Corporates’: Show proof of spending taxes
The Treasury reimposing 2019 taxes is all good, but companies are demanding to see where their hard-earned money goes as they only too well are aware of how wasteful state expenditure can be.
“We all agree that the government revenue has to increase but we need to have the right to scrutinise the activities of the state, and see actually how our taxes are deployed,” Mahendra Jayasekara, Managing Director Lanka Tiles PLC and Lanka Walltiles PLC told the Business Times.
Many corporates’ expressed fears that the same pattern as earlier would be repeated when deploying taxes. “Will it fund the burgeoning ministries and maintenance of ministers and infuse money into bleeding state-owned enterprises? How is cash used? We have a right to know,” a CEO of a manufacturing company agreed.
Many taxes introduced were in place in 2019 before the present regime came into power. With the taxes, the Treasury hopes to secure a stronger budget. Economists said that this should have been done a long time ago and they could not comprehend some of the taxes that were cut in 2019.
“Reintroducing the taxes is a good move. We are returning to PAYE and withholding taxes. I could not quite understand why these two were removed in the first place,” said Reyaz Mihular, retired Managing Partner KPMG Sri Lanka. He said the increase in corporate tax by 30 per cent will fetch the much-needed cash to the Treasury.
All of us would need to tighten our belts, he said noting that the government should immediately restructure the state-owned enterprises that are losing money, adding: “The formula method for fuel pricing has been reintroduced which is a good thing. Similar formulas should be introduced for energy as in power and water as we simply do not have the money for these commodities to be subsidised.”
Mr. Jayasekera noted that at higher income earning capacities 10 to 15 per cent income tax is a big loss but the increase in corporate taxes to 30 per cent by the earlier 24 per cent is still within the world average. Increasing these taxes is good but the Treasury needs to be transparent with what they are collecting from people and companies, he added.
Analysts say that sin taxes for tobacco and alcohol should be more, adding that company earnings growth will be dented with the taxes, but most firms will pass them onto the customers.
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