‘The Tax Forum 2023’ organized by the SLIM brings insights

‘The Tax Forum 2023’ organized by the Research Bureau of the Sri Lanka Institute of Marketing (SLIM) was held at Kingsbury Hotel recently to discuss the taxation policy introduced by the government in the 2023 budget.

Highlight of the event was the keynote speech made by the President of Sri Lanka, Ranil Wickramasinghe.

The President stressed the current tax policy in Sri Lanka is rather a rescue operation than a normal one. He said the new tax policy acts as a savior to the nation to bridge the huge budget deficit and generate revenue to bequeath economic benefits to the masses.

President Ranil Wickramasinghe stated that the budget presented for the year 2023 in Sri Lanka was mainly aimed at rescuing the economy.

The President said, once an agreement with the International Monetary Fund is reached, it will be presented to the Parliament and the latter will have the option to pass or reject it. If the proposal is rejected, the relevant parties should submit alternative proposals to the International Monetary Fund, he said.

He said apart from the Sri Lanka Chamber of Commerce, no other party, person or institution has submitted any proposals or alternatives to the IMF and also said if this process is disrupted, Sri Lanka will not be able to join the International Monetary Fund (IMF) program and may lose the opportunity to do business with foreign countries.

Commenting on the debt restructuring process with the main creditors of Sri Lanka, the Paris Club, India and China, the President said the Paris Club has guaranteed its financial support for Sri Lanka and India is following its own method but China has not expressed agreement on its method so far. However, the President mentioned that their stand will be announced at the G-20 Finance Ministers’ meeting in Bangalore, India.

Panel Discussion held

A panel discussion was held following the President’s speech with a view to bringing in more insights to the subject and to discuss implications for the masses from the new tax policy.

The Honorary Secretary of the SLIM Council of Management and Chairperson of the SLIM Marketing Education and Research Committee 2022/23 Prof. Dewasiri N. Jayantha (Professor, Sabaragamuwa University of Sri Lanka) acted as the moderator of the panel discussion.

In his opening remarks the Professor  said, “PAYE Tax would be the focal point of the day’s panel discussion. Sri Lanka’s lagging performance in tax collection is a more recent problem instead of an inherited one. As per the research conducted in the recent past, the expected relationship between tax revenue and GDP Per Capita should be on a positive move. However, there is an inverse relationship between tax revenue and GDP Per Capita in Sri Lanka. It reflects that we have not focused on the right sectors/industries when designing the tax policy during the past few decades.    

He emphasized that three basic principles of tax policy were threatened; fairness, certainty and convenience by the newly implemented tax policy. He further highlighted that it is unfair to expect a 400 percent growth only from PAYE when expectations of other tax components are lower than 200 percent growth including VAT and Corporate Tax.

The Prof opined that the government should introduce a national tax policy which cannot be amended with regime change highlighting that there was a 500 billion (LKR) loss in 2020 due to sudden changes in tax policy without a public demand for the same.

He further stated that the current PAYE policy hits the poverty line of the country which is unfair and why it is imposed on  the poverty line during this economic recession remains unclear.

He questioned about the fairness of imposing a 36 percent tax rate for the individuals whereas the corporate tax is levied at 30 percent and said that is questionable to impose taxes without subtracting the essential expenses of an individual or family.    

The panel comprised of the SLIM President Nuwan Gamage, CMA President Prof Lakshman R Watawala, Sri Lanka Chartered Institute of Personnel Management President Ken Vijayakumar, Faculty of Taxation CA Sri Lanka Chairman Tishan Subasingha, Deputy Commissioner General of Tax Policy and International Affairs N M. M. Miffly and the President’s Senior Adviser on Climate Change, Ruwan Wijewardene.

SLIM President Nuwan Gamage expressing his views said, after the introduction of the present payee taxation method professionals now get a take-home salary probably that they enjoyed four years back. At the same time inflation having its toll on salaries has taken out another great portion of their disposable income, hence they are hit in multiple ways.

“Consumer behavior has drastically changed. Consumers are now more concerned about their needs more that of their wants. Thus in supermarkets impulsive buying by them has shrunk drastically. This scenario is also impacting on sales and marketing personnel in other ways as well. Sales forces are being given unrealistic targets to achieve but they find it agonizingly difficult to achieve them in this context of changed consumer behavior.

Corporates in the meantime reduce training and development and the marketing budgets as a cost cutting tactic. When marketing budgets are pruned, utilizing prospective consumers become difficult.

Concurrently salaries of sales personnel are being taxed. The commissions that they are entitled for achieving targets are also being taxed. As an immediate result of this scenario we now see many sales professionals changing their jobs. While people with experience and education and Tacit knowledge migrate, others are lagging behind. To groom the latter to perform to the anticipated levels, training and development budgets have to be enhanced.

