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W.M. Mendis & Company has incurred a loss of Rs. 10.3m as against a profit (before taxation) of Rs. 16.4m previous year. Loss after taxation was Rs. 11.5m as against Rs. 9.9.m profit previous year.
Turnover declined by 14% from Rs. 904.9m to Rs. 775.5m Shareholders' funds decreased marginally from Rs. 300.1m to Rs. 296.6m as a result of the net loss incurred during the year.
Chairman, W.M. Mendis, commenting on the performance of the Company says that higher taxes levied by the Government which amounting to 88% of gross sales is one of the major factors that adversely affected the Company. He further states that taxation of liquor industry in Sri Lanka is the highest in the world and as the size of the market compared with India or other SAARC countries is small.
The Finance Company Limited reported favourable operating results for the year ended 31st March, 1996.
Turnover for the year increased to Rs. 1,671m from Rs. 1,400m, showing an increase of 19.5%, from the previous year. Net profit before taxation increased by 3.9% from Rs. 61.9m to Rs. 64.9m. during the year. Net profit after taxation also shows an increse of 4.9% from Rs. 61.9m to Rs. 64.9m. However, shareholders funds declined by 13% from Rs. 565.8m to Rs. 489m during the year.
The Directors of the Company have recommended a first and final dividend of 20% for the year under review.
Despite the increase of turnover from Rs. 4,952,000/- to Rs. 5,240,000/- Hunas Falls Hotels Limited incurred Rs. 687,000/- loss for the 3 months ended 30th June 1996 as against profit of Rs. 300,000/- earned for the corresponding period in 1995 according to the unaudited accounts.
The consolidated provisional accounts of Swadeshi Industrial Works Limited reported Rs. 65.3m turnover for the 3 months ended 30th June 1996 as against Rs. 95.1m reported for the same period in previous year. This shows 31% decrease of turnover.
The Company's pre tax profit increased sharply by 62% from Rs. 2.9m to Rs. 4.7m. Post tax shows an increase of 129% from Rs. 1.4m to Rs. 3.2m. Shareholders' Funds increased marginally by 5.6% from Rs. 89m to Rs. 94m.
Heytech Marketing Limited reported 7.6% drop of net turnover from Rs. 65.8m to Rs. 60.7m for the 3 months ended 30th June, 1996.
The unaudited accounts of the Company shows sharp decline of profit during period under review. Profit before taxation dropped by 81% from Rs. 4.7m to Rs. 877,000/-. Profit after taxation dropped by 74% from Rs. 2.5m to Rs. 653,000/-. However, shareholders' funds dropped marginally by 2% from Rs. 31.9m to Rs. 31.1m.
Haycarb Limited reported favourable performance during the 2nd quarter 1996 in terms of net turnover, profit before tax and profit after tax.
Net group turnover increasd by 108% from Rs. 174m to Rs. 362m during the period under review. Profit before tax was Rs. 48.9m. This shows 45% increase over the corresponding period the previous year. Profit after tax increased by 34% from Rs. 29.6m to Rs. 39.5m.
We are mid-way in the decade of exports. Yet our industrial export performance this year has been below recent rates of growth. There are reasons for anxiety about our future industrial export growth and a need for positive actions to increase exports.
In the first seven months industrial exports had actually declined by one half per cent compared to the same period last year. There has however been an improvement in August and consequently in the first eight months our industrial exports grew by 4.8 per cent compared to the first eight months last year. In 1995 industrial export growth was 13 per cent. In previous years we had industrial export growth rates exceeding this. For instance in 1990, our export growth of industrial products reached 20 per cent.
Garment exports, which constitute nearly two thirds of our industrial exports, increased by only 2 per cent in the first eight months of this year and reversed the trend of high export growth in this sector. In the first eight months rubber and leather goods, which had also shown a healthy growth in recent years, declined by 4 per cent. The only category in which there was a good growth was in other industrial exports which increased by 22 per cent. But this item is still relatively insignificant, less than 15 per cent of our total industrial exports.
If we relate this performance of industrial exports to our trade picture, then the anxiety is greater. In the first eight months of this year imports of capital goods, which mean mostly machinery, declined by as much as 7 per cent. Raw material imports used mainly for industries also decreased in the first eight months of this year compared to the same period last year. These reductions in imports imply that investment in industries is declining and that industrial production in the next few months, at least, is likely to be at a slower pace.
