WHT implementation baffles tax payers
The public has been baffled by the implementation of Inland Revenue Act (IRA) since there are still grey areas in the Act including the effective date of the 5 per cent withholding tax (WHT) despite over 100 amendments to the original draft.
The Inland Revenue Department’s (IRD) implementation of WHT has created confusion and concern among taxpayers and the public bringing the present administration into disrepute, an eminent tax consultant said.
He said the TRD’s circular (SEC//20I8/01) issued on March 16 was misleading and the commercial banks are relying on the guideline stipulated in the circular when deducting WHT from interest paid to any person on any rupee or foreign currency deposit.
According to the circular “tax should be withheld at the time the interest /discount /profit is paid or credited, reinvested, accumulated or capitalised.” he said.
Citing an example he said if a deposit is made in July 2016 and matures in July 2018, the WHT will not be imposed pro rata from April 2018 but for the entire two years.
An independent check carried out by the Business Times revealed that the banks had to follow this directive as the IRD is yet to clarify the exact position relating to this matter.
The government had earlier planned to charge the 5 per cent WHT under the laws from October 1, 2017. But the Treasury had to delay it due to the Supreme Court directive to amend certain clauses of the bill, a senior official of the Finance Ministry said.
The Ministry then decided to implement all the provisions of the new tax law from April 1 owing to difficulties in maintaining two types of accounts in a single financial year, he revealed.
Finance Minister Mangala Samaraweera told a media conference recently that several discrepancies in the implementation of the IRD act will be rectified by the Ministry as the government is flexible for any changes for the benefit of the public.
The IRA manual explaining the provisions of the Act is being prepared and this was the first time that the IRA is accompanied with such a comprehensive explanatory manual,” an IMF official said adding that it will be published soon.
In the case of senior citizens the 5 per cent interest income deduction under WHT will be made above an aggregated annual interest income of Rs.1.5 million from savings deposits.
The withholding tax increase is expected to raise an additional revenue of Rs.26 billion to state coffers.
The WHT exemption on savings account with less than Rs. 60,000 interest per annum will be removed. WHT will be re-introduced on specified fees where the payment exceeds Rs. 50,000 per month.
However, charitable organisations established for the purpose of the care of children, elderly or disabled have been exempted from the tax.