- It was reported that the deduction was as high as 60% in some cases.
Taxation in South Africa impacts pensions as the South African Revenue Service (SARS) recently imposed a heavy tax deduction on the Government Employment Pensions Fund (GEPF) which led to beneficiaries receiving a reduced income for October.
Reacting to the issue after numerous irate members of the GEPF had expressed their dissatisfaction with the cut, SARS defended its actions by stating that before the deduction, it had explained in detail why it had to happen.
The GEPF on the other hand claimed that the communication wasn’t clear enough.
This eventually led to a meeting between the two entities on Monday afternoon to discuss the situation and find a way to resolve the issue.
According to a female member who receives a widow’s pension from the GEPF, the deduction was so severe that she only received half of her usual income.
She mentioned that after she made a complaint to the GEPF, she was told that it was a directive from SARS. She also lamented the tax body’s failure to give prior notification that a step like this would be taken.
Taxation in South Africa: A background to the cut
Back in December 2021, SARS said that the recently introduced legislation made provision for it to find out the effective rate of tax in regards to the combined employment and/or pension sources of income of a taxpayer, regarding the latest data available to SARS.
The agency is then expected to give that rate to the retirement fund administrators for purpose of withholding PAYE (pay as you earn).
SARS mentioned that the sole purpose of the directive was to deal with the “tax debt” that many pensioners with more than one source of income experience at year-end.
Speaking on the issue, SARS spokesperson Siphithi Sibeko explained that although there is a directive in place, pensioners can choose to opt-out.
He mentioned that the tax agency had previously made this clear to the GEPF so that they can explain it to their members.
However, GEPF spokesperson Matau Molapo responded that the communication was ambiguous and could have been done better.
The GEPF could not say how the affected pensioners would be paid back if it is ultimately determined that income tax was surely wrongfully deducted.
Who is GEPF?
Established in 1996, the Government Employees Pension Fund (GEPF) is Africa’s largest pension fund.
It has over 1.2 million active members, over 450 000 pensioners and beneficiaries, and assets worth more than R1.61 trillion.
Its main business, which is overseen by the Government Employees Pension Law (GEP Law), as amended, is to organize and allocate pensions and other benefits for government employees in South Africa.
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