The Budget proposals for 2016 were spelt out in the Budget speech by the Finance Minister on 20 November. BDO Partners, a leading audit firm in Sri Lanka, organised a post-Budget seminar to educate their clients and other stakeholders on the impact of these proposals on business and the industry perspective of the proposed changes to be made in the future on 23 November at the CA Sri Lanka Auditorium.
The event commenced with the lighting of the oil lamp by the Partners and Business Unit Heads of BDO and other special invitees. Managing Partner Sujeewa Rajapakse welcomed the guests and made a short introduction to the Budget proposals for 2016. He made special mention that the Budget is focused on granting concessions especially to the private sector and individuals and also to create new job opportunities. It was noted that the increase in tax free allowance of individuals from Rs. 500,000 to Rs. 2,400,000 was a welcome change for individual taxpayers.
The main presentation for the day on the specific changes to be made in the revenue statutes was done by Dhammika Gunathilake, Deputy Commissioner General of the Inland Revenue. She explained in detail the various changes to be made to the Inland Revenue Act, Value Added Tax Act, Nation Building Tax Act and the Economic Service Charge Act to name a few and also explained the underlying rationale for making such changes.
The proposed changes have been made not only to increase the tax revenue to the Government but also to remove certain taxes and simplify the tax system in Sri Lanka. This has been done with the objective of easing the compliance burden of taxpayers to ensure better compliance statistics among the taxpaying population. She urged that everyone should approach the Department of Inland Revenue to iron out any issues that they are facing as the officials of the Department of Inland Revenue have now been instructed to be more accommodating and supportive towards the taxpayers.
The presentation was followed by a panel discussion. Gunathilake was joined by Kalyani Dahanayake, Commissioner General of Inland Revenue, Kishu Gomes, the Managing Director of Chevron Lubricants PLC, Mangala Yapa, CEO/Secretary General of the Ceylon Chamber of Commerce, Sarah Afker, Director Tax Services of BDO Partners, and Sujeewa Rajapakse as the moderator.
The Commissioner General made note of the progress that has been made within the administration of the Department of Inland Revenue with the introduction of new technology after implementing the Revenue Administration Management Information System (RAMIS) and the services which can be offered to taxpayers through this system especially to make tax payments online and simplifying the income tax Return to a one page document.
Yapa added that with the introduction of the digital national identity card the information systems of the Inland Revenue Department, the Customs Department and other relevant government institutions can be linked to provide a seamless platform to ensure compliance with revenue collection laws. He also commended the Government on the steps taken to promote investment in shares in the Colombo Stock Exchange by removing the Share Transaction Levy and the relaxation of the exchange control regulations to encourage foreign investments to flow into the country.
To give the audience the industry perspective on the Budget proposals for 2016, Gomes was asked to give his views on the proposals made. He explained that on the face of the budget the tax burden of the individuals and corporates have been reduced. However, when the actual numbers are being worked out, there is actually no significant reduction in the tax to be paid. Special note was made on the proposals to increase job opportunities for the people of the country. He also emphasised the need to improve the education system in our country to change the demographics of the work force in Sri Lanka and change the culture where we export house maids and import CEOs.
There were several pertinent questions that were raised by the audience from each of the panelists including the impact of these changes to the financial sector. The imposing of Economic Service Charge on all businesses at 0.5% of the turnover was hotly debated as creating a significant impact on businesses with thin margins. This will have a severe impact on companies with higher sales volumes but thin margins and lower taxable profit where the ESC paid would be a cost rather than an advance payment of income tax. The retrospective impact on the removal of qualifying payment relief introduced on the expenditure associated with the merger of financial institution consolidation process also was debated.
BDO Partners organises the post-Budget seminar each year after the Budget speech by the Minister of Finance. BDO Partners Sri Lanka is a leading professional service firm providing audit, advisory, tax and consultancy services to national and global businesses. BDO Partners is a part and parcel of the global network sharing knowledge and expertise. The firm has expended into varied service lines providing the client a seamless array of professional services with high quality delivery. BDO brand stands for exceptional client service, delivered by exceptional people.
Pix by Sameera Wijesinghe