the subregional office for arab asian countries

ISSA. AISS. IVSS Subregional Office For Arab Countries in Asia

The Subregional Office For Arab Asian Countries

The Subregional Office For Arab Asian Countries

The International Social Security Association

The International Social Security Association


Administrative Innovations to Improve Compliance and

Enforcement The experience of the Arab Asian

countries

Administrative Innovations to Improve Compliance and

Enforcement The experience of the Arab Asian

countries

Presented by: Diana JreisatThe ISSA Technical Adviser for Arab

Countries in Asia

Presented by: Diana JreisatThe ISSA Technical Adviser for Arab

Countries in Asia


Motivations For Reform Motivations For Reform WorldwideWorldwide

AsiaAsia: Concerns about broadening coverage and improving benefits.

EconomiesEconomies in transitionin transition: Concerns to adjust pension programs and administrating institutions to a market economy.

Latin AmericaLatin America: The desire to insulate the pension system from political interference.

North America, Japan, and Western Europe:North America, Japan, and Western Europe: Focus on the costs of an ageing society.


Contributions constitute the essence of financial viability of contributory social security schemes.

Evasion is a threat to the legitimacy of the schemes and the adequacy of benefits.

Contribution evasion is serious in the developing countries.

The size of the contributory base will be reduced.


General information from the Arab Asian General information from the Arab Asian countriescountries::The social security schemes are for the most part The social security schemes are for the most part defined benefit schemesdefined benefit schemes

The social security programs are relatively young The social security programs are relatively young and were introduced in :and were introduced in :

CountryEstablishment year

Syria1959

Palestinian National Authority1964

Saudi Arabia1972

Bahrain and Kuwait1976

Jordan1980

Yemen and Oman1992

Untied Arab Emirates1999

Qatar2003


Birth rates are highBirth rates are high

Crude birth rate per thousand in 2005, were :

37.3 Palestinian National Authority

29 Jordan

24.4 Oman

21.3 Bahrain

17.47 Qatar

* *


Mortality rates are relatively lowMortality rates are relatively low

Crude mortality rates per thousand in 2005 ,were:

7 Jordan

3.1 Bahrain

2.7 Oman

1.77 Qatar

1.4 United Arab Emirates


Types of Evasion in the Social Security Types of Evasion in the Social Security schemes of the Arab Asian Countries schemes of the Arab Asian Countries

• Fictious self- employment.Fictious self- employment.

•Delay in paying the contributions due which lead to Delay in paying the contributions due which lead to indebtedness. indebtedness.

• Concealment of workers .Concealment of workers .

• Underreporting of the number of employees. Underreporting of the number of employees.

• Underreporting of earnings where benefits are based Underreporting of earnings where benefits are based on the highest last few years of earning. The full career on the highest last few years of earning. The full career earnings have no effect.earnings have no effect.


REASONS BEHIND EVASIONREASONS BEHIND EVASION

1.1. High contribution ratesHigh contribution rates

The Social Insurance Institution Total Rate

The Pension Fund Commission (Bahrain) 18%(Nationals)15%(non-national military)

The General Organization for Social Insurance (Bahrain) 15% Nationals

3% Non-nationals

The Social Security Corporation (Jordan) 16.5%

The Public Institution for Social Security (Kuwait) 27%

The National Social Security Fund (Lebanon) 23.5%

The Public Authority for Social Insurance (Oman) 19%

The General Corporation for Insurance and Pension (Palestinian National Authority)

21.5%

The General Retirement and Pension Authority (Qatar) 15%


The Social Insurance InstitutionTotal Rate

The General Organization for Social Insurance (Saudi Arabia)

20%

The Institution of Social Insurance (Syria) 24%

The General Pension and Social Security Authority (UAE)

22.5%

The General Authority for Social Security and Pension (Yemen)

13%


Country Average Wage

Syria40.4% of wages are below 108 USD

Yemen300 USD

Oman 454 USD

Jordan366 USD

Lebanon500USD

Bahrain 690 USD

Saudi Arabia1330 USD for the Annuities Branch and 580 USD for the Occupational Hazards Branch.

