Written by Keshala Dias
28 Mar, 2017 | 9:14 pm
Whilst a strong taxation policy is an essential attribute of a robust economy, the uncertainty surrounding the current rate of Corporate Income Tax has led to ambiguity – the one thing a taxation policy should not be.
On Monday, March 27, News1st reported on the manner in which the government was attempting to replace the Inland Revenue Act, by bringing in a Draft Income Tax Bill, in a hurried manner, with minimal consultation with stakeholders.
To date, the Draft Bill is not in the public domain.
This issue came under discussion during the programme Face the Nation last night:
Chandra Jayaratne (Former Chairman of Ceylon Chamber of Commerce): [quote]”It is shocking, firstly, I think we have to look at… Sri Lanka has had a very good tax system in operation for nearly fifty years in this country. Now, having had that, we are supposed to be importing a new Bill which has been drafted by the IMF, which we understand is their recommendation for Ghana. Now, Ghana is starting their tax system and we have a lot wrong in our tax system. There was a Tax Commission whose report has not been seen by even us in the Parliamentary Select Committee. So, when we have had our own people knowledgeable with tax, making recommendations to make the change that commission report is kept aside. We are bringing IMF draft, we are bringing consultants from overseas who are going to manage and set up a tax. None of us know what it’s going to be”.[/quote]
In this connection, it is important to note that at the moment, corporate Income Tax too is an area riddled with contradictions.
Delivering his Budget Speech for 2016, Finance Minister Ravi Karunanayake says the Corporate Income Tax applicable is 15%.
However, in a circular released on March 28, 2016, the Inland Revenue Department set out the percentage of Corporate Income Tax as 7.5%.
On April 01, 2016, the Inland Revenue Department says “The earlier circular is ‘temporarily withheld’, adding that further announcement will be made upon receipt of proper instructions from the Ministry of Finance.”
On April 08, 2016, the Inland Revenue Department once again says the applicable rate is 17.5%
To date, no statute has been enacted to reflect the multiple changes made to the rate of corporate tax.
To date, businesses are still uncertain as to what percentage of Corporate Income Tax they need to pay.
This has resulted in the former rate of 28% remaining as the effective rate of Corporate Income Tax.
The financial year 2016/2017 ends this Friday, with no clear direction on the rate of Corporate Income Tax applicable for the past 12 months.
The business community is burdened with heavy taxation. However, the taxable income of the political parties continues to be unclear.
Transparency International Sri Lanka had requested for the financial statements of all political parties under the Right to Information Act. Yet, there appears to be little clarity on their taxable income, despite the large amounts of money they make.
With just three days before the end of the financial period 2016/2017, the applicable rate for Corporate Income is in the lap of the Gods.
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