Tax Ceiling

Apr.12 (LBO) – Sri Lankan banks have asked the government to consider imposing a lower tax on credit card transactions, as the new stamp duty will discourage people from using the formal banking system, an official said. Starting April 4, the government is charging one percent or Rs10 for every Rs1000 spent on a credit card transaction, by way of stamp duties.

While the details are still being worked out, Inland Revenue Chief A A Wijepala said the stamp duty will be limited to transactions over Rs25,000.

The move, which has a double taxation effect, has riled bankers and many credit card users, with the banking industry accusing the government of secretly thrusting the tax on them with little room for discussion.

“It came as a shock to us,” said Upali de Silva, Secretary General of the Sri Lanka Banks’ Association.

“The association has suggested to the Treasury to change the levies to a per transaction charge like Rs3.00 or a tax of 0.1 percent,” de Silva told Lanka Business Online.

The wording in the law also gray, says Sriyan Cooray, Financial Controller of HSBC Bank, the island’s largest credit card issuer.

“The law refers to credit balances,” Cooray says. “For instance, if you have an