Tax policy delay 'a bad idea'

The Treasury's plan to postpone implementation of some of its retirement reforms is a bad idea, according to the country's accountants.

The South African Institute of Professional Accountants at the weekend described as "a negative development" the National Treasury proposal to parliament to put some of the reforms on ice for two years.

A host of reforms were scheduled to take effect in March, with the tax treatment of retirement fund contributions the most eagerly awaited by individuals and the retirement industry. But Treasury poured cold water on this on Thursday by publishing a revised draft Taxation Laws Amendment Bill.

Ettiene Retief, chairman of SAIPA's national tax and SARS stakeholders' committees, said the move introduced uncertainty and would breed mistrust between the industry and policymakers.

"There has been extensive consultation with all stakeholders and agreement on the need for reform had been reached and a clear date set - in fact, the process has been dragging on for years," said Retief.

The Treasury said last week that the "government has agreed to delay the implementation" to allow for further consultations at the National Economic Development and Labour Council.

This would give trade unions another shot at sinking some of the reforms they do not like - especially provident fund members being forced to preserve their savings (from March 2015 onwards) in similar investment vehicles until retirement age.

"There's some indication that unions are unhappy with this preservation approach because their members use retirement savings to fund current shortfalls. We even see people resigning from companies to access their provident funds, and then rejoining the same company a few days later," said Retief.

Though many South Africans face financial pressures, he said it was irresponsible to let short-term considerations mortgage peoples' futures, and authorities should find a better way to address the problem.

"Allowing this damaging practice to continue for two further years will have severe consequences for the future of the most vulnerable workers," Retief said.

Old Mutual Corporate's Hugh Hacking said last week it would be watching developments closely, but the company still supported the reforms.

"The proposed retirement reforms seek to simplify and improve the tax deductions that are currently available to fund members in respect of their fund contributions, as well as align the way in which retirement benefits are accessed from provident and pension funds," he said.