At the Ju­ly 7 Mon­day Night Re­port of rul­ing Unit­ed Na­tion­al Con­gress (UNC), Prime Min­is­ter Kam­la Per­sad-Bisses­sar made an an­nounce­ment that has the po­ten­tial to be trans­for­ma­tion­al for a sig­nif­i­cant per­cent­age of T&T’s pop­u­la­tion.

Mrs. Per­sad-Bisses­sar pro­posed mak­ing all pen­sion pay­ments tax-free.

In do­ing so, she ad­vanced a promise she made dur­ing the elec­tion cam­paign, which trumped the promise of the Peo­ple’s Na­tion­al Move­ment to make pub­lic ser­vice pen­sions tax-free.

Here is what Mrs Per­sad-Bisses­sar said:

“I be­lieve that once a per­son reach­es the age 60 and has been con­tribut­ing to the pen­sion sys­tem for decades, they should no longer be taxed on their re­tire­ment ben­e­fits.

“The on­go­ing tax lessens the val­ue of the pen­sion, which is meant to sup­port re­tirees in their lat­er years and can feel like dou­ble tax­a­tion. So you are pay­ing it (tax on your in­come) for your whole life while you are work­ing, you get a re­tire­ment ben­e­fit and they want to tax you on top of that! That means you are pay­ing tax­es both in your work­ing years and in your re­tire­ment years.

“We will look at that law. These tax­es strain the fi­nances of se­niors, es­pe­cial­ly those who are liv­ing on fixed, lim­it­ed in­comes and can be a sig­nif­i­cant source of frus­tra­tion.

“My gov­ern­ment will re­view and amend the tax laws re­gard­ing pen­sions to re­flect fair­ness and recog­ni­tion of life­long con­tri­bu­tions made by per­sons.

“Ex­empt­ing pen­sion in­comes from tax­es af­ter age 60 is a fair pol­i­cy ad­just­ment that will ac­knowl­edge the ser­vice and sac­ri­fices of so many re­tirees. It will al­so strength­en the so­cial sup­port to re­tirees.

“We will en­sure that those of you who have con­tributed so much are not un­du­ly bur­dened in your gold­en years.

“My Gov­ern­ment, and yours, in­tends to cor­rect this in­jus­tice to our se­nior cit­i­zens.

A lit­tle clar­i­fi­ca­tion

Hav­ing turned 60 in April, and hav­ing gone through the process of turn­ing two of my three an­nu­ities in­to month­ly pen­sion ben­e­fits, I can at­test to the fol­low­ing:

1. If your pen­sion and oth­er in­come to­tal more than $90,000 a year, you are now taxed on the in­come you earn above $90,000. That is be­cause in­come up to $90,000 in T&T is cur­rent­ly tax-free.

2. If they do things the right way, peo­ple who turn 60 and wish to ac­cess their re­tire­ment ben­e­fits are re­quired to fill out a TD1 form in which they de­clare ALL of their sources of in­come. They are then re­quired to take that form to the Board of In­land Rev­enue (BIR), where an of­fi­cer on the fourth floor in­puts the in­come in­for­ma­tion in­to their com­put­er and cal­cu­lates the amount of tax on the pen­sion. The amount of tax to be de­duct­ed from your pen­sion is then out­lined in an of­fi­cial doc­u­ment from the BIR;

3. The po­ten­tial re­cip­i­ent of the pen­sion MUST then take the BIR doc­u­ment to their pen­sion provider, who deducts the tax from the pen­sion at source, in ac­cor­dance with the in­struc­tions in the BIR doc­u­ment. You are told by the pen­sion provider that if they do not get that let­ter from the BIR, they will au­to­mat­i­cal­ly tax your pen­sion at the statu­to­ry rate of 25 per cent;

4. I am told that this mul­ti-step process must be con­duct­ed on an an­nu­al ba­sis—or else the pen­sion provider, one sup­pos­es, is en­ti­tled to levy the 25 per cent tax on the pen­sion;

5. It is my un­der­stand­ing that, for peo­ple who re­ceive more than $90,000 a year of in­come, tax­es are levied on oc­cu­pa­tion­al pen­sions—which are re­ceived from your work­place—and on their an­nu­ity-type in­vest­ment plans—such as the Tax In­cen­tive Sav­ings Plan, which is of­fered by Re­pub­lic Bank. But no tax­es are levied on the Na­tion­al In­sur­ance (NI) pen­sion ben­e­fits, re­gard­less of the in­come of the re­cip­i­ent. That is be­cause the NI pen­sions are based on the num­ber of con­tri­bu­tions made by the in­di­vid­ual and the lev­el of those con­tri­bu­tions.

