SC clears NBT hike to 4%

The Supreme Court has cleared the Nation Building Tax (NBT) amendment, which was moved recently in Parliament, paving the way for it to be increased to 4% if the House gives its approval, the Speaker said yesterday.   

Speaker Karu Jayasuriya, reading the Supreme Court determination in Parliament, said: “The Bill is on par with Article 121 of the Constitution. It is held that the Bill is consistent with the Constitution in general.”

The latest amendment calls for the earlier 2% tax to be doubled and was approved by Cabinet earlier. 

The Government has been pushing to increase VAT to 15% from 11% and NBT tax to 4% to bolster much needed revenue as it aims to decrease the deficit to 5.4% of GDP. In 2015 the Government incurred a hefty deficit of 7.4%.  

“It is going to help improve revenue collection but not have a significant impact in terms of boosting the 2016 number,” Shiran Fernando, an analyst at Colombo-based Frontier Research, told Daily FT. 

NBT was imposed with effect from 1 February 2009 and was subsequently amended a few times - Nation Building Tax (Amendment) Act No. 32 of 2009, Nation Building Tax (Amendment) Act No. 10 of 2011, Nation Building Tax (Amendment) Act No. 9 of 2012, Nation Building Tax (Amendment) Act No. 11 of 2013 and Nation Building Tax (Amendment) Act No 10. of 2014. ​​However, the amendment moved last month was challenged by a public interest litigant petitioning against retrospective tax liabilities.

According to the Department of Inland Revenue, NBT is payable by both persons and establishments of all scales and stature when importing any article other than what is found inside personal baggage, conducting business of manufacturing any article other than any accepted article or​ carries on the business of wholesale or retail sales of any article (other than such sale by the manufacturer of that article to whom the NBT provisions are applicable as the manufacture and liable under item above, or carries on the business of providing a service of any description, including the business of banking or finance, other than any accepted service. (AH)