Written by Staff Writer
08 Mar, 2016 | 2:33 pm
Making a special statement on introducing new taxes and revising existing taxes in Parliament today Prime Minister Ranil Wickremesinghe proposed to increase the Value Added Tax or VAT , to 15 percent.
Prime Minister Ranil Wickremesinghe also briefed Parliament on the Sri Lanka’s position in the face of the Global Economy.
The Prime Minister charged that when the 2016 budget was being prepared , not all information on the country’s debt was recorded and many information was concealed and it was only in December that a record on the government debt was created
He went on to note that at the end of 2015, the Governments debt burden was 8475 Billion rupees and the debt which had to repay by state-owned enterprises have not been included in the state debt and this debt amounts to 1,442 billion rupees and due to the economic mismanagement of the Rajapaksa regime, the country is in a debt trap of Rs 9.5 trillion rupees.
“If we are to rise from this dangerous situation that we are in, we need to raise the income” said the P.M
It was proposed to introduce new taxes and revise existing taxes in order to raise the income of the Governments.
Prime Minister,Wickremesinghe stated that statutory Income Tax has been increased from proposed 15 percent to 17.5 percent and the government will also introduce the Capital Gains Tax which has not been implemented in Sri Lanka from 1987 but the Nation Building Tax will remain unchanged at 2%
The Prime Minister also announced that several tax concessions will be removed
The Prime Minister explained that the tax concessions on electricity supply, lubricants and telecommunication services will be removed and the tax per quarter of 3.7 million rupees will be revised to 4 million rupees
He further added that in the budget for 2016 it has been proposed to implement two rates of Value Added Taxes as 8 percent and 12.5 percent instead of the 11 percent of single rate,however it seems that it is prudent a single rate of 15 percent is maintained and tax concessions on telecommunications, private education and private health will be removed but essential goods and electricity has been exempted from VAT and will only be imposed on selected retail and wholesale goods
The Prime Minister is of the view that through these revisions, the 2016 budget deficit would be 5.4 percent of the GDP and will enable to maintain the economic growth at 06 percent.
“We have not asked a single dollar from the IMF”said the Premier who also noted that there is need for a new tax system and therefore is in discussion with the IMF in order to obtain advice
The tax amendments which were proposed by the Prime Minister will come in to effect only after the proposal is passed in Parliament.
Economists point out that the proposal which is aimed at increasing the revenue of the Government would have an impact on a number of sectors.
Individuals and Companies were granted consessions through the 2016 Budget and these consessions are proposed to be removed.
Accordingly, personal tax has incresased from 17.5% to 26% while a profit after tax of 24% will be introduced to corporates through this amendment.
Although it was proposed to increase the value of tax free income to 2.4 million rupees under the 2016 budget this has been brought back to 600,000 Rupees under the proposed amendment making those earning in excess of 600,000 Rupees per year liable to pay taxes.
The capital gains tax that was previously removed from the sale of listed shares on the Colombo Stock Exchange will be re-implemented as well. As a result capital gains from the sale of assets of immovable property such as houses and land will also fall under this tax.
In the meantime the Nation Building Tax will come into effect in respect of the supply of electricity, lubricants and telecommunication services .
The proposed amendment will also see an increase in Value added Tax to 15% from the 8 to 12% that is presently in effect. However the economists point out that the general public will stand to gain from this tax that has been removed from essential items. Furthermore, Telecommunication services, private education services and private health services will also be liable for VAT.
Economists state that this amendment can be viewed as an expansion of the net that has been cast to capture high income earners.
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