Tax noose tightens round errant wholesale and retail traders
The noose is tightening on wholesale and retail traders as tax authorities enforce a new campaign against those attempting to evade the two per cent Nation Building Tax (NBT), Inland Revenue Department (IRD) officials said.
In a new, virtually fool-proof initiative, the department is now cross-checking the volume of Fast Moving Consumer Goods (FMCGs) sold to traders from the main suppliers.
By using this method, the department can detect traders who were in the habit of submitting their quarterly returns without submitting the actual turnover in a bid to avoid NBT levies, a senior official of the IRD revealed.
The IRD has directed milk powder companies like Fonterra which owns the Anchor brand; Nestle Lanka offering Nespray, Nestomalt, Cerelac, Milo and Maggi brands; Maliban, Lanka Milk Foods and Milco, etc to provide details of their sales to wholesale and retail traders in the island so that it can find out the actual volume of sales, he said.
The cross checking of actual sales with big suppliers will enable the department to arrive at a conclusion on the total turnover of traders, he said.
This tax collection system has forced certain retail traders to pay massive sums of money amounting lacks of rupees, after being ordered to by the IRD.
A retailer in Boralesgamuwa told the Business Times that he had paid around Rs. 500,000 as taxes and he is facing a cash problem at the moment.
He noted that he is now not selling Anchor milk powder and may be forced to close the business.
Several retail traders in Maharagama, Piliyandala, Ratmalana and Kollupitiya also expressed their concern on the new system of assessing NBT.
However tax officials said that they resorted to the new initiatives because these traders were defaulting tax by not disclosing their actual turnover to the department.
According to trade associations, the recovery of the NBT has far-reaching consequences since nearly all wholesale and retail sales as well as consumers are likely to bear the cost of this tax.
Importers and traders are liable to pay NBT at the point of import as well as at the point of sale negating the very objective of avoiding payment of tax on tax.
Moreover, the pricing of goods sold at wholesale or retail levels may change adversely as the effect of the NBT may be passed on to the customer/consumer.
Although the two per cent rate appears a small fraction of the cost of the product, the tax has negatively impacted on the margin of retail trade segment particularly in view of the fact that the retail trade segment is a high volume- low margin business operation, trade association sources said.
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