Zulu withdraws social security green paper after backlash over 12% tax proposal

Lindiwe Zulu. Image credit: Twitter/Dept of Social Development

Social Development Minister Lindiwe Zulu has withdrawn the government’s Green Paper on Comprehensive Social Security and Retirement Reform barely two weeks after she gazetted it.

Zulu announced the withdrawal in a gazette notice published on Tuesday (31 August). In a statement on Wednesday, the Department of Social Development said the withdrawal will allow for “further clarification” before it publishes the paper again.

“Since its publication, there has been widespread commentary on the key recommendations entailed in the green paper. Some of the technical aspects of the proposals were not well understood and many have misrepresented the proposals, particularly on the National Social Security Fund,” the Department said.

“It has become apparent that some of these areas need further clarification to avoid any further confusion. By virtue of this being a discussion paper, the department is pleased by the level of public discourse on this subject matter, as it reinforces the fact that society should be involved in the policy making space.”

Green paper’s NSSF, Basic Income Grant proposals

The Green Paper proposed that all employed South Africans must pay 8-12 percent tax from their income (up to a maximum of R276,000) to fund a state-run national social security fund (NSSF).

The proposed NSSF would then pool the tax revenue to provide retirement, survivor, disability and unemployment benefits to all South Africans, according to the paper.

The green paper also proposed a universal Basic Income Grant (BIG) that should be “unconditional, individually targeted and at [a] level that will at least lift the individual out of poverty.”

“Microsimulation for universal income support at the level of the food poverty line suggests that the financial cost will be approximately R200 billion and will require a 10-percentage point increase on income taxes,” it added. 

Backlash

Zulu invited the public to submit comments on the proposals before 10 December 2021. However, she was criticised after reports emerged that she had gazetted the green paper without Cabinet approval.

Further reports suggested that the paper had ignored research at the National Economic Development and Labour Council (NEDLAC) which had raised concerns from business about some of the proposals.

According to National Treasury Deputy Director-General Ismail Momoniat, business, labour, civil society and government had not reached consensus at NEDLAC before Zulu published the document.

Labour federation COSATU has also criticised the 8-12 percent mandatory tax proposal, while business expressed concern about the creation of another large bureaucratic structure in the form of NSSF.

Reacting to the withdrawal, COSATU’s Sizwe Pamla said the government should have consulted more before publishing the paper.

“You have to make sure you have your social partners or stakeholders fully engaged. We don’t want to shoot the entire thing down,” he told EWN.

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