13th ICASL Tax Oration - future taxation policy in Lanka

Minister of Enterprise Development and Foreign Investment Dr. Sarath Amunugama delivering the 13th Annual Tax oration of the Tax Faculty of the Institute of Chartered Accountants of Sri Lanka recalling his early lessons from his economic gurus at Peradeniya when they were told not to tax the successful, emphasized the importance of not overtaxing the corporate sector and the new and emerging successful industries like Telecom.

He said the remarkable growth of the Telecom sector has benefited consumers.

However, the minister said that budget making has always been a dilemma and a tedious task for the PA governments who have always been strongly committed to social welfare and development.

Successive governments had to consider the key factors such as increasing petroleum costs and investing in health, education, income support (Samurdhi) and energy sectors in relation to the population growth.

These had to be given priority over policy prescriptions. This also necessitates the steps for higher tax revenue that has been a positive factor in the past several years.

Dr. Amunugama while complimenting the many reward schemes that have been introduced to create a tax payer friendly culture and enhanced compliance said that the tax payer should not be treated as a criminal. He appealed to the authorities to make compliance a painless process.

Today collection of tax revenue has become harder due to the prevalent economic downturn and the need to provide concessions on essential items. Despite the removal of VAT from nearly 21 essential items the Government is also compelled to pay a higher price for the supplies. Taking motor vehicles as an example, the Minister said that due to the curtailment of the import of high value motor vehicles import duty losses to the government have been substantial.

Other factors threatening revenue were the expansion of duty free car imports to a larger segment of public servants and the declining trends in tobacco and alcohol sales.

He called for the reintroduction of previously removed VAT owing to the declining oil prices.

He expressed concern over the plethora of cess levies adding to the costs that are now being introduced and its not uncommon for such temporary taxes to become permanent and the necessity exists for proper broad-basing. Temporary taxes are also detrimental to the objectives of Free Trade Agreements, he said.