Kuwait2116 USD

2. Low wages compared to high cost of living and inflation 2. Low wages compared to high cost of living and inflation rates:rates:

- - Deductible average wages in the social security systems for the year 2005 were:


3.Weak relationship between contributions paid and the benefits 3.Weak relationship between contributions paid and the benefits received:received:

The average pensions provided for the year 2005 were : :

CountryInstitutionAverage*

Pensions

JordanSocial Security Cooperation255

KuwaitThe Public Institution for Social Security 2747

OmanThe Public Authority for Social Insurance 338

Palestinian National Authority

General Corporation for Insurance and Pension

339

SyriaInstitution of Social Insurance 78

YemenThe General Authority for Social Security

and Pensions 68

BahrainGeneral Organization for Social Insurance

710

* *AverageAverage Pensions are in Pensions are in USDUSD


4. Myopia 4. Myopia

5. Lack of confidence in the system.5. Lack of confidence in the system.

6. Workers may be reluctant to report nonpayment by 6. Workers may be reluctant to report nonpayment by employers.employers.

7. Relationship with the labor market:7. Relationship with the labor market: Great majority of the workforce are not covered by social security protection because of their position in the labor market.


•Groups excluded from membership due to difficulties in Groups excluded from membership due to difficulties in monitoring them are:monitoring them are:

- Employees and their family members working for them;

- The self-employed;

- Certain groups of agricultural workers;

- seamen and fishermen;

- artisans; those working in forestry; non- nationals.

8. Financial Hardships: Establishments with financial crisis.8. Financial Hardships: Establishments with financial crisis.

9. Lack of trust in the State and discontent with the quality of 9. Lack of trust in the State and discontent with the quality of the public services.the public services.

10. Inadequate monitoring and enforcement system.10. Inadequate monitoring and enforcement system.

11. Ignorance of the benefits provided by the social security 11. Ignorance of the benefits provided by the social security schemes.schemes.


Let’s keep in mind that compliance has two extremely important Let’s keep in mind that compliance has two extremely important factors: factors:

Social factorSocial factor: : Protecting rights of the insured;

Financial factorFinancial factor: : Financial viability and sustainability of the social security programs

In the Seminar on Policies to Control Contribution EvasionPolicies to Control Contribution Evasion, , participants came out with a set of result:

- Importance of automated IT systems in monitoring contribution payers and improving external cooperation through electronic links with governmental bodies and other related parties.

- Increasing the authority and resources provided given to the social security inspectors in order to give them the necessary powers to withhold and seize the holdings and accounts of employers in arrears without the need for judicial decisions.

- Urging government bodies to pay contributions due in order to become the model and good example of compliance.


-Delivering high quality services which meet customer needs and expectations as a means of marketing the social security services to build trust between the scheme and its beneficiaries.

-Reducing the compliance burden through quick response and follow up of the amounts due, so that fines and penalties would not accumulate and turn into an additional burden.

- Importance of intensive information campaigns for both employers and employees.Measures to raise compliance Measures to raise compliance

First: Raising public awareness through:First: Raising public awareness through:

A.A. Providing ongoing information campaigns through radio and Providing ongoing information campaigns through radio and television programs and press releases; brochures and television programs and press releases; brochures and pamphlets.pamphlets.


B. Meetings with employers and employees;Meetings with employers and employees;C. Regulations and registration forms related to registration C. Regulations and registration forms related to registration

and collection of contributions functions are made as and collection of contributions functions are made as simple and easy-to-understand as possible.simple and easy-to-understand as possible.

Second: Effective inspection systems:Second: Effective inspection systems:

A- Establishing special departments for fighting evasion.Establishing special departments for fighting evasion.

B- designating highly-qualified, sufficiently trained and motivated designating highly-qualified, sufficiently trained and motivated inspectors. inspectors.

-C- Raising the authorities of the inspectors:C- Raising the authorities of the inspectors:

-They have the right to examine and check accounts, balance sheets and financial documents and records.

