SME sector tax compliance vital for economic growth

By Gamini Warushamana

Large business organisations that represent less than 20 percent of the corporates contribute 80 percent of the tax revenue of the country and tax compliance of the SME sector needs to improve for Sri Lanka to achieve higher economic growth and other targets, Commissioner General of Inland Revenue (IRD), Mallika Samarasekara told a seminar on SME Taxation in Kandy last week.

It was organised by the Institute of Chartered Accountants. She said that there are around 2,000 tax files of large corporates which contribute 80 percent of the tax revenue.

SMEs that represent 80 percent of business organisations in the country account for only 20 percent of tax revenue.

Sri Lanka has the lowest tax rates in the world.

The tax rate applicable to SMEs is 12 percent and no other country has a tax rate of less than 17 percent.

Therefore, we call upon the SME sector to fulfill its obligation by paying taxes and it would not be a burden on the organisations.

She said that Government has invested a large amount of money on infrastructure development from which the corporate sector has already gained tremendous benefits.

The development of road networks, ports and airports and other infrastructure is visible and taxpayers can be satisfied with the Government putting tax money into proper use.

Government investment in recent years was around six percent of the GDP and after 2009 a large amount of money was invested in the rehabilitation of the North and East and now the focus is on improving infrastructure. This creates a path for private sector investment.

The Government targets an eight percent economic growth rate, an unemployment rate of less than four percent and inflation to be below five percent.

It also targets to reduce the Budget deficit, public debt and increase per-capita income.

The economy is moving in the right direction and this can be seen not only through figures but also on the ground from the North to the South, she said.

The new tax policy was introduced in 2011 to reduce the tax rate and widen the tax base to increase tax revenue.

Estimated Government expenditure for this year is Rs.1,900 billion and estimated Government revenue is Rs.1,400 billion.

The anticipated tax revenue is Rs. 500 billion.

The increase in tax revenue will help reduce the budget deficit and government debt which is essential for macroeconomic stability that will finally help the corporate sector, she said.