Friday, October 15, 2010

Sri Lanka may trim 25 taxes on business to 15: official

Oct 15, 2010 (LBO) - A report on reforms to Sri Lanka's complex national and regional taxes will recommend consolidating 25 different existing taxes into 15 or lower, a member of an expert committee said.

Saman Kelegama, a member of a presidential commission on taxation, and head of Sri Lanka's Institute of Policy Studies, a think tank, said the final tax report is expected to be handed over to Sri Lanka's president next week.

An interim report was earlier released to authorities.

The commission will recommend rationalising the taxes charged by provincial councils and local government bodies, by introducing a single tax for the multitude of taxes of similar types now charged, he said.

Sri Lanka's state is attempting to increase the tax it extracts from the people to 20 percent of gross domestic product by 2011-16 from the current 14.5 percent.

The commission's proposals to eliminate anomalies in the existing tax system and broaden the tax base are expected to be included in the budget for 2011 to be presented to the parliament in November.

The tax commission sought the views of many stakeholders before developing its report.

In Sri Lanka about 80 percent of the tax revenue comes from indirect taxes (turnover based) with direct taxes accounting for the balance 20 percent.

Critics say Sri Lanka has an oppressive direct (income tax) system undermining just rule of law where politicians and state workers do not pay taxes on their salaries and pensions and only private citizens do.

But the same politicians claim in public forums that not enough 'direct' taxes are collected.

A private sector pension fund of even the most poorly paid worker is taxed. State enterprises also make large losses running into tens of billions of rupees and get state handouts instead of paying taxes.

Sri Lanka also suddenly imposes taxes on the people at mid-night by gazette notification literally while people are sleeping with no prior warning.

Taxes are changed from budget to budget and sometimes within budgets to help politicians increase spending on sudden whims, and citizens carry on an uncertain existence having no predictability or certainty in planning or living their lives.

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