By Cassandra Mascarenhas
The tax regime has been relaxed, simplified and streamlined and these changes will be imposed not next year, but starting tomorrow and the tax department will have to concentrate on making the said clients pay double in existing taxes to make up for the loss on the many abolished taxes, stated Treasury Secretary Dr. P.B.
Jayasundera, summing up the major overhaul of the taxation system in the 2011 Budget that was announced on Monday.
Speaking at a post budget seminar organised by the Department of Inland Revenue last night at the Ceylon Continental, the Treasury Secretary further said that all institutions including the revenue department, customs, the UDA and all other ministries need to become less stringent and more efficient and more open minded in order to bring about a simpler but stronger economy that will be needed to achieve the targets set by the budget.
A total of 15 to20 commodities claimed as single tax products and refunds on VAT and other taxes, which were heavily ridiculed by the Secretary, have been done away with for the most part. “What money comes to the Treasury should never go back as refunds — therefore refunds have been eliminated,” he said bluntly.
Taxes in selected sectors such as telecommunications have been reduced and certain equipment used in such industries can also be obtained tax free.
He detailed some of the tax structure reorientation such as the 35% corporate tax and the 15% concessional tax — the latter after the budget, has increased by 40% on imports of liquor and tobacco — but the former has been reduced to 12%. Taxes on certain exports, specifically those that would generate 65% value addition within the country will only be liable to 10% taxes.
The Government also has a very exciting agenda, Dr. Jayasundera added, with a time frame attached to each sector for intense investment – two years for ports, three to four for road development and the water supply sector, six years for irrigation systems and so on.
Incentives have been provided for both the public and private sectors for research and development in order to encourage this and further PPPs to advance product development.
Bankers themselves will be required to open investment accounts and have to use this for long-term lending. With this new investment account, people can borrow 10 to 12 year loans on very low interest rates and will be entitled to other innovative services.
Thresholds are quite lucrative and people can live with them for the next 10 years – if inflation moves the way it has been doing now, incomes will exceed the rate of inflation, which has been decreasing. Poverty is also much lower than what many people assume; the latest survey has revealed that it was 7.6% whereas it was 15.5% in 2006. The target is to be an economy free of poverty, one which has a growth rate higher than the rate of inflation and that would achieve the target income of $4000 in five years.
He also urged the private sector, which until now had waited for the Budget 2011, to quit relaxing and make a move.
“Adapt the Budget to your own working environment in order to help yourselves and be a part of an emerging middle income country,” he said. “The previous complaints of how successive governments could never provide the support required by the private sector as they had to deal with high fiscal deficits can no longer be made. The current Government is managing a deficit at 6.8% which is tolerable and has provided the private sector with a much more promising environment.”