Deducting Withholding Tax from depositors

It is praiseworthy to note that government has taken stringent measures to collect the due revenue from various resources, and as per the data significant increase in the government revenue, by way of taxes has been achieved.

But on the other hand major areas where they should look into have been evaded with focus mainly on the direct areas such as depositors to grab the income irrespective of the consequences faced by the depositors.

There are depositors who with limited savings through their EPF, ETF, etc earn aggregated interest amounts exceeding Rs 108,000 per annum from private banks or finance companies who offer higher interest rates than state banks.

Many are prone to various illnesses and have to meet enormous amounts of medical bills in addition to the exorbitant cost of living. In addition, they are losing considerably about 7 percent per annum by depositing in banks or finance companies, since the average interest rate from a bank or financial company, where the risk factor is less is today about 10 percent whereas the inflation rate has shot up to 17 percent.

The government should take measures to enhance the aggregate interest amount to reduce some pressure of the depositors, who are the ultimate losers from every nook and corner. Instead they request the depositors to make their own declaration to the Inland Revenue Department making them more miserable.

I am sure the state can recoup this revenue if the officers concerned handle this area more efficiently and meticulously to nab unscrupulous people who resort to unlawful earnings.

There are so many importers who are undervaluing their consignments in order to pay less customs duty; there are so-called professionals who earn huge amounts but evade taxes.

When these elements make enough and more revenue without declaring their actual income, it is grossly unfair for Inland Revenue to adopt unreasonable amendments at this crucial stage to collect easy money.

Mangalika
Wijetunge
Mattegoda

The ‘us-and-them’ taxes

A few years ago the tax system in the country was simplified, thus hoping to make it easier to understand and, thus, getting more people to pay it. But has this actually happened?

The system might have been simplified, but as Rajan Asirwatham, senior partner at KPMG said, it didn’t take too long for other levies to take their place.

This is what irks the tax payer. Other than paying, say, their 35 percent income tax, it’s all plus plus. We now have the Social Responsibility Levy, as well as the Ports and Airport Development levies, among others.”

“Maybe there wouldn’t be so much resistance if there were areas that were tax deductible, say for expenses and entertainment, as found in numerous other countries. But nothing is tax deductible here,” he said.

Then there are the sectors that are complaining that their tax is too high, where the financial institutes take the brunt.

“Here the thinking from the government is that banks earn huge profits; so tax them stiffly,” Asirwatham said, adding that in the West, there is a certain pride when the public sees particular home-grown companies doing well, but in Sri Lanka it is envy.

“You also hear of people boasting about them getting away without paying any tax, justifying it by saying the tax department was wasteful and corrupt. And the reason people got away with it was the department was very lax following up investigations of tax evasion,” he said.

It seems it’s also those double standards. The richer you get the easier it seems to get away with it due to the people you know or the power you have.

“Where corporations have to pay say VAT, those with contacts blatantly don’t and nothing is done. Just look at the recent VAT scandal. No wonder the general public are unhappy when it comes to paying tax,” Asirwatham said.

Then, of course, there are all the duties when it comes to buying a car, whereas MPs get away with paying no duty.

“To defend the government, it is not the worst in this manner. It has little to no money and has to deal with high fuel prices and an ever increasing defence budget. Plus it’s easier to raise capital by indirect tax, such as stamp duty,” he said.

In the past there was also the problem that if you did pay your tax, the Inland Revenue would continually hassle you to find out if there was any hidden income, whereas keeping your name out of the system caused no problems at all.

“Even when the tax amnesty was introduced a couple of years ago, that caused resentment from those who had been paying all along,” Asirwatham said.

“For years the remittance being sent back by migrant workers was a powerful tool to cushion rising prices elsewhere, such as fuel, but that is not the case any more due to the ever increasing prices, so hence the tax moves. There is also the need for more people in places like the Inland Revenue Department to make it run more efficiently.”

And that seems to be happening after a hiring freeze that has gone on for five years at the department, whereas people were still retiring or leaving, leading to even more shortages.

(RI)