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| Sunday, 14 September 2003 |
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Book Review : Sri Lanka Tax Review The Sri Lanka Institute of Taxation, a body dealing exclusively with taxation and tax-related activities and now an incorporated body under an Act of Parliament, has published its latest official journal, the Sri Lanka Tax Review Volume II No. 1. The journal is well presented and contains a number of taxation issues of current interest and even controversies that are being discussed in the country. These relate to such topics as the Value Added Tax (VAT), now creating a furore in fiscal and administrative circles, the ongoing tax amnesty, another issue of hot debate, some of the fiscal and tax changes resulting from the proposals of the last two budgets and the effects of three legal decisions in some recent important tax cases. To deal with the tax amnesty first, the article by D. C. Jayakuru examines the law and procedure resulting from the provisions of the Inland Revenue (Special Provisions) Act No. 10 of 2003 certified on March 17, 2003. It is a wide ranging Act giving legal immunity and exoneration to offences in no less than 26 statutes including income tax, Exchange Control, import and export control, custom duties, excise duties and stamp duties. Its main objectives as stated by the Minister of Finance K. N. Choksy are that "there are large sums of money that have not been declared for tax over the past several years" and the purpose of the legislation "is to harness this money into development." The article deals with such clarifications as who should make a declaration, what is to be declared, acknowledgement of the declaration, withdrawal of investigations and prosecutions and time for recovery proceedings, matters which are of importance to would-be declarants and taxpayers. It also brings out some salient points and apparent weaknesses in its provisions that could create problems in the future when declarants seek to take cover under the declarations made. The provisions apparently do not enable the Commissioner-General to use any discretion and all declarations are to be accepted at face value without verification or without proof. The articles on three separate tax cases bring out the effects and importance of the decisions made both as regards fundamental principles of tax law as well as in respect of factual matters. For instance, the Magpek Exports case marks as stated in the editorial to the publication, "a significant watershed in the advancement of taxpayer rights in this country." The Court had no hesitation in allowing the petitioner's application for a Writ of Certiorari for an order that it was entitled to a direct refund of Advance Company Tax paid. Landmark decision The Supreme Court also allowed with costs the taxpayer's appeal in another landmark decision in the case of Deva Rodrigo vs CIR. It was held that only the directly identifiable expenses incurred in earning exempt gross income is disallowable in considering the "reasonable expenses" that could be allowed in remitting foreign earnings exempt under Section 15(ccc) of the Inland Revenue Act No. 28 of 1979. The legal position emanating from the famous cases of Fernando vs. Ismail and New Portman Ltd. vs. Jayawardena had been held to be landmark decisions which protected the taxpayer against arbitrary assessment without providing sufficient reasons for rejecting a taxpayer's return, reasons which must be specific. In the case of Ponniah vs Weerasuriya and others, it was however held that such absence of reasons was a "curable defect" which does not preclude the Assessor from issuing a fresh assessment. This legal decision has been very critically examined and analysed in an article by Dr. Shivaji Felix who maintains that the decision is unsatisfactory as far as the protection afforded to the rights of taxpayers is concerned. The issue however has apparently now become more academic in lieu of the amendment under section 134(6) of the new Inland Revenue Act No. 38 of 2000 which now makes it lawful for an Assessor to make, where necessary, a further assessment in place of the assessment annulled. The VAT has currently created controversy particularly due to its inability to provide the estimated revenue. There are a number of reasons for the defective performance of the VAT, not the least being its structural weaknesses. The features of the VAT and some of these issues such as the effect of multi-rates, exemptions, other effects on the price level and on the customer are examined in an article by P. Guruge, Fiscal Advisor Ministry of Finance. The enlargement of the deferment provisions in the VAT is one of the reasons for the lack of prompt VAT collection and the provisions involved in the deferment scheme are explained and examined in another relevant article by P. K. D. Fernando. Changes to tax regime The budgets of 2002 and 2003 brought in a number of changes to the tax regime in Sri Lanka, the combined effects of which are analysed again by P. Guruge. Their effects on the corporate sector, personal taxation, the withholding taxes on interest and dividends under a schedular scheme, the enlarged allowable expenses, the new tax exemptions granted and the simplifications and administrative changes are explained in detail. The journal also contains a students' section which is of importance as the Institute is now conducting courses in taxation, where successful candidates are entitled to be considered as "authorised representatives before the Inland Revenue Department. It also contains miscellaneous items of interest such as the Sri Lanka Double Tax Treaty Update, the current Tax rate Schedule for 2003/2004, tax deadlines for 2003, a Tax Bibliography and a cumulative Index. All in all, the journal is interesting and should prove valuable not only to tax practitioners, tax lawyers and tax advisors, but also to students, academics, policy makers and: the taxpaying public. It is reasonably priced and is available at the taxation institute, Dehiwela. Reviewed by D. D. M.Waidyasekera |
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