Davies

The Ministry of Finance has hit back at pension fund managers, saying they are to blame for some of the backlog in the refund of withholding taxes on investments citing delinquency in the submission of vital information.

But the ministry, in an email, said some arrears will be paid at the end of September.

"The arrears have been due to lags in processing and oftentimes incomplete information submitted. Claims are assessed and verified by one revenue agency and sent to another agency for payment," the ministry said.

The email was a late response to queries on the billions it owes to pension schemes, reported in Wednesday Business.

The Minister of Finance, Dr. Omar Davies, introduced the tax in 1999.

At the time it was envisaged that the refunds would be done within 45 days. But, according to a number of pension fund managers with whom Wednesday Business spoke, the refund period takes up to three years.

"In some instances referred to, lags of three years, the amounts are relatively small and oftentimes due to incomplete submissions," said the ministry.

Actuarial reports

"The absence of actuarial reports as a critical requirement for the processing of withholding tax refund claims is primarily the cause of claims being unprocessed for extended periods, despite repeated requests to fund managers for these reports."

However, two senior managers, with whom the Financial Gleaner spoke, dismissed the ministry's claims as disingenuous.

"It's the first I am hearing of that requirement," said one pension fund manager, who requested anonymity. "I have not been asked for that before. It has never been raised in any of our discussions."

Another senior pension fund executive was more frank in his dismissal, but also spoke on condition of anonymity.

"It's a cop-out. We have never gotten requests for actuarial reports," he said.

The ministry said in its statement emailed late Wednesday that it would "move with dispatch" to eliminate the arrears, and that it remains in dialogue with pension funds to resolve the situation.

It said "full and frank" discussions were held in May with with institutional pension fund managers. That meeting secured on a "phased payment programme and a review of the situation at the end of September 2006."

"By this time, all claims processed up to May 2006 would be paid," the ministry said.

Pension fund managers complain that that they are losing hundreds of millions in opportunity costs.

"It is anticipated that the arrears will be substantially eliminated by the beginning of the next financial year," the Ministry said, indicating that provisions would be made under the next budget cycle.

- A.M.

Taken from the Financial Gleaner Friday September 1, 2006.