Positive transformation in tax system
By Sanjeevi Jayasuriya
A positive transformation of the tax system has taken place over a
period of time. This has been done consciously, bearing in mind the
development of the contemporary environment and to promote Sri Lanka as
a conducive place, from a fiscal point of view to do business, Partner,
Gajma and Co., Chartered Accountants, and Tax Consultant, N.R. Gajendra
told Sunday Observer Business.
Excerpts of the interview:
Although Sri Lanka has done away with several taxes it has not been
given publicity internationally. It is time that Sri Lanka informs and
empowers international multinational businesses of this striking
transformation some of which are not found in many parts of the world.
Tax Consultant N.R. Gajendra |
Sri Lanka has done away with all capital forms of taxes. "We do not
now have taxes such as wealth tax, gift tax and capital gains. Only a
few countries have done this. Many of the 'nonsense' taxes such as debit
tax also have been done away with. Relatively, the number of taxes has
been scaled down. Now other than import taxes there are only a few
export taxes."
The main tax base is VAT, NBT and income tax. The tax rates for
companies and individuals have been bought down to 28 and 24 percent.
"I believe that this was done by the State on its own initiative. I
do not think that anyone ever asked for such a reduction. These rates
are competitive even in the South East Asian region. There is much focus
on simplification. In the case of an individual there is no requirement
to file returns unless you have business income and rent income."
PAYE employees need not file tax returns. Interest income and
dividend income follow the presumptive tax. People who own such passive
income need not file returns. If the tax associate rates are met,
compliance has been encouraged. In the case of personal income tax if
people pay their taxes one month in advance they get a discount of 10
percent.
If an person pays Rs 250,000 as tax per annum for 10 years, one could
import a vehicle where total import levy is reduced by one percent. This
is almost like getting back the tax paid to the state as in the case of
a rebate.
The SMEs have been looked after like never before. The Micro and
Small and Medium Enterprises (MISME) no longer need to fear taxes. These
MISMEs are the backbone of the economy, contributing almost 70 to 75
percent of the GDP. These enterprises have preferential tax rates.
MISMEs having a turnover of less than Rs 250 million and less than Rs
100 million in profits per annum need not file returns. Large taxpayers
have also been recognised with gold and silver cards.
These positive and proactive reform policies may have brought about
challenges to the government. The revenue to the GDP is not at its best.
"I believe this has been consciously done considering future growth.
The challenge is to find innovative methods of broadening the tax base."
May be the people still fear the tax administration where the policy
has not be given effect as stated. The time is right to project and
promote Sri Lanka as a place where multinationals and transnational
corporations could base their headquarters, financial centres, research
centres, counters for sharing services and training centres in Sri
Lanka.
Sri Lanka is a small island that is blessed by nature. The
infrastructure facilities that are fast developing is an added advantage
to accelerate the country's forward march. The country has no extreme
weather patterns and no water shortage and there is plenty of food.
"We have a literate, healthy and trainable populace. In fact now
there is a shortage of manpower. The fiscal reforms if packaged and
promoted with nature, the sky may be the limit for Sri Lanka."
The future of the country is in the hands of Sri Lankans. When plans
are in place for highways connecting major cities people are hopeful
that they could compete with countries such as Singapore. |
