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Tax Authority to return millions deducted from pensions

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The Israel Tax Authority has admitted that it unlawfully collected tax from tax-exempt pension payments received by pensioners between 2012 and 2019, and it is now obliged to return the money to them. The illegally collected sums amount to tens of millions of shekels annually.

The Tax Authority’s unlawful conduct was exposed in a lawsuit, and a request that the suit should be recognized as a class action, filed by Shabtai Shabtai, a retired person who receives a pension, through Adv. Adi Leibowitz. The claim stated that the Tax Authority unlawfully instructed entities making pension payments – employers, provident funds, and others – not to award the tax exemption for a qualifying pension to anyone who had not presented approval in advance from the tax inspector, despite the fact that there was no real justification for this requirement, and despite the fact that the law stated that tax should not be deducted at source from an exempt pension.

In a ruling giving court approval to a settlement in which the Tax Authority admitted having collected tax unlawfully, Central District Court judge Avi Gorman said, “Income determined by the legislator to be exempt from tax must not be taxed. The recognition of property rights makes it obligatory to terat exempt income carefully, and not set up obstacles to the exemption that are unnecessary and unjustified. Even a paternalistic concern to ensure that the taxpayer is aware of all his rights cannot justify taxation of exempt income.”

The court made a NIS 100,000 award to the bringer of the class action, and awarded costs of NIS 1 million plus VAT to his counsel.

The claim concerned amendment 190 to the Income Tax Ordinance, which is mainly to do with expanding tax benefits given under section 9a of the ordinance when pension savings are withdrawn by taxpayers who have reached retirement age. In amendment 190, the legislator considerably enlarged the exemption given to a qualifying pension, with the aim of securing pensioners’ rights in a reality in which life expectancy is rising and pension savings accumulated during a person’s working life need to finance a longer period of retirement. As a result of the unjustified requirements imposed by the Tax Authority, however, a substantial portion of tax-exempt pensions, amounting to tens of millions of shekels, did not end up in the hands of the pensioners, but was instead paid to the Tax Authority as income tax.

Following the lawsuit, the Tax Authority changed its instructions and told all pension payers to give the exemption without the need for approval from the tax inspector, but on the basis of the pensioner’s signature on a short declaration only. The Tax Authority thus accepted Shabtai Shabtai’s claim.

According to the findings presented by the two sides, there are about 10,000 pensioners who, as a result of the Tax Authority’s original instructions, had the tax-exempt element of their pensions taxed at source.

In the request for approval of the settlement presented by the Tax Authority and Shabtai Shabtai, the amount of the tax rebate due to pensioners for the two years preceding the filing of the lawsuit, 2016-2017, is NIS 45.9 million. The amount unlawfully collected in 2018-2019 is estimated at a further NIS 80 million.

Published by Globes, Israel business news – en.globes.co.il – on May 2, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.


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Sri Lanka Hunts For Cash To Pay Oil Traders For Crude And Fuel

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Unloading procedures for one cargo of gasoline have begun but the ship cannot berth yet because there’s no space for it to do so, according to the harbor master at the port of Colombo. Meanwhile, Prime Minister Ranil Wickremesinghe said the government is also trying to find the cash to complete a rare purchase of crude oil from Russia.

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EPFO adds 15.32 lakh net subscribers in March

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Retirement fund body EPFO has added 15.32 lakh subscribers in March 2022, over 19 per cent more than 12.85 lakh enrolled in February this year.
The provisional EPFO payroll data released on Friday highlighted that it has added 15.32 lakh net subscribers in March 2022, a labour ministry statement said.

According to the statement, a month-on-month comparison of payroll data shows an increase of 2.47 lakh net subscribers in March 2022 compared to the net additions during February 2022.

Of the total 15.32 lakh net subscribers added during the month (of March), around 9.68 lakh new members have been covered under the provisions of EPF & MP Act, 1952 for the first time.

