Business Times

Govt. grapples with ways of increasing revenue

By Bandula Sirimanna

The Sri Lankan government, grappling with ways to increase revenue through the 2010 budget while maintaining the deficit at 8% of GDP, is likely to introduce new taxes while reducing some of current ones, outside the budget. Some taxes through the budget is also being contemplated, official sources said.

Tax officers to visit defaulting firms from Monday
The Inland Revenue Department (IRD) is to introduce a 3-pronged strategy to increase tax compliance to between 70 % and 80% from a current 40 % in the next six months with the intention of reaching targetted revenue of Rs.124 billion, new Tax Chief K.M.S. Kandegedera said.
He told the Business Times in an interview that officials will visit companies which have failed to submit returns and defaulted taxes or with huge arrears running up to millions of rupees. This initiative will be implemented from tomorrow (Monday). Legal action will be taken against tax defaulters as a final resort, he said.
Around 50% of local companies of certain categories have failed to furnish tax returns and this is a serious matter, he said adding however that all the big companies are in full tax compliance. The IRD is maintaining 24,278 tax files of resident and non resident companies at present and plans to widen the tax net to increase this number as there is a boom in the tourism, construction, transport, media, advertising and telecommunication sectors. There are a total number of 825,045 taxpayers. He disclosed that the department has been able to collect Rs.111.2 billion for the first five months this year compared to Rs.105.6 billion in the same period last year. The Inland Revenue Department has devised plans to increase its cadre. Increasing the units and providing facilities for staff would be one of the department's main priorities, he added. He said that the administrative regulations of the department will be amended soon to ease promotions and appointments, and provide more avenues for suitable and qualified staff members to climb the ladder in their respective fields.

“There is a dilemma as to ways of raising revenue,” one source said. Some of the taxes are likely to be increased to a considerable level with the inclusion of tax recommendations of the Presidential Tax Commission in the 2010 budget on June 29 contrary to earlier plans not to impose new taxes through the budget, the source said.

The Tax Commission has final ized its recommendations and its report will be presented to the President shortly. IMF officials have also been apprised regarding this action, a senior Ministry official said. The Treasury is now in the process of allocation and accounting of financial provisions for expenditure heads according to the composition of new ministries, he revealed.

He added that the reduction of taxes on imported items like vehicles, mobile phones and wrist watches will pave the way towards increasing imports and the demand for such items.

This will increase state revenue, as well as the demand for the US dollar but it will depreciate the rupee which is unavoidable, he added. Sri Lanka has US$5 billion in foreign reserves at present and this will help to maintain the balance of trade, he added.

Meanwhile, IMF’s Country Representative for Sri Lanka, Koshy Mathai, says that the revised taxes this week are important steps toward reforming the tax system. “While the measures could result in some additional imports and thus increased demand for foreign exchange, this shouldn't be a problem, we think, since the reserves position at the Central Bank is quite healthy,” he told the Business Times.
He said the things seem to be moving in the right direction. “Aside from the positive moves on taxes and in other economic areas, we understand that the government intends to bring the budget deficit down substantially, and not on the basis of unrealistic revenue forecasts or undesirable cuts in badly needed capital expenditure, but rather mostly through a rationalization of recurrent spending. All in all, we're encouraged by the government's policies,” he added.

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
Other Business Times Articles
Govt. grapples with ways of increasing revenue
FTA figures at IIFA Global Business Forum
Telcos should contribute 1% GDP by 2011- TRC
LOLC enters big time hotel business
New SEC chief to address capital market irregularities
Sri Lankans say allow private universities
Top Sri Lankan leaders receive global leadership awards
Tall order on education
Conference on 10 years of the Indo-Lanka FTA
Jostling over CEPA
tomorrow BEAUTIFUL: Perfectly genetic
Sri Lanka Tourism needs tagline-PATA Chairman
Central Bank urged to crack the whip on F&G
Richard Peiris in consolidation and core area expansion
Concern over Hayleys investment in Hotel Services -- Fitch
Tudawe Engineering ensures IIFA Awards held in ideal air conditioning comfort
3D TV now in Sri Lanka
Janashakthi speedily expedites flood-related claims
New appointments at Phoenix Ogilvy
Trade unions want Rajapaksa to implement the Workers’ Charter
Crisis for Tourism in Thailand
IMF: Sri Lanka’s deficit has to be improved
EZY Computers for Journalism Awards winners
Lankan mobile phone vendors urge TRC to crack down on phone mafia
Hayleys case study by INSEAD wins top award in Europe
300+ sign up for SL workshop at m-Billionth mobile awards
SLT spreads the wealth of knowledge to Jaffna schools
John Keells Group annual profits increase by 10%
70-year old TFC moves towards recovery
Logiwiz receives OHSAS certification
DFCC: Looking at new investments after ComBank deal
Ceylon Chamber welcomes simplification of tax structure
CIMA has legal right to use FCMA/ACMA
US business guru advises Brandix on being a world class facility
Sri Lankan business mission to Singapore works out well
Inadvertent error in Business Times story
Citi Sri Lanka gets coveted ISO Certification
Private universities: Quality assurance a must
Now that I have a degree, I need a real education


Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 2010 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved.| Site best viewed in IE ver 6.0 @ 1024 x 768 resolution