Certain tax anomalies in Budget 2011 will be corrected in Budget 2012 which will be presented in Parliament on November 15, an Inland Revenue Department (IRD) officer told this reporter.
Deputy IRD Commissioner General H.B.A. Seneviratne as an example said that it was announced in the last budget that certain qualified corporates making under Rs. 300 million would be liable to only a 10% tax, but there had been certain others which previously were subjected to only a 5% tax, so that anomaly would be rectified, he said.
Additionally, some corporates, allegedly taking advantage of this directive, have qualified certain of their subsidiaries to pay only a 10% corporate tax, whereas holding companies and their subsidiaries are subjected to a 28% tax, said Senaviratne.
Such anomalies too will be rectified in Budget 2012, he said.
Seneviratne said that together with the BoI they would also be looking at tax incentives. Post war FDI has not seemingly grown as fast as it should have had, coinciding with alleged IMF pressure that has knocked out BoI tax incentives for a number of categories of investments.
Seneviratne said that VAT is the biggest contributor to tax revenue comprising 60% of total tax revenue. That was followed by Income Tax (30%) and other forms of indirect taxation such as Nation Building Levy bringing up the balance 10%.
However, Seneviratne said that ideally revenue from indirect taxes such as VAT should come down, while that of Income Tax should increase. Indirect taxes are bad in law as both the rich and the poor are subjected to the same tax, he said.
Seneviratne further said that tax revenue this year should pass the 15% of GDP mark, from last year’s 14.5%. Ideally tax revenue should hit 16% of GDP, he said.
Meanwhile IRD Commissioner General K.M.S. Kandegedera said that personal income taxes generate some 2% of tax revenue. It would be better if such persons are released from the tax bracket, because from a tax perspective consumption then would also increase, resulting in more taxes being collected by way of consumption tax, he said.
IRD Commissioner Miss Dhammika Gunatilake said that new tax files are being opened in the North and East with grace being given to such taxpayers because of the sufferings they underwent due to the 26 year old terrorist war.
Investments to those provinces are expected from the Tamilian diaspora, she said.
Gunatilake further said that the low tax regime is expected to be an incentive for those outside to voluntarily come into the net.
Meanwhile IRD will be hosting the 32nd Annual Commonwealth Association of Tax Administration (CATA) conference which kicks off in Colombo today. Some 125 CATA representatives from 32 member countries are expected at this summit which will be held over six days.
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