By Uditha Jayasinghe
With the Budget on the horizon, the Inland Revenue Department (IRD) yesterday dropped hints that there would be more relief to local investors come 15 November.
IRD Commissioner General K.M.S Kandegedara acknowledged that the department was currently meeting with various associations and organisations to formulate proposals for Budget 2012.
He was speaking at the press conference held to announce the 32nd annual Commonwealth Association of Tax Administration (CATA) Conference, which is being held in Sri Lanka from 18-23 September.
When asked what the key focus of their proposals to the Finance Ministry would be, Kandegedara remarked that it would be to further ease tax regulations imposed on local investors.
“Our main aim is to encourage local and foreign investments. However, we have realised that the Board of Investment provides much assistance to foreign investors and large local investors, but there isn’t enough attention paid to the average local investor and these are the people that we hope to help with the new Budget.”
He revealed that the IRD would only consider tax holidays for foreign investors but would attempt to further simplify tax procedures and levels for local investors and businesses. “We might consider giving tax holidays but that will only be for foreign investors,” he insisted.
While encouraging investments, the IRD is also considering ways to give relief to tax payers. Nonetheless, in the upcoming Budget the Government will move more towards increasing indirect taxes and minimise dependency on direct payers.
“At the moment about 25% of people pay direct tax and we want to reduce this still further in the 2012 Budget. As a measure to assist these direct payers, we will make the IRD even more people friendly and broaden the procedure for paying VAT. This is building on the policies that were introduced in the previous Budget where a simplified VAT system was introduced.”
Last week the International Monetary Fund (IMF) warned the Government against changing the tax regime yet again in the 2012 Budget. Instead they advised that the Government should maintain the current framework to inspire stability and predictability among local and foreign investors.