There can be little doubt that there are overall reasons for the decreased industrial exports. Some of these are temporary and we have perhaps overcome them for the present. Industrial growth this year was no doubt affected by the power crisis. Actions taken by particular industries and the improvement in the general situation may mean that these industrial enterprises could increase their production during the rest of the year. Yet we must be mindful that unless a permanent solution to the energy shortage is found, investors would be reluctant to undertake new industrial ventures. Higher power costs could also affect the viability and competitiveness of our industries. There are also other reasons such as poor economic fundamentals, like large budget deficits, high interest rates and increased inflation, which deter investment.
There is a need to look into these as well as take a realistic position with respect to our exchange rate if we are to continue an export led growth.
Besides these, there are specific factors affecting particular industries. That appears to be the case with respect to some garment industries. These difficulties may have arisen due to over expansion, inability to compete with other countries on certain types of garment exports and poor industrial management. It is necessary to look at such specific problems with a view to some sort of re adjustment of these industries.
Then there are the reasons connected with the governments labour policy which could be a significant deterrent to industrial expansion. In an economy exposed to global competition, there is a need for greater flexibility in labour mobility. Some industries will grow, while others would perish. Only the fittest would survive. Industrialists must have the flexibility of laying off labour when they have difficulties or else their investments cannot be shifted around to yield the best returns.
For a country attempting an export led economic strategy the recent industrial export performance is threatening. The total export growth of nearly 5 per cent has been due to the good performance of our agricultural exports, tea and rubber. Tea prices have held high at a time when production levels were also good. But the export led growth strategy is essentially one for expanding new industrial exports. And this is precisely where we have faltered this year. Let it be a challenge for industrialists, as well as the government, to take effective measures to ensure that the momentum of industrial export growth of past years could be maintained, if not, increased.
Sri Lanka Insurance Corporation has collected a premium income of around Rs 3,154 million from January to August - a 25 per cent increase over the corresponding figures of last year. Life premium for the period is about Rs. 949 million - a 26 per cent increase and General Rs. 2,205 million - a 24 per cent increase a press release said.
The Corporation Chairman, J.W. Wickremasinghe in a press statement says that judging the progress made during the last eight months there is no doubt that the projected income for 1996 could be surpassed.
In the case of Fire Insurance for the same period the premium income has been Rs. 363 million and the increase over the last year's figures has been in the range of Rs. 32 million.
While increasing its collections, the Corporation has honoured claims without delay, the release says. From January to July, fire claims alone have been around Rs. 83 million, in addition to an amount of US $1.5 million also being awarded. The General Accident premium income Rs. 625.9 million showed a massive increase of Rs. 226.4 million over the last year figures - 56.7 per cent increase.
Since the beginning of the year SLICL has opened branches at Veyangoda, Galagedara, Nawalapitiya and Bandarawela and several more branches are also scheduled to be opened in the near future in various parts of the island.
The SLICL operates its business through a massive branch network of 70 including a branch in Male, Maldive islands. The corporation has also secured the highest single Life Policy of Rs. 25 million sum assured, the statement says.
During the period under review a new Life Insurance Policy 'Desanda" was launched which covers husband/wife with facility to extend the cover at death of the spouse by the living party. This Life Police could be linked to the following life policies operated by SLICL. Divi Thilina, Marriage Endowment, Yasa Isuru, Jana Setha, and Mini Muthu. For the Family Protection Unit Cover the age limit has been extended.
The Critical Illness Cover which covered 16 illnesses, now covers 20.
The Sri Lanka Insurance Corporation Ltd. (SLICL) recently issued special 'Millionaire Gold Cards' to those clients who pay an aggregate of over rupees one million as premium to the corporation.
According to a corporation official, the purpose of the cards, which are issued to both corporate and individual clients, is to provide an efficient and speedy service to Gold Card holders.
"The basic eligibility requirement to enjoy this exclusive personalized service is that the client's aggregate contributions should exceed one million rupees in annual premiums from all his insurance policies held with the Sri Lanka Insurance Corporation.
"If the Cardholder is not a corporate client, his or her life insurance premium is also taken into account," the official said.
