2009 Budget - NCCSL calls for reduction of input tax

by Gamini WARUSHAMANA

[email protected]

The National Chamber of Commerce of Sri Lanka (NCCSL) in its budget proposals for the 2009 national budget has recommended that the retention of input tax be reduced to 5% or 0% from the present 15%.

Today, the input tax allowable for any taxable period was restricted to 85% of the output tax declared or the actual input tax paid, whichever is lower to be effective from January 1, 2007. Unclaimed input tax, if any, shall be carried forward to the subsequent taxable period subject to the same restriction.

However, under normal circumstances in many business organisations, the balances carried forward are expected to increase monthly and the total input tax paid cannot be claimed. This in effect will destabilise the financial base in the businesses as too much money is blocked in the VAT account, NCCSL said.

NCCSL has also recommended to work out excise duties as a percentage of the CIF price or CIF + import duty. Today it is worked out on the CIF price + Import Duty + VAT.

It has also proposed to deduct the contributions made to Pension and Provident Funds in full from the taxable income where such contributions are recommended by a qualified actuary.

The NCCSL has pointed out that today customers are subject to debit tax on two occasions i.e., when receiving a loan and when repaying the loan if both transactions are effected through a current account and said this an additional burden on the people. It has recommended, exemption of all transfers made from a current account to a loan account of the same party from debit tax to eliminate dual taxation.

The Chamber has also proposed to increase the personal income tax limit up to Rs. 600,000 per annum which is Rs. 300,000 and above today. The NCCSL said that as the prices of all goods and services have increased people find it difficult to manage their daily expenses. It also said that taxing only the private sector employees is unfair while government employees and elected members are exempted. Considering regional development and increasing investment needs in the agricultural sector, NCCSL has recommended to make profits on agriculture free of income tax. Last year’s budget provided tax relief for only three years. This will help achieve a greater success in the Api Wawamu Rata Nagamu program, it said.