Strong calls to make Sri Lanka taxes work
Most companies are gearing to pass the tax hike through price increases to the end customer, and are urging state authorities to put the taxes to work, a survey of CEOs of 15 companies by the Business Times revealed. Mahendra Jayasekara, Managing Director Lanka Tiles PLC emphasised that it is not the rate of tax that matters but for what purpose taxes are raised. “We don’t like being pick pocketed but we willingly give money for the right purpose. The government is not uttering a word as to where this increased tax revenue will go. Neither do they say how they are going to broaden the tax base by netting the people who ought to pay but don’t. Taxing a few existing taxpayers will not solve this problem. I also feel that increasing PAYE tax beyond corporate tax without showing any accountability is a ploy by the government to drive professionals away from the country so that they can rule an illiterate state.”
The Ceylon Chamber of Commerce in a statement last week said there is a widely-held perception that the tax revenue is not being fully utilised for the benefit of the people.
A CEO of a manufacturing firm also agreed saying that while that increased taxation is required, this level of taxation is sending businesses and high net worth individuals to tax haven residency schemes.
Having increased the tax base the government should have kept the tax rate at a maximum 25 per cent, an industrialist said. It will not be easy to pass on the entire tax increase to customers because the businesses have to be competitive and customers’ purchasing power is already eroded, he added.
Certain industrialists had an opposite take on the tax increase saying that when the government needs it most it is important for the private sector to chip in. One of them said, “Successive governments have been giving tax breaks but our revenue position has not improved. Discriminating tax breaks have their own set of issues.” He added that giving 30 per cent to the state if making a hundred per cent profit is reasonable. He said the government has not been competent in revenue collection and the weak tax administration has contributed to a lot of problems. Noting that the government has been not very transparent in showing how the taxes work, the corruption card is overplayed by greedy firms. “How is free healthcare and free education funded if not with the taxes etc?”
“We have to be very efficient and smart in handling these external shocks but Sri Lanka sadly lacks good and honest people who consider the company and country above themselves. Let’s hope that we will somehow pull through this difficult situation rather than increasing the taxes, the government should cut down expenditures and make government services more efficient and productive.”
The chairman of a logistics firm said that they will see a drop of around 5 per cent in profits for all local companies mainly because they are already paying higher taxes at 24 per cent.
They will not pass on the increased corporate tax to customers as the companies will not be competitive, he added. Also, the need to focus on restructuring loss-making state enterprises to ensure the good money earned is not utilised to subsidies the inefficiencies is paramount, a CEO of a large bank told the Business Times on Thursday.
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