Special personalized facilities afforded to Millionaire Gold Card holders include immediate confirmation of cover on request pending documentation and payments, comprehensive insurance cover on all motor vehicles and inspection of vehicles, inspection of damaged vehicles within 24 hours of submission of claim documents, certified copies pertaining to ownership and driver competence to be accepted as valid reason in lieu of original documents, motor claims not exceeding Rs. 25,000 to be allowed to repair without inspection and a host of other facilities.
Senior Tax Partner
Jayewickreme & Co
Edmund Burke once said that to tax and to please, no more than to love and to be wise, is not given to men. Whatever the revenue officials do, it may be that sometimes their functions would not give pleasure to the taxpayers. No tax system can succeed without the co operation of the taxpayers. More than for most government departments, it is important for the Inland Revenue to secure the respect and trust of the public.
Good Tax Administration
Fortunately for the revenue, Sri Lankan public, by and large, take a responsible attitude towards taxation. Few may actively enjoy contributing to the cost of social services or national defence, but most people accept that these things must be paid for and are prepared to pay their share. This readiness, however, is not unconditional. Taxpayers look for certain salient features in a tax administration before they extend their cooperation.
If people do not think that the laws are fair, still they may pay their taxes because Sri Lankans are traditionally law abiding, but they will pay reluctantly and will not be disposed to co operate with the Revenue.
The taxpayer must feel reasonably assured that when he pays the tax, everyone else pays their proper share. It is the responsibility of the revenue administration to ensure and to secure uniform and efficient tax administration of the tax laws.
In his own personal dealings with the Revenue, perhaps the taxpayers first requirement is that the private atfairs which he must disclose to the Department must be kept private. Taxpayers would be less ready to give information if they thought that it would he used for extraneous purposes.
The taxpayer always desires that the tax laws are made easy for him as far as possible. He wants to be sure that he pays his legal liability and no more. He wants to understand or at least to be offered the means of understanding how his tax liability is arrived at. Above all, he wants things to be very simple.
People have always felt strongly that the tax system should be equitable in the sense it should be adjusted closely as possible to the taxpayers ability or the capacity to pay.
Anomalies in the tax laws bring about repeated amendments to the tax legislation and this works against simplicity. The Revenue should play a lead role and minimize the request for amendments even if there is a loss of revenue. In the long term, it would enhance revenue collections.
Having considered the issues which bring about good tax administration, it may be in good order if the revenue administration focuses on issues which dilute a good administration and finds ways and means of giving solutions to these issues so that a tax administration could move towards beneficial tax administration. When I say beneficial tax administration, it is a good tax administration which focuses more on the welfare and the need of the taxpayers without diluting its attention or emphasis to its obligations to the policy makers and to its staff.
Despite the conflict between equity and simplicity, some measure of simplification is possible from time to time even in matters affecting the incidence in taxation and no one is better pleased than the Revenue when such opportunities arise.
Let the law be what it may be, the Revenue has the duty to explain it to the taxpayer and to do so as simply as the nature of the subject matter allows. Such endeavours should be plain, short and easy description of different clauses in the tax statute, so as to render it familiar to the Meanest Capacity. This may be an ideal to which all writers of explanatory material must aspire. Attaining the ideal is another matter.
In the contemporary environment most of the taxpayers, whether big or small, place heavy reliance on tax consultants. Of course, as the tax consultants and revenue officers are trained personnel, they may be in a better position to handle difficult technical questions on equal terms to the benefit of the taxpayer and the government. However, it is the ordinary taxpayers whom the Revenue should have particularly in mind when it sets out to explain the law.
Repeated requests have been made to make the tax return forms as simple as possible. However, such endeavour is bound to conflict with accuracy. The designing of the return form is to a great extent a matter of layout and arrangement of the material, for the quantity of the material that must go on the form is largely dictated by the law. A taxpayer would rightly complain if a particular relief to which he happens to be entitled was left out because the form looked simpler without it. On the other hand, the Revenue would like to itemize all sources of income with extensive description so as to jog the taxpayers memory.
It may be good for the Revenue to have a Press Officer who is available to answer questions about tax law and practice and to explain the background to items of tax news. Many newspapers run advice bureaus for their readers and the Press Officer could also give official opinion on particular cases. The Press officers contacts, not only with the press but with authors, publishing houses, sound and television broadcasting authorities and others, are of considerable value to the department itself, as they provide an objective source of information above the climate of the public opinion on tax matters.
