accordance with the Revenue Code.
Responding to questions from lawmakers, Myers distinguished severance benefits from pension payments, explaining that severance is calculated using an employee's current gross monthly salary multiplied by the number of years worked and is therefore treated as gross taxable income under existing tax laws. He added that pension benefits administered under Liberia's pension reforms are governed by separate legal provisions.
Civil Service Agency Director-General Josiah F. Joekai Jr. told lawmakers that the government's pension system differs significantly from retirement arrangements in the private sector.
Joekai explained that before the Pension Law came into force in 2019, government pensions were administered through the Ministry of Finance. Since then, responsibility for administering government pension benefits has been transferred to the National Social Security and Welfare Corporation.
He said the Civil Service Agency's role is limited to counseling retiring employees, processing documentation and forwarding beneficiaries' records to NASSCORP.
"To the best of the Civil Service Agency's knowledge, government pension transfers and payments to beneficiaries are not taxed," Joekai said, adding that any isolated cases involving discrepancies could be reviewed by the agency and NASSCORP.
The differing explanations prompted additional questions from lawmakers, particularly over whether the Revenue Code and subsequent pension reforms provide different tax treatment for pensions administered by NASSCORP and severance payments made under labor laws.
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Following the hearing, Grand Gedeh County District #1 Representative Jeremiah G. Sokan moved that the matter be referred to the Committee on Public Accounts and Expenditure and State-Owned Enterprises for further scrutiny, citing the number of unresolved questions raised during the hearing.
Sokan proposed that the committee hear further testimony from the witnesses and submit recommendations to plenary within one week.
Before the vote, lawmakers amended the motion and agreed that the witnesses should respond to all outstanding questions during the committee hearings before a final report is submitted.
Plenary unanimously adopted the amended motion, mandating the Committees on Public Accounts and Expenditure and State-Owned Enterprises to jointly investigate the matter and present their findings and recommendations to the House within one week.
