Sri Lanka’s cash-strapped Government is implementing far reaching tax reforms from April 1 in a move towards simplification of the tax system while also improving the effectiveness of tax administration, in keeping with Budget 2011.
Several new changes have been introduced to finance, tax and investment related legislation in the form of amendments to the existing 14 Acts and with one new legislation in keeping with the budget proposal, Finance Ministry sources said. The most noteworthy budget proposal is re –imposing income tax on salaries of public servants after 33 years, a senior official of the ministry said. Pay As You Earn (PAYE) tax is applicable for all officials drawing a monthly salary of over Rs. 50,000 all inclusive, he said.
The reduction of the VAT rate on financial services and on certain Goods and Services from 20 % to 12 % and introduction of a new VAT suspension scheme for exporters and deemed exporters, removal of the Debits Tax, removal of the Social Responsibility Levy and Cellular Mobile Subscribers' Levy are some of the proposed amendments to the existing Acts, he revealed. Eight amended tax bills including VAT and nation building tax were debated and passed in parliament recently .
Tax exemptions will be given for Unit Trusts or Mutual Funds from investment in listed debentures and equity. Taxes on the telecommunication industry (VAT, NBT,Cellular Mobile Subscriber’s Levy and ECL) will be combined plus a telecommunications levy of 20.0%. Machinery and equipment to manufacture textile, leather, footwear and bags will be exempted from import duties and VAT and reduced VAT on financial services from 20.0% to 12.0% and on profits of banking and financial institutions from 35.0% to 28.0% .
A 5-year tax holiday will be offered for any company, which carries on a new undertaking, with a minimum investment of not less than US$ 5000 (but not more than US$ 10 million) or an amount equal to such amount in rupees in such activities as specified by the Minister from time to time, the official said. According to the proposed tax levy structure, a tax of 4% of the total salary less than Rs 2000 will be levied from employees whose monthly salary inclusive of all allowances is above Rs.50,000 and below Rs. 91,667. If the monthly salary is between Rs. 91,667 to Rs. 133,333 the tax amount will be 8% of the salary less Rs. 5667. If the monthly salary is in the slab between Rs. 133,333 and Rs. 175,000 the tax levied will be 12 % of the salary less Rs. 11000.
Employees whose monthly salary is between Rs. 175,000 and Rs. 216,667 will be taxed 16% of the salary less Rs. 18,000. If the monthly salary is between Rs. 216,667and Rs. 300,000 the tax will be 20% of the salary less Rs 38,667.A tax of 24% of the salary less Rs. 38667 will be levied from employees who are drawing an all inclusive monthly salary of over Rs. 300,000. This proposed tax scheme will be applicable to the private sector as well.
He said the estimated cost to build this hotel is some US$ 30 million. He added that the Initial Public Offering (IPO) that Softlogic has planned will go on board by next quarter. He did not want to comment on how much they’ll be raising. He added that the IPO will facilitate Softlogic’s expansion plans.
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