Business Times

Budget and the Deemed Dividend Tax

Right of Reply

I read, with disappointment, Mr T.S.Perera’s critique on Sunday, 26th December, 2010, of my article that was published on Sunday 12th December in the Business section of the Sunday Times.
I have never resented criticism of my writings. Mr Perera’s article has caused me no offence. However I was deeply astonished that anyone could so utterly fail to grasp the meaning and purpose of my article especially because it was written in simple, unambiguous English.

For the benefit of Mr Perera, a Chartered Accountant, I shall summarise the essence and significance of what I wrote , in a few simple sentences. 1. The Government has erred in amending in the latest Budget the Deemed Dividend Tax (DDT) that it introduced in 2006.

2.The main purpose of that tax was to persuade Boards of Directors to increase their dividends to a reasonable level. It was not intended to be a revenue raising measure except by the collection of more Dividend Tax.

3.It worked – dividends increased and the share market was given a boost while shareholders got a squarer deal.

4.The increased share activity was good for the economy.

5. In order to avoid paying DDT all that a company had to do was to pay a reasonable dividend.

6. Paying a reasonable dividend could never prevent a company with a good reputation from expanding as much as it thought necessary.

7. If it lacked the funds to do it, the company could raise funds by bank loans, the issue of Debentures, or a Rights Issue.

8. A number of companies (listed in a table in the article) had paid reasonable dividends while expanding to the extent they desired. Those companies included John Keells and HNB.

9.The DDT is an excellent example of that rarity – a tax that encourages and enables development. It benefits the shareholder and the share market without harming anybody because it can be avoided by merely behaving ethically. (The Code of Ethics of the Ceylon Chamber of Commerce has urged its members to pay reasonable dividends ever since 1982).

That Mr Perera has totally misunderstood the message of the article is clear from his statement that “The writer’s spotlight on JKH,VPEL,JNS and HNB is, in my opinion, in poor taste”. He has failed to grasp that listing out those companies was a compliment to them!

This sort of obtuseness is the misfortune of specialists who fail to see the wood for the trees. A little knowledge (in this case of tax) can be a dangerous thing.

Charitha P de Silva, Colombo.

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
Other Business Times Articles
Dollar seen weakening to Rs 106-108 in 2011
Erroneous New Year lottery incurs heavy loss for NLB
No big names for Kalpitiya, Govt. may issue fresh bids
Seylan Bank’s top three officials resign
Grand Oriental Hotel deal in fizzled out mode
Order reserved in oil hedging arbitration
Comment - Roadmap to prosperity
Feature - US GSP for over 130 countries expires, likely to re-start in next few months
Feature - Crisis in coconut: Long term perspective for development of coconut needed
20,000 MFIs to be regulated under Micro- Finance regulations: CB Governor
Indian experts to share insights at ICASL workshop
Laugfs to offer non Acetylene metal cutting gas
Coca Cola gives permanent jobs to 25 top salesmen
City tour for tourists
Central Bank predicts 8-9% economic growth for Sri Lanka
Budget and the Deemed Dividend Tax
Overseas employment prog. should be pro-active: NWC
Markss Healthcare helps in courses to educate ‘budding’ surgeons
Communications’ specialists to share expertise at Feb. 3 seminar
No control over share price movements : PCH
New MD at Ceylon Tobacco Company
SLASSCOM elects new board for 2011
Efutures provides support services to Wall Street firms
ODEL builds 20 houses to mark 20th anniversary
Pelwatte milk foods to enter the market shortly
East coast - hot destination for heli flights
Aitken Spence Printing at Galle Literary Festival
ICASL to introduce new ICT enabled products to its students and members
20 mln shares on offer in Marawila rights issue
Former Nestle SL MD to head Kotmale
‘SURE’ rewards from Seylan Bank to all customers
Emirates sponsors popular authors to Galle Literary Festival
CB Governor on ITN's "Rupees and Sense"
Colombo bourse half day on Jan. 14
SLIC pays Harry’s DCSL Rs. 6.7 bln as per SC order
HVA set to consolidate HELADIV brand through IPO
Lankan PR firm launches website
Ray of hope for GK depositors under new payment proposals
New port city being built at $450 mln cost
Commercial Bank reaches milestone 400th ATM
Proposed 5-day week for those seeking flexible working hours: EFC
Mobitel reached 3.8 million subscribers by Nov. 2010
Tea prices, production and exports seen strong in 2011: Forbes report
SEC may revisit price band
Lanka Bell may not be sold
Sri Lanka rubber prices seen rising
Oman Air CEO speaks on in-flight entertainment
Sri Lanka is next Asian economic miracle :ex-Pakistan bureaucrat


Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 1996 - 2011 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved | Site best viewed in IE ver 8.0 @ 1024 x 768 resolution