Kikwete promises action on PSPF, workers’ tax complaint

“ PSPF members should relax. I can assure them every member will receive his/her benefits when retiring. For a start, we will disburse Sh50 billion for paying pensions” President jakaya kikwete By Frank KimboyThe Citizen Reporter Dar es Salaam. President Jakaya Kikwete gave an assurance yesterday that the government will come to the rescue of the Public Service Pension Fund (PSPF), which faces bankruptcy arising from arrears the government owes the fund, which now stand at Sh6.4 trillion and payment will be released at the rate of Sh50 billion each financial year, according to the president.   Speaking in Mbeya at a ceremony to mark Labour Day, President Kikwete had more good news for workers with a promise that the government will reduce Pay As You Earn rates. Finance Minister William Mgimwa is expected to announce the new taxation rate when he tables the 2013/2014 national budget. Low income earners now pay up at 14 per cent. Said the President: “When I came to power, minimum wage earners were paying 18 per cent of their salary as income tax but we have managed to lower that to 14 per cent. I can assure you the Finance minister will announce a new rate when tabling next year’s budget.” As for the cash-strapped PSPF, President Kikwete said the government will do everything in its power to ensure that the fund remains solvent. He added: “PSPF members should relax. I can assure them every member will receive his/her benefits when retiring. For a start, we will disburse Sh50 billion, which will be used to pay pensions.” Should the amount PSPF needs exceed Sh50 billion, the government will release more funds to settle the difference. Mr Kikwete denied claims that the government has borrowed Sh6.4 trillion from PSPF. According to him, the amount is an accumulation of unpaid contributions by public employees. In 1999, the government made a decision that every public servant should be pensionable. This applied even to public servants who were in service before 1999, even though neither they nor the government had made any initial contributions.  The President added: “This also occurred in the Local Authorities Pension Fund (LAPF) after we transformed it into a pension fund rather than a provident fund shortly after I came to power. We (government) were forced to disburse Sh10 billion each financial year until LAPF became stable.” Reports from the Controller and Auditor General, the ministry of Finance and the PSPF management indicate that the fund is in trouble because the government has failed to honour its obligations. The fund’s problems started soon after it was established way back in 1999. The reports indicate that the government’s failure to pay up will ultimately result in the collapse of the fund. This shutdown could take place in as short a time as three years. According to PSPF acting Director General Adam Mayingu, the fund is now using some of its assets to pay benefits. Meanwhile, President Kikwete said that although the government has raised the minimum wage for public servants, it will not match the level proposed by the Trade Union Congress of Tanzania (TUCTA). According to TUCTA Secretary-General Nicholaus Mgaya, a study they conducted indicated that, due to the rise in the cost of living, the minimum wage should be raised to Sh742,000. It now stands at Sh125,000. The government currently spends most of its money on salaries, President Kikwete says, and it will need Sh4.76 trillion in the coming financial year for salaries--which works out to more than 40 per cent of its budget. But regardless of the challenges, he said, the government was committed to paying the outstanding arrears. In this financial year, the government paid more than 11,000 workers of the 52,000 that it owed. He disclosed that the government plans to generate about 600,000 jobs before 2015. More than 12 per cent of the labour force is unemployed. Mr Mgaya urged the government to come up with laws and policies for the informal sector. Despite its contribution to the economy, he added, the sector had not been given due recognition.