VAT changes not good for business

Reported by Duruthu Edirimuni and Natasha Gunaratne

The government is estimating the 2007 revenue to go up by 24% and income tax revenue to go up by 36%. That’s going to be a tough task, according to N.R. Gajendran, a well known tax specialist.

He said:
“The GDP currently is going up by 17%. The GDP estimated for 2007 is over Rs 3 trillion, an increase by 17% over the previous year.

They are further compromising on the VAT principles. It is perishing because of the administration. They are going to disallow the input tax and restricting input tax on capital or intermediate goods is not good.

Dividend pay out: How to manage a company should be left to the directors of the company and they should decide on the dividend. It is not healthy to impose a tax on dividends.

They are allowing professionals to hold monies in foreign currency and this should be expanded. They should be allowed to transact in foreign currency because you are transacting on a strong currency and the risks are mitigated when the currency gets distributed to more people. That trend and principle is being recognized and should be expanded.

The government is promoting local value adding companies and it is a good proposal. Even for that, they are encouraging it to transact it in foreign currency. Sri Lanka should be promoted as an offshore financial centre like Singapore. This principle has to be acknowledged and expanded.

There was a heavy focus on agriculture. There was a lot of encouraging of the plantation sector, fisheries, and prawn farming. However, gold, gems and diamonds are getting substantial incentives but those are luxury items.