The new caretaker government today announced a heap of tax concessions which included the annulment of Nation Building Tax (NBT), Capital Gain Tax, Withholding Tax and the reduction of VAT to 8 per cent from 15.
The proposal made by President Gotabaya Rajapaksa in this regard was approved by the Cabinet of the new government which held its maiden meeting today.
Announcing the decision, Co-Cabinet Spokesperson and Minister, Dr. Bandula Gunawardana said most of the tax restructuring will come into effect from December 1.
“The proposal made by the President to revive the economy was approved today. Prime Minister and Finance Minister Mahinda Rajapaksa will see to it that laws and regulations are amended to make way for these concessions and issue necessary gazettes by December 1,” Minister Gunawardana said at the maiden Cabinet news briefing.
Accordingly, he said the Nation Building Tax, Economic Service Charge, Debit Tax on banking on financial institutions, Capital Gain Tax stock market transactions, VAT on the condominium property, Pay As You Earn Income Tax, Withholding Tax and Debt Servicing Taxes will be removed.
Minister Gunawardana said the NBT which was 2 per cent on goods and services would be removed and the 15 per cent VAT on goods and services will be cut down to 8 per cent.
“Tax-free threshold for turnover for VAT will be raised from Rs.1 million per month to Rs.25 million per month or Rs.300 million per annum to provide immediate relief especially to the small and medium sector enterprises in all sectors. The tourism industry will be treated as export for zero rates provided that 60 per cent of turnover is sourced from local suppliers. All religious places of worship will be exempted from all forms of taxes, all foreign exchange revenue will be made free from income taxes and the telecommunication tax will be reduced by 25 per cent,” he said.
The proposed tax reforms will also make the information technology service free from taxes.
Any form of monthly earning of Rs.250,000, Rs.500,000 and Rs.750,000 and above will be imposed an income tax of 6 per cent, 12 per cent and 18 per cent respectively.
PAYE taxes would be removed for earning on the all-inclusive monthly income of Rs.250,000 in place of the current ceiling of Rs.125,000 per month for all public and private sector employees with effect from January 1, 2020.
In the proposal, President Rajapaksa recommended that imports of tea, pepper, raw rubber, cinnamon and other locally made small industrial products be either placed on negative list or subject to high custom-based taxes.
The proposal also said that items which are not manufactured in any form and also beneficial for the country to have access to global sources will be made duty free. “Machinery and equipment which are not made in Sri Lanka along with advanced technology will be made duty free. Preferential rate under various trade agreements will be reviewed having regard to national interest and obligations in terms of such trade agreements,” the proposal said.
Commenting on how the government would increase its income which will go down as a result of tax concessions, Minister Gunawardana said they expect to widen the net of taxpayers so as to increase the income from direct taxes.
When asked whether the government would present a budget, the Minister said, “No! There will be no budget. There will definitely be a general election in March so we will submit another vote on account.”
(Source: Daily Mirror – By Lahiru Pothmulla)