Ceylon Chamber of Commerce’s key recommendations on taxation

• Sri Lanka Economic Acceleration Framework 2020-25 

The Ceylon Chamber of Commerce recently launched a working draft of ‘Sri Lanka Economic Acceleration Framework 2020-25’ towards building a $ 135 billion economy by 2025. Today we feature the Tax Working Group proposals from the document

Lead:

Duminda Hulangamuwa, Partner, Ernst & Young

Members of the working group: 

Nilanthi Sivapragasam, Chief Financial Officer, Aitken Spence PLC 

Shamila Jayasekara, Partner, Head of Tax, KPMG Sri Lanka 

N.R. Gajendran, Senior Partner, Gajma & Co Chartered Accountants 

Naomal Gunawardena, Partner, Nithya Partners 

Amal Badugodahewa, Director, Tax, Carson Cumberbatch PLC 

Nisreen Rehmanjee, Head of Tax Strategy,  John Keells Holdings PLC

Roshan Anselm, Group Tax Manager, Hayleys PLC

Amila Priyadarshana, General Manager Finance, Hemas Holdings PLC

Priyadharshana Ekanayake, National Finance Director, Unilever Sri Lanka (Pvt) Ltd.

Charmaine Tillekeratne, Director, Tax Services, PricewaterhouseCoopers

Prasanna de Silva, Director, Credit, Central Finance Co. PLC 

Lalith Yatiwella, Finance Director, Singer (Sri Lanka) PLC

Thilani Perera, Chief Manager, Tax and Finance, Commercial Bank 

Brandon Morris, Acting Managing Director, Associated Motorways (Private) Limited

Aruna Deepthikumara, Group Chief Financial Officer, Commercial Bank of Ceylon PLC 

Trinesh Fernando, General Counsel / Vice President, Group Legal and Regulatory, Dialog Axiata PLC

Nilam Jayasinghe Group Finance Director, Ceylon Biscuits Limited

Tenets of taxation Broad principles

Certainty: Taxes ought to be certain and not arbitrary

Interventions: 

• Provide consistency in the tax regime in the period leading up to 2025 and avoid the application of retrospective taxes. Maintain existing tax rates including the concessionary tax rates (e.g. for SMEs, exports at 14%) until we move toward an equitable tax base. 
• Taxes should be aligned to national policy, and essentially be a tool for signalling Policy.

Accountability and regular review, tax shifting and hypothecation have a role to play

Interventions: 

• Establish a think-tank on tax policy that will perform rigorous analysis prior to implementation of tax policy. It will enable the evaluating, monitoring and implementation of policy initiatives that would be backed by research and would hold the Government accountable for policy actions. The think-tank should also have links with the private sector, so that policies and projects that are cognisant of the private sector would be implemented. The think-tank can consider policies in addressing the challenges in taxation of the digital economy, promote policies that will provide more positive societal behaviour towards protecting the environment.
• Hypothecation has an important role play in pooling funds for dedicated expenditure purposes. Such revenue needs to be managed and utilised in a transparent efficient manner.
• Create metrics to evaluate efficacy of the tax policy. This is vital to win taxpayer confidence and gain taxpayer “buy-in.”  
• Consultations: Any new tax should be opened to the public for a reasonable period for discussion and debate.

Other interventions

Equity and fair play in the tax administration

Implementations: 

• Appoint a Tax Ombudsman — presently there are provisions established for this appointment, though it has not been made in the last 12 years. Furthermore, authority should be given to strengthen this office by an Act of Parliament.

Tax administration and competitiveness

Tax regime must be globally competitive in efforts to attract new capital, ensure progressive outcomes, avoid regressive outcomes and be well administered. 

• Establishment of a rational tariff structure that promotes the macroeconomic growth objectives of the economy. 
• Provide investment incentives for anchor investment in sectors that have potential to drive export and FDI into the country. 
• Improve tax administration by improving capacity of the Inland Revenue Department (IRD)
• Develop industry specific knowledge within the IRD
• Re-look at the operating structure and procedures of the IRD
• Improve implementation of RAMIS