Sri Lnka’s business community last week expressed cautious optimism on the smooth implementation of the new Inland Revenue Act (IRA) which will take effect from April 1, 2018.
Speaking to the Sunday Observer, Chairman of the Ceylon Chamber of Commerce (CCC), Rajendra Theagarajah said it was heartening to note the government provided enough time to raise and rectify concerns, as the Act was presented to the public during the last quarter of 2017 before being enacted in Parliament.
“One good thing is unlike the Budget, where changes and withdrawals happen frequently, this Inland Revenue Act had more certainty. They did not pass it overnight, but we had a six months timeframe which was reasonable to ask for,” he said.
In a written response, the CCC said it had commenced preparing the business community for the new IRA and are continuing to watch the implementation of the new law and to identify issues, if any arise in implementation.
The CCC has a Steering Committee on Taxation to examine the tax regime and new policies introduced from time to time, to examine concerns raised by members and to engage with Government on these matters, the statement noted.
“The interpretations given by the Authorities with regard to the provisions will also be examined. For this purpose, issues raised by members will be collated and examined,” the Chamber said, adding that it will engage with policy makers on issues brought up by members, as necessary.
The main objective of the new IRA is to simplify the tax system with a view to create an investor-friendly environment that will attract more Foreign Direct Investments. The Act intends to reduce indirect taxes levied on people from 80% to 60% and increase direct taxes from 20% to 40% within three years. Key provisions in the IRA, among a host of others, include the increase in the present Pay As You Earn (PAYE) tax slab to Rs. 1.2 million from Rs. 750,000, introduction of the capital gains tax, restriction on investment incentives and widening of concessions for activities qualifying under export category.
Meanwhile, a high ranking official of the Ministry of Finance said, although the Act, which has been enacted with a positive intention to usher in a rule-based society, may have shortcomings, they could be rectified once the law is in effect. Commenting on whether concerns have been raised, the official said that many of the policy issues have already been included while certain grey areas have been cleared. The Finance Ministry is also working on a cabinet paper to obtain approval for certain transitional provisions.
“People should understand the objective of the Act. If there are shortcomings, they have to properly justify that it can be considered. We also have to think about change orientation as the IRA aims to bring down leakages and curtail losses suffered by the State,” the official who did not wish to be identified pointed out.
On the other hand, Deputy President of the National Chamber of Commerce, Nandika Buddhipala said there will be a negative impact on the business community given that the government is presently struggling to raise revenue to meet debt repayments.
“We need to wait and see how it is going to be. It is hard to make any predictions at this point of time. We hope that an implementation committee appointed by the government interacts with the stakeholders of the law effectively to address concerns,” Buddhipala highlighted.