Letters to the editor

The new return forms sent out to income taxpayers by the Department of Inland Revenue include a schedule which requires a complete declaration of assets and liabilities. Though it would be interesting to discuss the socio-political background to the introduction of such draconian disclosure requirements, which extend to the cash held in one’s pocket on March 31, I wish to point out only one specific and urgent issue arising out of this.

This is with regard to the section on declaration of assets held in the form of shares, which requires disclosure of: Name of Company, Number of Shares, Date of Acquisition and Cost of Acquisition. In my view this requirement is exceedingly onerous, due to the reasons given below. I would like to suggest that a shareholding is usually a long-term asset acquired over many years. I for one, have shareholdings in a handful of public-listed companies which, like most long-term investments, have been gradually built up since about 1980.

I do not have a record of each and every date of acquisition, cost and number of shares that I have bought over the past 26 years and, therefore, have great difficulty in accurately providing the information asked from me by the Department of Inland Revenue.

I would also like to mention the plight of an elderly and conscientious investor I meet at various fora for stock market investors. He has been steadily investing in shares since 1956 and has now fallen ill due to anxiety over how to gather the details to make an accurate declaration of each share purchase he has made from 1956 to date. My last illustration on the impracticality of this requirement is the example of a recent investor in a share such as NDB, which has a broadbased shareholding.

Those who invested in the initial public offering of NDB and have held on to those shares to date, would have received shares in NDB Bank by way of an in specie dividend some years back, which were in turn recently subject to a share swap for shares in NDB itself.

A normal taxpayer will go mad trying to figure out the cost of acquisition for this present NDB shareholding, which will include his original acquisition plus the swapped in specie dividend shares of NDB bank! There are many other practical issues, which will drive the average taxpayer to the brink of insanity, and perhaps over it. These are too lengthy to discuss but include share warrants, securities which were convertible to shares, share splits and consolidations, bonus issues, rights issues and the treatment of share disposals.

It appears to me that if those responsible for imposing such requirements were in possession of some general wisdom and specific knowledge regarding long-term investment in listed company shares, such onerous details would not have been demanded. If these are shareholdings in publicly listed companies, it would have been quite sufficient to merely ask for the number of shares held in each company as at March 31.

In the event the department became curious over the number of shares declared, they could easily inspect the share register of the public company concerned or the Central Depository System. Sri Lanka has one of the most advanced securities clearing and depository systems in the world, but tax payers are being asked to resort to paperwork spanning decades.