Revenue proposals and new tax policies expounded

by Gamini Warushamana

The debate on the budget continued last week and the business community and tax experts were keen on the revenue proposals and new tax policies proposed in the budget. A seminar organised by the Ceylon Chamber of Commerce (CCC) last week discussed the matters in depth.

Senior Tax Advisor, Ministry of Finance R.P.L Weerasinghe explained the issues raised by the tax consultants and the business community on some complicated tax policies proposed in the budget.

Weerasinghe said that it was the seventh seminar he was addressing after four days of the budget.

These are your proposals and therefore this time there aren't many issues. But we are ready to correct any dispute when drafting the Law, he said.

Weerasinghe did not provide direct answers for complicated issues raised by the panellists and the participants. He said that any amendment can be made by drafting the law and there will be consultation with the tax experts, business community and concerned groups.

Senior partner, Gajma and Co. N.R. Gajendran was one of the main critiques of the tax policies at several seminars since the presentation of the budget. Addressing the ACCA organised seminar a few days ago, he said Weerasinghe is like a father.

He gives us the thing we demand little by little and he has given small portion that we asked three years ago. The Budget proposes Rs. 750 billion in tax revenue. Weerasinghe is good in arithmetic but there are no revenue enhancement proposals.

He said that though the government claims that 79,000 new tax files have been opened under the government's new tax base widening process most of the individual files do not have a meaning. They are not business files.

The best policy is to get some tax from everybody, even from government servants. There are 800,000 government servants in the country. All can't pay but many of them can and are ready to pay taxes.

When government servants start paying taxes the tax culture in the country will also be changed, he said.

Commenting on tax exemptions on foreign remittances including dividend and interest income Gajendran said that to implement the policy the obsolete exchange control laws passed in 1972 and Central Bank laws should also be amended. Weerasinghe asked whether Gajendran wants to open the capital account.

Gajendran said that the proposed tax laws do not go with the policy. Tax exemption has been given to agriculture but heating, cooking and grinding have been excluded.

There are three privileged groups-agriculture, government servants and Gem and Jewellery industry. Around 80% of the businesses are SMEs and we asked a three-year tax exemption for the SME sector, but it had been given to big companies.

Gajendran said that even in a modernisation process of the Inland Revenue Department the tax assessments are erroneous. There are serious computer errors. He said that there are serious translation mistakes in the English version of the budget and proposed to draft the original in English and translate them to other languages.

Weerasinghe said the policy objectives of the budget are to protect the motherland, infrastructure development, develop and protect local industries and boost foreign earnings. All these need money and we want to increase revenue and therefore the tax revenue increase is the main focus of the tax policies.

In the 1980s government revenue was around 20% of the GDP and it was reduced to 13.2% in 2003. In 2004 we targeted a 1% increase annually and measures have been taken for the purpose.

Today we have achieved the targets and in 2008 our revenue target is 15% of GDP and the figure is over 20% in most of the other developing countries.

We have taken hard revenue measures. But we got proposals from the business community and tax consultants. We discussed with 25 clusters in policy making and the tax cluster is one of them. We can discuss and solve any issue to make laws, Weerasinghe said.

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