Call for enforcement mechanism to collect taxes

By Lalin Fernandopulle

With the debate whether the upward revision of the Value Added Tax (VAT) should be enforced or done away with, industry personalities expressed the need for an effective enforcement mechanism to collect taxes from businessmen and professionals. Corporate personalities said imposing or increasing taxes must be done with thought and managed properly.

Precedent Partner of Nithya Partners, Aritha Wikramanayake said VAT or tax by any other name should be rational. It should be fair by those who are being taxed. Doctors and lawyers are taxed but they do not pay their taxes. There should be a solid enforcement mechanism to collect taxes from businessmen and professionals.

The increase of the VAT from 11 to 15 percent effective from May 2 this year stirred up a hornet’s nest among various sections of the business chain and the public. However, the revision of the tax was suspended by the Supreme Court a fortnight ago reverting it back to the Parliament for due consideration.

“The general perception in the country is that the government has not got its story or act together. There has to be meeting of minds between the two parties that constitute the government. Going back and forth in key policy decisions such as the case of the VAT and the appointment of the Central Bank governor cannot be accepted. A prime factor for smooth operation of businesses is consistency in policy to make decisions,” Wikramanayake said.

He said the way forward to bring in stability and create a conducive atmosphere for businesses to thrive with more foreign direct investments is consensus where there is one voice, allocate responsibilities and hold people responsible for what they do and build a team of people with professionalism to run key positions.

Consultation alone is not adequate but there needs to be a means to extract what is important and implement suggestions. Bureaucracy, the implementing arm is unfortunately not there today. It was destroyed by the former regime. The country needs to focus on areas that it is strong such as the IT sector which has great potential, train women seeking foreign employment and utilize their skills for the country, he added.

With regard to global challenges, Wikramanayake said the future will be tougher with uncertainty looming. The effects of Brexit will be felt later and the US elections will be a determining factor for global trade and politics. Sri Lanka has to focus on alternative markets such as India, Africa and China.

Former chairman, Ceylon Chamber of Commerce, Chandra Jayaratne said the focus of VAT should be to expand its cover to include the wholesale and retail markets and not merely to increase the rate. “The VAT is a good proposal but has to be managed properly with thought. The rich and the poor pay the same tax.”

“Key decisions should be taken after consulting stakeholders and done in a transparent manner. The right people should be appointed for the right job. There are excellent and dynamic people who should be made use of,” he said.

Chevron Lubricants Lanka, CEO/Managing Director Kishu Gomes said the business community has been lobbying for policy consistency for over two decades. “Businesses are unable to make medium to long term decisions due to the ad hoc changes to the VAT structure. The approval process in business organizations take time.

“Business chambers should address vital issues of this nature where the business community is put into severe inconvenience,” Gomes said.