This has thus become a chicken and egg story. These are immediate challenges marketers are facing. Since the non-availability of medicines, people working in the pharmaceutical sector face difficulties”, he said.

Faculty of Taxation CA Sri Lanka Chairman Tishan Subasingha said, the recent announcement of the Inland Revenue Department focusing Non-cash benefits, confusion has arisen in the market. He pointed out the lack of proper communication that has resulted in this outcome.

He also focused his attention on the brain-draining process taking place like never before.

“Retention of the qualified staffs in companies is of paramount importance. We have this immediate threat of tackling the financial crisis and Sri Lanka being a small nation with 22 to 23 million of population we could derive the advantage of being small to come out of this crisis.

However, who is going to take part in the sustainable development of this nation after the revival is questionable. Youngsters going abroad for higher education and to gain world exposure is understood. They can always get back with newly acquired qualifications. But the issue is with the professionals leaving the country with their families and with that the Tacit knowledge they have gained across the industries, they take away.”, he said.

He stressed there should be fairness to all social strata in enjoying tax concessions and a particular segment shouldn’t be discriminated in the process He said although the President precisely said people cannot escape from taxation, loop holes prevail. Further, Subasinghe stressed that he does not observe a plan laid out by the government to reduce the recurrent expenditure. Due to this reason, people will be paying taxes when instead, the policymakers need to declare the cutting down of expenditure while imposing taxes to reduce the budget deficit.

Subasingha stressed a ‘time-bound’ plan has to be implemented with deadlines by the authorities for people to get motivated to adhere to the excessive taxation.

CMA President Prof Lakshman R Watawala in his speech said with new taxation revenue expansion is happening but expenditure rationalization is not.

“We are in a painful situation. People of this country cannot bear the burden of taxation. The supply chain is not working properly and raw material do not arrive in time. People are paying the sins of the earlier people. But accountability is at stake. No one is accountable for this mess of money draining. Tax webinars are bombarded by people now because they are suppressed by unbearable taxation.

Protesting parties must give an alternate plan. Shouting on the roads will take us nowhere. All who are protesting must first go to their workplaces and work efficiently and increase their targets to expose the bottle-necks? The shortage or non-availability of raw material and fuel will be then exposed. We have to adopt digital identity like in India to expose bottle necks. In India there is a separate ministry for expenditure management and we should follow suit. Then value creation can be monitored”, he viewed.

“Professionals have to take a different approach. To enhance profitability of an organization, technology and expertise must be enhanced first and not the price of its products or services”, Prof Watawala further said.

Chartered Institute of Personnel Management of Sri Lanka President Ken Vijayakumar said, though some big companies reimburse the taxes deducted from their employees, every company cannot do that. By increasing the human resources cost, companies cannot be competitive in the market.

“Employees are pawning their jewelries and pulling their savings in this desperate situation and also selling their lands. If there are no savings, how can a country do investments and expect a GDP growth?”, he questioned.

“Loss making government institutions are still functioning and only the professionals in the country are being victimized. Hence we are working on counter-proposals to be given to the government which will be a comprehensive action-plan”, he said.

Deputy Commissioner General of Tax Policy and International Affairs N M. M. Miffly agreed that there is a different treatment not only on non-cash benefits but also on cash benefits received by the different sectors of employees. “For an example earlier the housing benefit was calculated based on the total remuneration. But according to the new circular issued, housing benefits is calculated based on the salary. Hence now housing benefit is worked out on the basic salary of the government sector employees while at the same time it is treated on the gross salary of the private sector employees. Similarly, transport allowance is 25 percent taxed for government sector employees and it is 100 percent taxed for the private sector employees”, he said.

The long journey of SLIM

SLIM being the apex body for marketing in Sri Lanka has been promoting marketing excellence and elevating the status of marketing since 1970. The institute is a member of the National Chamber of Commerce of Sri Lanka (NCCSL), OPA and Federation of Chamber of Commerce and Industry of Sri Lanka (FCCISL). SLIM was bestowed with ISO 9001:2015 certification in recognition of its superior quality management system and ISO 2990:2010 for Learning Service Provider (LSP), providing non-formal education and training services. The tailor-made programs done by SLIM for the corporate sector has gained immense recognition.

‘The Tax Forum 2023’ was initiated by the SLIM Research Bureau (SRB) which is an operation associated with SLIM. SRB does market research from ideation to commercialization and post launch evaluations.

SRB provides valuable insights to organizations by collecting, processing and analyzing market data through qualitative and quantitative research, surveys and a wide variety of sources to give an understanding of the dynamics of the consumers and their behavior.