-D- Motivating inspectors, in order to fight corruption.D- Motivating inspectors, in order to fight corruption.

Third: Effective enforcement measures:Third: Effective enforcement measures:

A- Legal measures:A- Legal measures:

- Imposing legal actions to enforce payments. (Reasonable penalties are levied and contributions should be paid within a preset period of time.


-These actions might reach imprisonment.

-Social security debts have priority over other creditors.

B- Administrative measuresB- Administrative measures:

-Employers need certificate of compliance from the social security institution before they are issued of business license or government contracts or work permits, through connection with public authorities responsible for issuing of permits.

Fourth: flexibility in enforcement:Fourth: flexibility in enforcement:

Penalties should not be so severe in order to improve collection effectiveness and raise incentive for firms to contribute :

-Deferred payment is permitted to be made in installments, in some cases.

- The social security institutions may write off part of the penalties and fines imposed.


Fifth: Modern facilities and IT system:Fifth: Modern facilities and IT system:

• Efficient automated registration system are being introduced in many social security institution and contribution records are being computerized.

•In Bahrain, the General organization for Social insurance, turned into paperless office as of January, 2006.

•Saudi Arabia, introduced an automated system (SIMIS), serving around three million insured persons.

The system allows:

Contributor’s functions:

-Benefits calculations.

-Employment history.

-Medical committee decisions.


Employer’s functions:

-Installment details.

- Registrations forms.

- Contribution and injury reporting.

Sixth: Building up connections with public Sixth: Building up connections with public administrations and State services to obtain information administrations and State services to obtain information on liable employers from multiple sources.on liable employers from multiple sources.

• In Kuwait, the social security system is connected to the Ministry of Commerce, Labor and Health and the municipalities.

• In UAE and Syria, the social security institutions both hold connections with the Ministry of Labor.

•In Bahrain, the GOSI has links with Ministries of Labor, Commerce, Education, Housing and Agricultural, besides links with the Department of Statistics and the Public Administration for Nationality, Passports and Residence.


Seventh: Introducing hot line services and call centersSeventh: Introducing hot line services and call centers

Eighth: Simplification of procedures related to contribution Eighth: Simplification of procedures related to contribution payments:payments:

A. Direct cash payment or payment in cheques to one of the social security institutions offices;

B. Payment through banks;

C. Online Payments.

Protecting rights of the employees:Protecting rights of the employees:

• The social security laws stipulate articles that guarantee the rights of the workers obliging the employers to bear the amounts due from contributions.

Extending Coverage plans:Extending Coverage plans:

• The application of the Unified System of Insurance Protection Cover for the Gulf Cooperation Council citizens working outside within the council member states.


• In Bahrain, starting June 2005, coverage was extended to cover establishment with one or more employees.

• Oman, is examining the possibility of extending coverage to self-employed and professional nationals.

• The United Arab Emirates, are planning to extend coverage to employers and self-employed in free occupations.

• In Kuwait, they are considering introducing insurance against work injuries and health insurance.

• In the Palestinian National Authority, there is a plan to adopt the Public Pension Law.

•The Syrian and Jordanian social security institutions are contemplating the feasibility of applying the benefits of health insurance and unemployment insurance.


Risk analysis:Risk analysis:

More investigation into characteristics of the non-complying firms and workers is needed:

Economic sectors and size of establishments where contribution evasion is high.

Characteristics related to workers.

Information related to the labor force and a set of key performance indicators related to contribution collection and enforcement need to be adopted in the social security systems.


Conclusions:Conclusions: Efficient collection of contributions has a crucial importance to any social security scheme;

The Arab Asian Countries are adopting effective administrative measures to ensure compliance: Field inspections and information campaigns for raising awareness of employers and employees are being intensified; flexible and modern IT systems are being introduced and effective enforcement measures are being imposed.

The Arab Asian countries are contemplating to extending coverage whether compulsory or voluntary for new categories of the population and expanding the branches of social security coverage.


THANK YOU FOR LISTENINGTHANK YOU FOR LISTENING

the subregional office for arab asian countries

Documents