New Inland Revenue Bill to ease indirect tax burden – Finance Minister
Sri Lanka’s Inland Revenue Bill, a joint product of International Monetary Fund (IMF) and government authorities, will be presented in Parliament by the third week of August.
The aim of introducing the new bill is to gradually reduce the indirect tax burden on the people while introducing reasonable direct taxation on considerable income earners, Finance Minister Mangala Samaraweera said at his maiden media conference convened in Colombo on Friday. He noted that the target is to shift towards a 60:40 indirect-to-direct tax ratio from the current 80:20 aiming to increase the number of persons who should be paying income tax. Direct taxes are generally referred to as the tax on income.
Tax exemptions will not be allowed in an ad hoc manner while the tax free allowance has been increased to Rs.100,000 per month from the current Rs.50,000. Referring to the heavy debt burden of the country, he noted that the government will have to pay an accumulated debt of Rs.3.2 trillion during 2018-2019 periods. Minister Samaraweera emphasized that it was unfair to allow the rich and the poor to pay the same indirect tax for basic commodities and, in this context the government is trying to ease this tax burden on the poor while imposing a reasonable direct tax on rich and income earners.“A major factor of the Government’s fiscal policy is to provide a stable policy regime with simpler, clear and more transparent tax policy,” he added.
Reasonable suggestions of the public including business chambers and taxpayers will be incorporated along with the Supreme Court directive in the bill at the committee stage debate or third reading in Parliament. The bill has been challenged in the Supreme Court which is currently hearing a petition. The suggestion to impose a 14 per cent tax on charities under the proposed new law is applicable for those engaged in income generating activities only; he said adding that charitable institutions and religious establishments which maintain commercial activities from ancient times would be considered for tax exemption. Minister Samaraweera emphasised the need of giving a taxpayer number for everyone over 18 years of age regardless of whether they had to pay tax or not.
State Minister for Finance Eran Wickramaratne said it would take at least six months to file returns and taxpayers and Inland Revenue officials had time till the second half of 2018 to become familiar with the new Inland Revenue Act.Tax officers will be trained before implementation to ensure that they understand the procedures and the relevant provisions, he said, adding that new technology, software and a manual of instructions would be provided to assist the officers. Inland Revenue Department officials will have to create awareness among the public on the changes in the law, he said.