IRD tax advisory services commended
View(s):Letter
It’s commendable that the Department of Inland Revenue (IRD) is going to provide free tax advice to the public at large, especially the tax payers. I welcome this news. However it’s better for the IRD to give a hearing to tax payers’ problems whenever a new tax is introduced. It will make the tax payers cooperate better with the department. For example, effective January 1, 2013, VAT is payable by wholesalers and retailers (including supermarkets), if the quarterly turnover is more than Rs. 500 million. In fact the Government has permitted the supermarkets and others to recover VAT at 12 per cent over and above MRP (Maximum Retail Price) which is marked on the product. But all these items in the supermarkets have become expensive.
The outcome of this is:
1. Cost of Living has gone up for supermarket customers.
2. Supermarkets and other large traders lose their sales materially
3. Supermarkets sales would be taken over by small wholesalers and retailers.
4. Locally produced cheap items would not be sold in supermarkets
5. Supermarkets may have to close down or reduce their outlets.
In addition the IRD loses major revenue on;
(a) VAT to be paid by supermarkets as sales will drop.
(b) VAT need not be paid by small traders who take over supermarkets’ share of sales.
(c) Tax on supermarkets is 28 per cent whereas small traders pay 12 per cent on profits not exceeding Rs 5 million.
(d) It is not possible to expect all small traders to account for income. They may not issue receipts in the proper manner. Their accounts may not be audited and returns not submitted to the IRD. What the supermarkets wanted was a refund in respect of VAT embedded on stocks held as at December 31, 2012. By this method the prices would not go up by 12 per cent and there would be a healthy competition between supermarkets and small traders. Since all supermarkets are computerised obtaining information about stocks as at December 31 is not difficult. It is better for the Government to consider this with an open mind and approve the claim in respect of VAT embedded in stockers as at December 31.
S.R. Balachandran
11, Ramakrishna Avenue
Colombo 6.
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