Recommendations of the Katz Commission

Topics: Pension, Tax, Taxation in the United States Pages: 4 (1460 words) Published: September 7, 2011
Olsegun Oyewole |

The purpose of this paper is to discuss the recommendations of the Katz Commission on retirement funding against the theory of taxation set out by the classical economists. The paper looks at the committee’s assessment of the classical economists’ theory of taxation, the proposed changes to the South African income tax system and the implications of this proposed reform on the position of the employer, employee and the retirement fund itself. It is necessary to first give an overview of the South African retirement fund tax system based on the classical economists’ theory of taxation before stating the Commission’s proposals for reform and the reasons behind them. Historically 3 schemes have existed; The Elizabethan Poor Laws, Bismarckian State Old Age State insurance scheme, and Occupational Schemes (Vivian 2010). For the purpose of this essay and its focus on the taxation of South African retirement funds, focus will be given to the Poor Laws and Occupational schemes because only they exist in South Africa, though it must be noted that the Bismarckian state insurance scheme co-exists with the others in most countries of the world (Vivian 2010). The Poor Laws, passed by Queen Elizabeth I of England in 1601, were established as a means to assist the poor. Then, the poor consisted mainly of widowed, crippled and old aged members of society. The presence of this obligation has helped to further develop the law and been the backbone of its necessity. Occupational Pension schemes involve Defined Benefit and Defined Contribution schemes. Occupational pension schemes involve a process where an employer undertakes to to provide retired employees with a pension and establishes a pension fund for its employees (Vivian 2010). In a defined benefit pension scheme, the amount of pension received is based on the employee’s number of years of service and the salary which the employee received towards the end of his/her employment. This...
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