What does PM mean?

I to­tal­ly agree with Mrs Per­sad-Bisses­sar’s analy­sis, which is spot on when she states that the tax on pen­sions lessens the val­ue of the re­tire­ment ben­e­fit and strains the fi­nances of se­niors “es­pe­cial­ly those who are liv­ing on fixed, lim­it­ed in­comes.”

She is al­so right that, the­o­ret­i­cal­ly, it is un­fair to tax some­one’s pen­sion in­come.

Yet, hav­ing said that, the Prime Min­is­ter’s state­ment on end­ing the tax on pen­sions seemed to be equiv­o­cal, mean­ing that it is open to more than one in­ter­pre­ta­tion

The Prime Min­is­ter starts off the com­ments by say­ing “I be­lieve that once a per­son reach­es the age 60… they should no longer be taxed on their re­tire­ment ben­e­fits,

Else­where in her pre­sen­ta­tion, she says, “We will look at that law;”

She al­so said, “My gov­ern­ment will re­view and amend the tax laws re­gard­ing pen­sions."

Giv­en the lan­guage she us­es, that may sound to some like the Prime Min­is­ter is hedg­ing her bets on whether the mea­sure would be im­ple­ment­ed.

What she left out

In her pre­sen­ta­tion in Pe­nal on Ju­ly 7, Prime Min­is­ter Per­sad-Bisses­sar did not out­line:

a. When is the pro­posed start date of the Gov­ern­ment’s in­ten­tion to make all pen­sion pay­ments tax-free? She did not say, for ex­am­ple, that this pro­pos­al would be in­clud­ed in the 2026 bud­get, which many peo­ple who lis­tened to her may have in­ferred;

b. If the pro­pos­al is in­clud­ed in the 2026 bud­get, would it be­come ef­fec­tive im­me­di­ate­ly or up­on the pas­sage of the Fi­nance Act in ear­ly 2027?

c. If the pro­pos­al would be retroac­tive. In oth­er words, would some­one who turned 60 in 2025, or be­fore, and is re­ceiv­ing a pen­sion that is taxed, no longer be re­quired to pay the tax;

d. Would the can­cel­la­tion of tax­es on pen­sion ben­e­fits ap­ply to all re­cip­i­ents, re­gard­less of their in­come?

e. How much rev­enue does the Min­istry of Fi­nance es­ti­mate would be fore­gone as a re­sult of the im­ple­men­ta­tion of the ter­mi­na­tion of tax­es on pen­sion ben­e­fits

f. If the Gov­ern­ment has done, or pro­pos­es to com­mis­sion, a re­port on the cost/ben­e­fit analy­sis on the pro­pos­al to ter­mi­nate tax­es on pen­sion ben­e­fits; and

g. If along­side the ter­mi­na­tion of tax­es on pen­sion ben­e­fits, the Gov­ern­ment is giv­ing con­sid­er­a­tion to the im­ple­men­ta­tion of the rec­om­men­da­tion, in the last three ac­tu­ar­i­al re­views of the Na­tion­al In­sur­ance Scheme, to push back the date on which an em­ploy­ee is el­i­gi­ble for Na­tion­al In­sur­ance re­tire­ment ben­e­fits.

To con­clude, my dis­pos­able in­come is like­ly to in­crease if the Gov­ern­ment goes ahead with its plan to end tax­es on pen­sion ben­e­fits.

If this pro­pos­al is cou­pled with the Gov­ern­ment’s can­cel­la­tion of the prop­er­ty tax, it is clear that mem­bers of T&T’s mid­dle class could win.

We are look­ing for­ward to more de­tails on this pro­pos­al in the com­ing months.