ISSN: 1391 - 0531
Sunday September 2, 2007
Vol. 42 - No 14

More taxes to raise billions

Cash-strapped Govt. proposes new levies on several items

A new set of pre-budget taxes for a cash-strapped government will soon be enforced, increasing the cost of mobile phones, vehicles and other items such as washing machines. The new taxes are set to raise billions of rupees for the government, ahead of the budget.

“The government is desperate for cash, so these are the various forms of ‘subtle’ taxes that come before the (November) budget,” one tax expert said. The bills presented in parliament and to be debated on Thursday, however, do not give an effective date but analysts say it will probably be set when the bills are passed in parliament next week or in the next month.

Under these amendments, mobile phone users will have to pay a new monthly tax of Rs 50 in addition to the ‘Cellular Mobile Telephone Subscriber Levy’ going up sharply to 7.5 percent from a current 2.5 percent. This is to be presented as an amendment to the Finance Act No 11 of 2004. The Rs. 50 tax alone is expected to raise at least Rs, 2 billion annually.

Vehicle prices will rise with increased import duties being levied in terms of the Regional Infrastructure Development Levy of the Excise (Special Provisions) Act. Under this, a 2.5 percent tax is being slapped on vehicles with engine capacity not exceeding 1,600 cc, 5 percent for engine capacity of between 1,600 and 2,000 cc and 7.5 percent for vehicles more than that. Earlier it was a flat rate of 2.5 percent for all vehicles.

Import taxes under the Excise (Special Provisions) Act No 13 of 1989 are also going up to 15 percent from 10 percent. The bill doesn’t specify the items that will be affected but the tax expert says it will apply to a whole list of items like washing machines, air conditioners and paints. It doesn’t apply to tobacco, cigarettes or beverages which come under the normal Excise Act.

A new levy called the Special Commodity Levy is also being introduced. This is to “provide for the composite levy on certain specified commodity items in lieu of the amount chargeable on such commodity items like a tax, duty, levy, cess or any other charge. This is meant to overcome the complexities associated with the application and administration of multiple taxes on such specified commodity items.”

According to the tax expert, this will bring about a combined tax taking in all these levies. “Invariably the price of the item will rise.” As always, consumers and not companies will bear the brunt of these taxes as in the case of mobile phone companies which enjoy tax holidays and merely pass on these extra payments to the end user, he says.

Top to the page

Copyright 2007 Wijeya Newspapers Ltd.Colombo. Sri Lanka.