Simplify tax reforms and improve service delivery

Tax continues to be an important ingredient in attracting and encouraging investments in various developing economies. In the context of globalisation and liberalisation, no country is immune to changes occurring outside its borders.As a result the tax system in many jurisdictions is subjected to modifications and reform by studying and adopting what may have been applied in other jurisdictions.

These were the opening remarks of the 12th Annual Tax oration delivered by Dr Veerinderjeet Singh President Malaysian Institute of Taxation & Chairman International Fiscal Association- Malaysia Branch and a well known writer in Taxation at a presentation made in Colombo at the Institute of Chartered Accountants.

Speaking on reforms in the region, Dr Singh stated that reforms in Malaysia are ongoing and some of the specific areas were self assessment to companies/individuals, Goods and Service Tax (GST), introduction of Tax Audits and Tax Investigations and clarification of rights and obligations of all parties. Thailand’s major reform was the introduction of VAT in 1992; Singapore introduced a single tier system of Corporate Taxation in 2003. Philippines revised their VAT rates in 2005 and also took steps to introduce Tax Amnesties from 2005 to 2007.

Indonesia‘s reforms were primarily focused on tax administration aspects. Dr Singh was of the opinion that all countries focus on incentives to attract investment but the best could be to lower corporate tax rates.

Sri Lankan tax reforms have been progressive but consistency has been lacking. The Taxation Commission report of 1990 follow up has been poor resulting in ad-hoc decisions. The Commission recommended the abolition of wealth taxations but since of late Income Tax return requires disclosure on wealth thus affecting tax payer confidence in the system. In the mid nineties Sri Lanka moved from Business Turnover Tax (BTT) to Goods & Service Tax (GST) & when GST was gaining familiarity GST was replaced by Value Added Tax(VAT). Sri Lanka’s basic corporate Income Tax rate too has lacked consistency.

In 1993 the government introduced a Tax Amnesty which of course had many flaws but a subsequent government repealed this law creating chaos in the system. In 2004 the government implemented a Minimum Advanced Tax under the style of Economic Service Charge (ESC) based on turnover perhaps not known in any other part of the world. Several amendments were brought over the years to mitigate the effects on the businesses. The long delays associated with VAT and Income Tax Refunds affect the confidence in the system affecting compliance.

On compliance Dr Singh suggests that to facilitate compliance adjustments for tax computations should be minimal, reduce the time frame for resolving appeals, minimize tax returns on those who have only employment income, timely refunds, ombudsman servics, environment for voluntary compliance etc.

One third of the compliance budget of the Australian Taxation Office (ATO) is on services to the tax payer.

In facilitating compliance the underlying philosophy should be that the tax payer is a client and not a thief to be caught.

In the United States the Internal Revenue Services (IRS) surveyed 50,000 people to help the agency improve the way it provides taxpayer services.

These surveys are designed to provide the IRS with greater and more accurate understanding of the taxpayer needs.

Informative websites are now being used by most countries. The ATO and IRAS (Singapore) provides email facility to any registered tax payer. Thailand uses “e-tax info” delivering regulations and rulings via email. Thailand, Malaysia and Singapore provide e-filing facilities. Facilities will soon be available for tax payers to view their balances.

Dr Singh in conclusion stressed the need to recognise the tax payer’s rights that has become very important in this current day and age. Tax agencies must adopt best practices, use technology, minimize delays, and provide friendly and courteous service. Introducing a well crafted tax payer’s charter and monitoring its effectiveness is a significant aspect of the culture of being accountable and receptive to ideas.

The delivery of Dr Veerinderjeet Singh a renowned Tax expert in the region was timely and should serve well for our authorities to take note particularly for reforms, tax payer rights, simplicity and technology being the key ingredients for a significant change to the whole tax culture.

For the 12th successive occasion the medallion to the speaker was presented by Esmond Satarasinghe, Former Chairman of Brooke Bond, and a member of the first ICASL council and for many years thereafter.