By:Staff WriterColombo (LNW): The government is set to widen the tax base rather than increasing tax rates without adverse impacts on the processes of investment and on living conditions of the low and middle income groups in Sri Lanka.
In this context fresh amendments to Inland Revenue Act will be introduced soon to raise revenues from the current level of 14-15 % of GDP to higher levels of above 20 % of GDP that are visible in more developed countries in the world.
Whatever the methods adopted in the short run to mobilize the required funds for financing development projects, eventually it is tax revenue buoyancy that is required because tax revenues are needed to repay in future the loans taken today with interest as well as to meet the continually rising new resource needs of the government official sources said.
With an aim to broaden the tax base by enabling electronic payments coupled with mandatory reporting for state institutions, the government plans to bring in fresh amendments to Inland Revenue Act, No.24 of 2017 in Parliament for approval this Friday.
Under the proposed amendments, Finance State Minister Ranjith Siyambalapitiya yesterday revealed that it would be made mandatory to submit the tax files of personal income taxpayers in electronic format.
“The new amendments will provide the necessary provisions to discourage cash transactions. So, we can calculate real taxes owed by taxpayers based on their electronic transactions.
If someone makes over Rs.500, 000 worth of purchases on a daily basis, then the Inland Revenue Department (IRD) would not permit them to reduce the amount above Rs.500,000 from their expenses. Therefore, they will definitely have to follow an electronic payment method,” he said.
Although earlier it was not mandatory for state institutions such as the Motor Traffic Department and state banks to report their transactions to the IRD officially, the minister noted that once the proposed amendments are passed in Parliament, such state institutions, which perform large numbers of transactions with the public, would be required to report them to the IRD.
In addition, the minister noted that the proposed amendments would also resolve the complications related to the withholding tax.
It has become a big problem as agents have not been able to release interest incomes below Rs.100,000, which doesn’t fall under the withholding tax bracket, to depositors in an expedited manner.
Under the proposed amendments, the withholding agents will be enabled to release such funds within a short period of time,” he added.