Presidential Tax Commission could be the starting point of consistent tax policy in Sri Lanka:tax expert

by Sanath Nanayakkare

Shamila Jayasekara, Partner of KPMG and Member of CA Sri Lanka Faculty of Taxation said yesterday that the potential establishment of a Presidential Tax Commission could be the start of a stable tax policy long-awaited by the business community in Sri Lanka.

Referring to the proposal made by President and Finance Minister Ranil Wickremesinghe during his Budget speech on November 14, to establish a Presidential Commission to assess and make recommendations to the authorities on taxation and the use of taxes for public services, Shamila Jayasekara said this could be the inception of formulating stable tax policies that enable the sought after sustainable operational path for businesses.

“This is a good move particularly because the tax policy could remain stable whichever government is in office,” she said.

She made this comment while addressing the Annual Budget Seminar hosted by the Institute of Chartered Accountants of Sri Lanka CA (Sri Lanka) which focused on the recovery from the worst financial crisis Sri Lanka is faced with.

Speaking further she said:

“Looking at the past, we have not seen a reversal of tax policy of this nature. If you look at the corporate sector in general, they will have to absorb its consequences as there is no other way of meeting the debt-financing. But if you target the same taxpayers at these high tax rates, it won’t be a sustainable model. My personal view is that you needn’t have raised tax rates so drastically if enforcement had been strengthened. If you had broad based the tax net and looked at leakages, it would have been more prudent. Broad-basing is very important because large businesses are paying taxes as they are listed companies or have good corporate governance and they can’t act unethically in terms of paying their taxes. But only the same circle of businesses should not be targeted for taxation leaving others who are liable to pay their taxes,” she said.

D. R.S. Hapuarachchi, Commissioner General of the Inland Revenue Department said that once the economy stabilizes and becomes healthy, a more lenient tax structure could be introduced.

“Not only the Inland Revenue Department, there are other stakeholders involved in revenue collection. We all have to collaborate to increase our revenue collection because even without these amendments, there are things that we can do to collect more taxes within the existing system,” he said.

Thanuja Perera, Tax Policy Advisor to the Ministry of Finance said that right now the government has to enhance its revenue base and control its expenditure while it focuses on increasing its inflows from exports and remittances as there is no other way to stabilize the economy.