Key Management Associates join hands with Chamber of International Trade Information Services, put forward proposals for Budget 2019 for Better Fiscal Management Development.
H.I.P. Imaduwa
LLB (Hons) Law, LLM (Reading),B.com., CPA, CMA Australia, Acc.Dir.SL Key Management Associates Attorneys-at-Law & Notaries Public. Authorized Rept. of Department of Inland Revenue Council Member Chamber of International Trade Information Services
The International Trade Information Services of taxation subcommittee of the Chamber Obtained the view of eminent business personalities, associations, corporate heads and audit firms before the final submission on budget proposals 2019 was submitted to the government.
Increasing revenue, taxation and tax administration, policy and macro economic issues were the key areas covered in the proposal.
Curtailing revenue loss from under invoicing and under valuation, broadening the tax net to cover public servants, preparation of accounts to confirm to accounting standards which will improve transparency and also more consistent and acceptable accounts for the revenue assessment process optimising the tax revenue and tax audits to identify non- filers and non-compliers were some of the measures put forward by the chamber to enhance the revenue for the government.
As a measure of attracting new foreign and local investment and to encourage company formation the chamber proposes the government to implement the Group Taxation in Sri Lanka. Further, suggestions were put forward on double taxation treaty arrangements in order to optimise the attractiveness of Sri Lanka for investment, trade and technology transfers.
Revenue proposals
Curtailing revenue loss from smuggling
The State and the business community lose billions of rupees annually due to the entry of smuggled, contraband/counterfeit goods and malpractices at point of entry such as by unscrupulous Importers. This questionable trade is fast growing and threatening businesses engaged in ethical competition. Tax evasion is mainly aimed at minimising import duty and VAT payments.
The modus operandi by these unscrupulous traders is:
lUnder – declaration of value and quantity smuggling
The main methods used for these operations are:
*Tax on Internet transactions
*Import under different product names and HS Codes
* Concealed with other Imported cargo in containers
*Unaccompanied sea baggage, mainly of expatriate workers returning from Middle East
* Malpractices at unaccompanied baggage warehouses
* Misuse of duty free allowance by arriving passengers
* Baggage carriers / organised traffickers
*Pilferage/ smuggling from ships berthed in outer harbor
* To prevent losses to Government Revenue” it is proposed that measures be taken to increase checking and vigilance” and enforce harsher penalties on those found guilty of having committed offences.
Declaration of Tax File numbers in large value transactions
Require parties engaged in business transactions in excess of a specified amount to disclose the respective income tax file numbers on the face of the invoice” receipt or contract note” to facilitate subsequent tracing and effective tax compliance. Possible limits could be: 
Acquisition of any capital assets with a dutiable value over Rs. 5 million.
Payments in excess of Rs. 1 million for any goods or services.
Tax Liability and statutory dues of foreign contractors
Foreign contractors retained by government” non-governmental organisation, multilateral agencies and private sector be required to open a tax file and register for statutory dues including super – annuation liabilities at the time of award of contracts.
The party securing the service of foreign contractors is made liable to ensure due settlement of taxes and other statutory dues before release of payment.
Compulsory registration of business
Require compulsory registration of any business with a turnover above Rs. 50 millions (and below a specified ceiling to be determined by Government) with the Department of Inland Revenue. The registration certificate to be displayed prominently at the place of business quoting the income tax file number. At the time of registration, the businesses will have to elect either to pay a fixed charge of 1% of turnover as income tax or else be subject to the
normal process of assessment. New businesses to register within first year of commencing business. Failure to register should be made punishable offence.
The revenue authority
Unique pin numbers (Business Registration No. or NIC No) to be assigned by parties to all transactions over a specified amount. This recommendation is possibly a project already undertaken by Sri Lanka.
Outsource tax investigation to Private Sector Taxation Professional, where possible and thereby establish a professional approach to co – ordinate revenue optimisation. In such events it should be ensured that there would be no conflict of interest in engaging them.
Measure to ensure speedier collection of Tax Revenue
Tax Audits
A special focused group of independent professionals with no conflicts of interest to be recruited and placed either under the Revenue Authority or the Inland Revenue Department to do special field surveys in the informal sector to identify the non – filers and non – compliers as a revenue enhancement measure. This will also help to generate a level playing field and it will be appropriate, as the exoneration has been until March 31, 2018.
The chamber feels that an enormous amount of tax can be easily collected by the evidence of the amount of moneys that have come into the economy.
Withdrawal of incentive schemes in revenue services
Improve the professionalism of tax administrators and reduce harassment of taxpayers by replacing the present incentives scheme applicable to revenue officers of tax, customs and excise departments with a performance based scheme.
Tax saving certificate
Re-introduce the previously successful scheme of tax savings certificates at market rates of interest as a form of investment for taxpayers and to ensure advance collection.
Speedy tax reforms
To improve tax payer services establish stretched targets for tax refund settlements and these be made in every instance with interest.
Use of private sector professional service organizations by the revenue authority on contractual basis
The revenue authority to identify areas and scope of work where, private sector professionals can be engaged on contractual basis in supporting the revenue administration to ensure speedier and more effective collection of tax revenue and improved tax compliance.
In outsourcing this work, the revenue authority and the private sector professionals to ensure that there are no conflicts of Interest.
Taxpayer recognition
Issue taxpayer cards to all individual tax payers and public servants, which will entitle them to preferential treatment in selected instances eg. exemption from motor vehicle license fees, airport taxes and passport fees, as an incentive for complying with tax regulations.
Such card holders may also qualify for preferential treatment such as admission to tax payer’s immediate family to national hospitals to National Schools and to other institutions owned and operated by the government to provide service to the public.
What is required to put house in order
Chamber officials urging the newly appointed Finance Minister to clean up the top administration in major revenue collection institution and economic nerve centre’s immediately as the heads of these institutions will definitely present a rosy picture on the economy misleading the authorities by hiding massive financial misappropriation and corrupt deals.
Problems need to be identified and corrective action taken immediately. Main problems according to our view are without making changes at the Inland Revenue Department, Sri Lanka Customs, Securities and Exchange Commission of Sri Lanka, National Lotteries Board, Development Lotteries Board, Sri Lanka Insurance Corporation and Employees Trust Fund Board coming under the Finance Ministry, the country’s financial administration cannot be saved. Sri Lanka’s Tax Revenue has fallen from its target in the first quarter of last year. Due to the unsatisfactory situation in the revenue administration many capable officers at various levels retired from the service pre-maturely or transferred to the Finance Ministry under the one man show.
Housing loans
It is not understood as to why the Inland Revenue Act of Sri Lanka at present does not provide for a tax deduction for interest on housing loans to white (other than defined professionals) and blue collar workers.
It is significant that there was no considered policy decision that was adopted to eliminate the tax deductions that prevailed for the housing loans prior to 2011 era.
0 comments: