What will be the result of abolishing withholding taxes?

What will be the result of abolishing withholding taxes?

What will be the result of abolishing withholding taxes?

Written by Staff Writer

06 Feb, 2020 | 9:37 pm

Colombo (News 1st): Withholding Tax on any payments is to be abolished with effect from January 01, 2020, as instructed by the Ministry of Finance on pending formal amendment to the Inland Revenue Act No.24 of 2017.

Will the abolishment of withholding taxes result in a revenue shortfall for the Government?

Accordingly, withholding agents including employers are instructed not to deduct any WHT/PAYE on payments to be made and any deduction after 01 January 2020 should be paid back to the respective person

However, With Holding Taxes will continue to apply to be implied at 14% on the amounts paid as winning as lottery, reward, betting or gambling and 2.5% on the sale of any gems at an auction conducted by the National Gem and Jewelry Authority

Tax Expert N.R.Gajendran highlighted that the individuals will be benefitted but from a macro point of view there will be greater challenges on the revenue shortfalls. He noted;

“The government has made a conscious decision to reduce taxes and even in the manifesto of course challenges will be there for the government on revenue shortfall, how it is going to be bridged or capped is not effectively pronounced to the public but there is an expectation that economic activity will grow and additional revenue will flow in but that will be in the long term also, interest rates can come down because the cost of interest rates can come down and also expect the exchange rate to improve so that the debt repayment situations will improve. These things are yet to be seen but there will be a huge revenue shortfall immediately from the month of January and February which will get magnified over of period of time and these revenue shortfalls have to be dealt with if not they will have to curb expenditure and large scale investment might have to be curtailed.”

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