Although the Revenue can never be a popular department, it cherishes a long standing reputation for efficiency and fair dealing and almost the first thing the new entrant should be taught is that it is part of his duty to help the taxpayer. This duty should be emphasized in every training course and at the beginning of all the official instruction books. The responsibility for making a claim to relief, for example, is placed by statute on the taxpayer, as it must be, but the department should stand ready to assist him in every reasonable way.
If the taxpayer raises his problem in correspondence, the Revenue should do its best to reply in plain words, as recommended by Sir Ernest Gowers: they should be in terms suitable for one honourable gentleman to address to another. If the taxpayer comes to the revenue office, the chief requirement for the interviewing officer should be apart from courtesy, tact and sometimes a good deal of patience is again a capacity to explain things as simply as possible.
Conflict between the taxpayer and the revenue officer is inevitable and it is a necessary feature in a democratic society. This conflict should be good and productive and it should strike a balance between the good for the public in general and the good for the taxpayer in specific and such a balance should be regulated by law.
As this is a part of a training session for the revenue officers, the following issues may require special attention which should help to guide the Revenue towards beneficial tax administration.
The revenue administration should have a vision. The vision may be to be the best and the premier government department in Sri Lanka, committed to quality service by which they meet the needs of the taxpayers and the government and provide outstanding career opportunities to its staff.
Arising from the vision the revenue administration should have a mission. The mission may be to help the taxpayers and the government to succeed in the global marketplace by exceeding their expectation and delivering value in everything they do.
The Revenue should be flexible in its administration. The revenue administration is not expected to break the laws but it can bend the laws for the benefit of the taxpayers.
Revenue officers are trusted persons as the powers are vested in their hands and those powers should be used for public benefit and not for personal profit. They must mean what they say and say what they mean.
The revenue should achieve the dual objective of minimizing the cost both to the government and to the taxpayers. The most important concern for the Revenue should be to minimize compliance cost for the taxpayer. The Revenue Administration should not fail in this obligation to the taxpayers.
The revenue should be always prepared to help the taxpayers as far as possible because they have technical superiority and are more aware of the procedural administration of the revenue than that of a taxpayer. Helping the taxpayer should not be viewed as a painful operation as there never can be any pleasure without pain.
The Revenue should develop structured procedures that would assist both the taxpayers and the revenue officers. Mandatory procedures, as specified by the law, should be amply recognized and respected. Great inconvenience may be caused if a mandatory requirement is viewed as directory.
The revenue officers should be educated to make decisions. They should be permitted to make firm decisions but at the same time they should be educated that those decisions should be fair to the taxpayers. The revenue officer should be discouraged from making unacceptable decisions and should be briefed on the objectivity of making reasonable decisions.
The revenue officers should be educated that they cannot delegate their responsibility to another. Similarly, they cannot delegate making a judgement or an opinion to another.
Revenue officers should be accountable for all their functions to their superiors and to the taxpayers and this should be preferably recognized by law. Arising from the aspect of accountability emerges transparency which has much contemporary relevance.
On crucial issues which affect taxpayers aversively, the Revenue should have one voice, and this voice. by no means, should be contrary to the policy pronouncements. By developing one voice, the Revenue Administration can ensure consistency.
The revenue administration should never have two standards, one standard for the revenue officers and another for the taxpayers which are contrary to each other.
A revenue administration should continuously research and identify inadequacies and infirmities in the tax laws and in the tax administration and should be prepared to change and improve the tax laws and the tax administration to the benefit of the public.
The revenue officers should always enjoy their work because no one could derive any satisfaction if they do not simply enjoy what they do. It is good to attach humour to the work the revenue officers perform which will definitely help to ease tension and handle difficult moments.
People always view the interaction between the taxpayers and the revenue officers as a battle or a contest with a view to achieve their own objectives which necessarily conflict or contradict with each other. Ideally, the taxpayers and the revenue officers should sit together, talk together and work together towards a common objective of justice and fair play. In this regard, I am reminded of an instance in nature. If you take a flower and a bee and when the bee extracts nectar from the flower, both enjoy the process of extraction and after the process of extraction the flower is happy because it has got lighter and can live longer and the bee is satisfied to have got a stomach full to live another day. Why cant the taxpayers and the revenue officers draw a lesson from this aspect of nature and subscribe to the following learned preachings of many sages.
The more you give the more you get
The more you give the more opportunities created to give more
live and let live
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