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ICASL proposes : Better recognition and rewards for compliant taxpayers

Institute of Chartered Accountants of Sri Lanka (ICASL), the country's premier national accountancy body, has provided the government with a detailed proposal to recognise compliant individual taxpayers.The proposal suggests issuing taxpayers who have filed their tax returns and paid their taxes on time with 'Green cards' that would entitle them to be treated as premier customers of the Department of Inland Revenue.

Additionally, the ICASL suggests that compliant taxpayers be issued with gold, silver and bronze cards, based on the quantum of tax paid annually.

These cards would entitle their holders to privileged treatment and recognition at public institutions such as government departments, statutory bodies and the airport, enhanced duty free baggage allowances, preferential interest rates from state banks, priority in admissions to national schools and priority in reservations of holiday bungalows owned by government departments and state banks.

"There is clearly a need to create a culture of tax compliance in this country," ICASL President Asite Talwatte said. "These suggestions are aimed at achieving that, and we have also urged the government to implement a taxpayer charter to empower compliant taxpayers and treat them with dignity." Recognising that the capacity to pay is fundamentally important in a tax regime, the ICASL as a revenue enhancement measure has proposed a luxury rate of Value Added Tax (VAT) for luxury items that are only consumed by people who possess a very high purchasing power.

In line with the same principle, the Institute also recommends a levy on the sales proceeds of shares transacted on the stock exchange.

If stock market transactions are made liable to income tax, such levies can be allowed as a deduction against income tax. In addition, as an attempt to broaden the tax base, it has suggested that the government should focus on the informal sector which may bring in substantial revenue to the government as it is timely following the amnesty.The ICASL has called for the scaling down of tax holidays and the grant of specific relief for equity capital formation, reasoning that this will bring better benefits to businesses as it reduces the cost of capital while improving financial expediency.

The Institute proposes that full deduction against statutory income be permitted for investments made in equity capital of a business enterprise.It also recommends to increase the tax free threshold to Rs 360,000 per annum, and suggests that the present threshold of Rs 108,000 for income tax on interest be equalised to the personal allowance, considering the aggregated income from all deposits.

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