Sep 07, 2017 (LBO) – Sri Lanka is expecting 45 billion rupees additional tax revenue through the new Inland Revenue Bill, the finance minister said, speaking at the debate in Parliament.
The multitude of tax rates prevailing in the current law have been rationalized into a three band income tax structure of 28 percent standard corporate income tax, 14 percent for thrust industries and 40 percent higher rate for liquor, tobacco and gaming.
Accordingly, small and medium scale enterprises will be taxed at 14 percent up to their annual gross turnover not exceeding 500 million rupees.
Other specified sectors such as IT, BPO & software development, education & culture, tourism, agriculture and export of goods & services will only be taxed at 14 percent.
New investors of these thrust industries will not have to pay any taxes until their investment is fully recovered.
The IT sector will have concessions based on the employment creation while the jems and jewellery industry will have the same concessions as at present.
Temples, Churches, Mosques and other religious institutions will not have to pay income tax under the proposed act.
According to new bill, monthly income of an individual below 100,000 rupees have been declared tax free and the threshold for annual PAYE tax has also been increased to 1.2 million rupees.
Under the new bill, monthly interest income of a senior citizen has been exempted up to 125,000 rupees and their rental income has also been excluded from tax up to 25 percent.
Corporate tax proposals will be effective from 1st April 2018 while individual tax proposals will be effective from 1st October 2017.
Speaking in Parliament, Finance Minister said that the contribution from Sri Lanka’s richest is not satisfactory.
“New bill seeks to limit most of the tax concessions and introduced capital gains tax,” Samaraweera said. “Because of various concessions, tax collection and administration has become ineffective.”
Tax exemptions and incentives in the current law have evolved over the years and were not targeted towards the economic development.
As a result, most incentives and exemptions are being misused resulting in a significant loss of revenue to the government and creating a non level playing field.
Taking this in to account, the proposed law grants income tax exemptions in the form of investment allowance and accelerated depreciation allowances.
Finance Minister added that a universal tax file number for every individual over 18 years old, is expected to be rolled out soon.
The Finance Ministry is to move 23 major amendments to the bill at the committee stage of the bill and the voting is to take place today afternoon.
JVP however charged that over 300 prevailing tax concessions have been removed from the new revenue bill.