People friendly tax system the need of the hour

A people friendly tax system together with plans to increase investment is needed to achieve the medium term growth projections of the government, said a top government official.

The government is planning to achieve a 8 per cent growth within three to four years from 6 per cent at present, and then to double digit growth, 10-12 per cent and higher. The current situation does not permit acceleration of growth because of many factors including tax policy. Therefore the new economic policy framework introduced by the government in the budget 2010 has addressed issues related to accelerating growth. Action will be taken to support the taxpayer to be a truly functional self-assessed person by making the tax system simple, friendly and effective. The tax system should be simple and help to attract investment as well. The rates should be reduced but there should be no exemptions for BOI registered enterprises. At present BOI enterprises registered under section 17 get incentives over local companies and there is no level playing field. This situation should be rectified. Most of the investments for BOI enterprises too are funded by local banks.

This leaves the banks with less funds to be given for local enterprises. An investor will consider the political and economic stability, labour relations as well as security prior to making the investment. Today, all these factors are positive and therefore the tax concessions are a bonus.

BOI should change its role and attract strategic investments in thrust areas highlighted by the government by doing promotions in a constructive manner rather than giving BOI status to insignificant ventures and giving them tax holidays as well as duty free concessions. These measures are affecting the state coffers. To achieve the growth projections the country needs a lot of investments. At present our investment is around 25% and measures should be taken to increase it to 40%.

The government has taken the lead and invested 6-7 percent of the GDP on ports, airports, expressways, irrigation systems, drinking water at a national level.

The private sector investment should be around 27-30 percent of the GDP so that the government together with the private sector can contribute in an effective manner to increase the growth rate as well as the per capita income of the country. This is the private sector’s turn, he said. SG