VAT or what?

by Uditha Kumarasinghe

Ravi Karunanayake

Mahinda Amaraweera

Susil Premajayantha

Anura Priyadarshana Yapa

The SLFP Ministers in the National Unity Government yesterday categorically denied that there were differences between the UNP and the SLFP over the VAT issue. Neither the Prime Minister nor the Government has shown any opposition to the amendments proposed by the SLFP, they said. The SLFP Ministers however, maintain that some relief should be given to the retailers and wholesalers.

The Special SLFP committee comprising Ministers Susil Premajayantha, Anura Priyadarshana Yapa, Mahinda Amaraweera, Dilan Perera and Lakshman Yapa Abeywardena is still studying the SLFP amendments and will submit their counter proposals within the next couple of days on how the Government’s income can be increased without passing the burden on to retailers, wholesalers and consumers.

According to the SLFP faction in the Government, the core issue is not increasing VAT from 11 to 15 percent, but, increasing the VAT threshold and imposing VAT on the health sector. The SLFP Ministers have decided to vote for the VAT Amendment Bill in Parliament, if the threshold on charging the tax from traders is increased from Rs. 1 million to Rs. 2 million monthly turnover, and the daily income of Rs.33,000 amended to Rs.66,000.

The SLFP Ministers in their counter proposals will point out alternative ways to collect taxes and increase the Government’s revenue rather than passing the tax burden to retailers and wholesalers. Speaker Karu Jayasuriya on Tuesday (August 9) told Parliament that the Supreme Court had determined that the Value Added Tax (Amendment) Bill was unacceptable as it had failed to adhere to the due process that a financial Bill should follow. The following are comments from several Ministers on the issue:

UPFA General Secretary and Fisheries and Aquatic Resources Development Minister Mahinda Amaraweera

Q: Is there a division in the SLFP over the VAT issue?

A: All SLFP Ministers in the Government are of one stance. The SLFP has proposed some amendments to the VAT Bill. It will be further discussed within the next few days. Two special committees have been appointed by the SLFP and the UNP to discuss the issue. Therefore, a very good set of proposals will be put forward after a wide range of discussions between the two parties.

Q: Is it possible to develop a country without taxes such as VAT?

A: Definitely not. VAT is one of the good methodologies in the world to impose taxes. The problem is, educating the public on this. We have to make a few amendments to the VAT Bill. A country cannot carry on without VAT, however, some amendments need to be made to the Bill. The financial allocations for education have been increased fourfold compared to last year. In addition, allocations for health, Samurdhi benefit and salaries of public servants have to be made.

Q: What are the alternatives you propose if VAT is removed or reduced?

A: We have proposed alternatives without causing any adverse impact on the state revenue. We know that a Government cannot progress without increasing its revenue. For example, we have proposed to bring down the fuel prices by a certain amount, rather than increase it. According to the profit earned by the IOC and CPC, they are in a position to pay more taxes. We hope the amendments proposed by the SLFP would be sufficient for the purpose.

Q: The Joint Opposition (JO) questions, ‘by supporting or opposing VAT are you with the Prime Minister or the President’. What is your comment ?

A: They make silly statements. The JO doesn’t want taxes and makes various irresponsible statements to reduce VAT and the prices of goods. They don’t present facts based on logical grounds.

Once, an MP in the JO said, a five member family can survive on a monthly salary of Rs.2,500. The JO members don’t express their views after a comprehensive study of the subject.

They just utter words to hoodwink the masses.

We will vote for the VAT Bill after few amendments are made. They are simple amendments and the Prime Minister has not shown any opposition to them.

There is no issue between the UNP and the SLFP. Neither the President, Prime Minister nor the Government are divided on the issue. Being in the Government, we could rectify the shortcomings in the VAT Bill.

Finance Minister Ravi Karunanayake

Q: VAT has become necessary because so many people and companies are not paying direct taxes. What could be done to widen the tax net?

A: Instead of concentrating on a few, we want to enlarge it to cover a greater number whose higher tax compliance will structure a greater tax base.

Q: If the VAT rate is amended, what are the alternative arrangements?

A: Those who ruined the economy are trying to prevent the Government earning due revenue. We will ensure a higher revenue collection soon.

Q: People are already burdened with the high cost of living, so, is it fair to impose more tax burdens on the people?

A: What else can be done? People silently watched 11 years of plundering of the nation and nobody dared say anything. If they had voiced dissent, they would have ‘vanished’ in white vans and not been seen. Today, we have a full-fledged democratic government.

Q: The Government says, more taxes are necessary to settle the debt accumulated during the former regime. What is the progress of tracking down the funds alleged to have been taken abroad?

A: It is in full motion at present. You will see things unfold one by one. At the end of the day, benefits should accrue to the people and we will do it. At the moment, two or three lands have been acquired by the Government.

All of them are assets robbed from the people. The former Government mandated the NSB for a loan of US$ 1,000 million with that they posted at 8.84 percent interest rate. Today, rated companies can borrow at 2 percent. It is a heinous crime by the administrators of the Rajapaksa regime to take at 8.84 percent and put the innocent bank in jeopardy. When we take steps to correct them, they make a big hue and cry. Those shouting are the ones who prevented us collecting the revenue, because they didn’t want it to happen.

Science, Technology and Research Minister Susil Premajayantha

Q: Has the SLFP appointed a committee to look into the VAT issue?

A: The SLFP committee had a discussion with Finance Minister and Ministry officials two weeks ago. Our position is that there are many alternative ways to collect taxes and increase the Government’s revenue rather than passing the tax burden to retailers and wholesalers. The SLFP will submit its counter proposals in the next couple of days.

Q: Is everyone in the SLFP in favour of keeping the VAT at 11 percent, instead of the present 15 percent?

A: The issue is not increasing the percentage of the VAT from 11 to 15 percent. The issue is increasing the VAT threshold and imposing VAT on the health sector.

Q: If VAT is reduced, how will the Government fund the gap in revenue?

A: That is the reason we propose to submit our counter proposals, to indicate how we will maintain the income.

Q: Do you agree with the President that VAT should be brought down?

A: It means we must give some relief, especially to the retailers and wholesalers by introducing an alternative.

Q: Is there a major division in the SLFP over VAT? Have they come to an agreement on the amendments to be proposed to the VAT Bill?

A: All the SLFPers are of the view that some relief should be given to the retailers and wholesalers. The special SLFP committee is studying the amendments. We will submit our counter proposals within the next couple of days on how to increase the Government’s income without passing the burden to retailers and wholesalers.