Bring evaders under tax net - biz community

By Lalin Fernandopulle

The business community and consumers do not have to worry about the increase of VAT to 15 percent, as it is only a temporary measure until the house is put in order, State Minister of International Trade Sujeewa Senasinghe said.

He said the tax system currently implemented in the country is confusing and added that it has to be simplified for the benefit of the people. “We are in consultation with economists of the Harvard Kennedy School of Economics to formulate a robust economic system.

They are willing to extend their fullest support with the sharing of expertise to boost productivity, exports and simplify the tax system to ensure tax evaders are brought into the tax net.” “Government revenue has increased three-fold since 2015 and the Budget deficit will be brought down to around five percent next year,” Senasinghe said.

However, economists and business chamber heads said while the tax base has to be increased to boost revenue to government coffers, steps should be taken to curb illegal imports through the Customs and undervaluing of goods which deprives the government of revenue.

National Chamber of Commerce of Sri Lanka President Thilak Godamanna said VAT has to be increased if the government needs revenue. However, taxing the health care and telecommunication sectors will create a bad impression of the finance management of the country.

“The increase of the threshold will ease the burden of small traders. However, to make the best use of VAT, the government must take stern measures to stop illegal imports and undervaluing of goods at the point of import.. If not, the tax issue will be an eternal problem to the consumer,” he said.

National Chamber of Exporters President Sarada de Silva said while taxes are increased to enhance revenue, the government should take steps to collect taxes from tax evaders through a proper mechanism. Measures should be taken to curtail illegal imports to increase revenue.

Softlogic Holdings (Pvt) Ltd. Chairman and Manging Director Ashok Pathirage said he is concerned about VAT on private sector health care and added that is not a good move as around 20 percent of the business sector who patronise private hospitals will switch on to government sector hospitals. “My question is whether the government is equipped to cater to the influx of patients to government hospitals? The VAT imposed on private sector health care will be an added burden on the patients,” he said.

A spokesman for Dialog Axiata Plc said that the company will comply with the directive of the government to increase the VAT upto 15 percent on services.

A senior business analyst said the 15 percent Value added Tax (VAT) that will be imposed on private health services other than diagnostic tests, dialysis tests and OPD charges excluding medical consultations under the VAT Amended Bill is not the right way to go about it.

He said the health care sector should not be subjected to VAT and this is not a healthy move.

The cost of living is on the rise and people are finding it hard to meet their daily needs.

On the other hand, the government increased the salaries of the public sector by Rs 10,000.

There are massive losses reported from State-owned enterprises. The government is not privatizing the loss-making State enterprises. Therefore, somebody must pay for these losses and the government has no optin, but to increase taxes, he said.

The government needs revenue. However, it should be done in a systemic way that would not burden the people.

The mega projects that are not generating revenue such as the Hambantota airport and port projects should be turned into revenue generating projects which would reduce the burden on the economy, he said.

The government will present a VAT Amendment Bill shortly according to a senior Minister. The VAT was increased from 11 to 15 percent which was to come into force in May this year.

However, the proposed move to increase the VAT to 15 percent was shot down by the Supreme Court in July, as the due process had not been followed when drafting the legislation.

The proposed 15 percent VAT is also applicable on the telecommunications sector, tobacco, air ticketing fees from Sri Lanka to other countries and powdered milk which contain added sugar or other sweet matter.

The threshold for retail and wholesale trade has been increased to over Rs. 50 million per annum.