The new member addition has increased by 81,327 in March 2022 as compared to the previous month. Approximately 5.64 lakh net subscribers exited but re-joined the establishments covered under the EPFO by transferring their funds from the previous PF account to the current account, instead of opting for final withdrawal.

Age-wise comparison of payroll data showed that the age group of 22-25 years has been on the forefront by registering the highest number of net enrolments, with 4.11 lakh additions during March 2022.

This is followed by the age group of 29-35 with an addition of 3.17 lakh net subscribers. The age group of 18-21 years also added around 2.93 lakh net subscribers during the month.

The age group of 18-25 years constitutes around 45.96 per cent of net subscribers addition during the month.
Age-wise payroll data also indicated that many first-time job seekers are joining the organised sector workforce in large numbers.

State-wise comparison of payroll figures highlighted that the establishments covered in Maharashtra, Karnataka, Tamil Nadu, Gujarat, Haryana and Delhi remain in lead by adding approximately 10.14 lakh net subscribers during the month, which is 66.18 per cent of the total net payroll addition across all age groups.

Gender-wise analysis showed that net female payroll addition is approximately 3.48 lakh during the month. The share of female enrolment is 22.70 per cent of total net subscribers addition during March 2022, with an increase of 65,224 net enrolments over February 2022.
The participation of women in the organised workforce is showing a positive trend from October 2021.

Industry-wise payroll data indicates that mainly two categories of ‘expert services’ (consisting of manpower agencies, private security agencies and small contractors etc) and ‘trading-commercial establishments’ constitute 47.76 per cent of total subscriber addition during the month.
A growing trend in net payroll addition has been noted in industries like textiles, heavy-fine chemicals, hotels & restaurants etc in March 2022 compared to net subscriber addition in February 2022.

The payroll data is provisional since the data generation is a continuous exercise and the process of updating employee records is done on a regular basis.
Hence, the statement said that the previous data gets updated every month. Since April 2018, EPFO has been releasing payroll data, covering the period September 2017 onwards.

EPFO is the country’s principal organisation responsible for providing social security benefits to the organised/semi-organised sector workforce covered under the the purview of EPF & MP Act, 1952.

It offers members a myriad of services, which includes provident fund, insurance and pension both for members and their families.

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Equitas SFB stock tumbles nearly 11% on MD & CEO’s exit announcement

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The stock price of Equitas Small Finance Bank tanked nearly 11 per cent to ₹52.95 apiece on the National Stock Exchange (NSE) after its founder PN Vasudevan’s announcement of stepping down to pursue ‘his distinct set of goals in life’.

Equitas Bank opened at ₹55.5 on the NSE. It touched an intraday high of ₹58.05 before tumbling to a low of ₹51.55 and closed at ₹52.95. 

The fall in Equitas Bank stock comes even as the key Indian benchmark indices Nifty50 and BSE Sensex soared nearly 3 per cent on Friday.

In a regulatory filing, Vasudevan, on Thursday, announced his decision to step down from his role to focus on the public charitable trust that he and his wife had set up. The bank said its Board would be forming a search committee soon to identify the successor and that Vasudevan would continue as MD & CEO till the succession and transition process are completed. 

However, the market seem to be unconviced as the announcement came without a proper transition plan and is in the middle of the merger process with iEquitas Holding Ltd.

“In our view, Vasudevan’s resignation could have been handled well with proper succession planning in place and keeping all the stakeholders well-informed. His sudden resignation at this crucial juncture, when the bank is just recovering from the Covid shock and also in the midst of a reverse merger with the holdco, will be a near-term drag on the stock,” Emkay Global Financial Services said in a report. 

Although the brokerage retained its ‘Buy’ rating for both Equitas SFB and Equitas Holdings, it has reduced its target price for both the stocks. For Equitas SFB, it has cut the target price to ₹67 from ₹75, factoring in a 10 per cent discount relating to management succession/transitional risk. For Equitas Holdings, it slashed the target price to ₹146 from ₹164.

The stocks of Equitas Holdings tumbled over 7 per cent to ₹108.10 apiece on NSE on Friday. 

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May 20, 2022

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