All eyes on Inland Revenue Bill
- Tax on stock market trading removed, only levy to apply
- No changes to EPF contributions from employer
- Exporters to be taxed at 14%, tax revenues up 20% till July
- Compromise to be reached on tax appeal process
- Bill to be presented in P’ment today with string of amendments
- President and PM to present eight-year policy framework on 4 Sept.
On the eve of presenting the Inland Revenue Bill to Parliament, State Minister of Finance Eran Wickramaratne yesterday said it would complement the economic goals of the Government, which will be set out in a new eight- year policy framework to be presented by the President and Prime Minister on 4 September.
The new policy framework, which will be jointly presented by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, will keep to key macroeconomic goals that centre on reducing the Budget deficit and improving investment.
The Minister added the key focus of the Government had been to stabilise the macroeconomic fundamentals since taking office in 2015 and was now in a position to move forward with reforms that would encourage growth.
He defended the proposed Inland Revenue legislation as essential to creating a more equitable society.
One of the key changes is exempting stock market trading from tax with no change to the current share transaction levy. The first draft of the Inland Revenue Bill proposed 28% tax on trading stocks, which was objected to by capital markets.
“Government revenue is absolutely essential to improve social welfare, maintain law and order, to provide basic education, health and social services. We have a fast aging population and we have to be conscious of that factor and try to discharge our responsibilities to that community. We have also, in an attempt to increase our exports, which have dropped drastically over the last decade and a half, taken a decision that the rupee exchange rate should reflect market forces. When we initially did that naturally the currency depreciated but now we have a more stable environment. Reserves have increased from $ 5 billion to about $ 7 billion and we expect them to grow more by the end of the year.”
Wickramaratne also rejected several arguments on the proposed Inland Revenue Bill presented by former President Mahinda Rajapaksa, who earlier this week called on Sri Lanka Freedom Party (SLFP) parliamentarians to vote against the bill.
In an extensive statement, Rajapaksa said the Employment Provident Fund (EPF) component usually paid by the employer would be taxed, an allegation that was rejected by Wickramaratne and Treasury Deputy Secretary S.R. Attygalle, who insisted the new tax structure would not impact the worker.
They also said concerns raised by exporters have been addressed. “Even if an exporter only exports 80% and releases the rest to the domestic market we will consider that 20% also as exports and tax at 14%. This is to encourage exporters,” Attygalle explained.
A compromise will also be reached on tax appeals, Wickramaratne said, acknowledging the Government was also keen to limit the time of the process. Changes suggested in Parliament will also be included before the bill will be put to a vote in the first week of September. Wickramaratne noted that they had engaged extensively with stakeholders, including unions, before proposing the new amendments, which are also expected to be presented this morning in Parliament.
“There is no need for anyone to sit in front of the Finance Minister’s door or my door anymore. What is set out in the bill will be what is practised,” he said. Earlier Finance Minister Mangala Samaraweera said the bill would be presented with over 100 amendments.
Broadening compliance, increasing transparency and widening the tax net were principles the Government will continue to focus on, Attygalle said, pointing out revenue has increased by about 20% in the first seven months of the year when compared to 2016.
The State Minister was confident the Government will end the year with $ 7.5 billion-$ 8 billion in reserves, partly helped by money from the Hambantota Port deal.
“On the Hambantota Port project we expect $ 400 million before December. Next year we expect another $ 600-$ 700 million just on that agreement. There will also be a further investment of about $ 600 million to make the harbour more commercial. It’s not just the harbour, there will also be other businesses coming into the industrial zone and new investments will come over the next 24 months and therefore that is an investment which will change the economic scenario in the south of the country. So we are on a journey,” Wickramaratne said.