The removal of tax exemptions in the light of recent economic challenges and ongoing discussions with the IMF was somewhat anticipated, said Jehan Perinpanayagam speaking in the KPMG Budget Analysis 2023 Forum held in Colombo.
He however said the export of IT-BPM services will continue to be exempt from tax. He said their membership and companies also include several companies that provide services locally. These will be taxed by 30%. This is going to be a challenge to companies already grappling with higher wage costs and their ability to compete for talent, he said.
Due to the proposed tax increases more than the big corporate, SMEs are going to feel the pinch and lots of SMEs will go out of business adding more confusion to financial institutions, Vish Givindansamy said.
Inflation is beyond 70-80%, businesses are under severe crunch for working capital management, the working capital costs is in excess of 30% and the suppliers have reduced the credit limits and now the financial institutions will have to reduce the facilities available to businesses as well, he said.
Thanuja Perera said one needs to look at these newly imposed taxes in the current context of the country. The Social Security Contribution Levy (SSCL ) has been introduced to collect more revenue and it is a simple tax. She said the issue was when the SSCL was introduced in the 20/21 Budget, the VAT rate was 8% now it has increased to 15% but the SSCL still exists. She opined that it may continue this way for one or two years and ruled out any possibility of amalgamating the two taxes.
The increase of taxes in the budget will have an overall negative impact on the economy asserted Jonathan Alles.
With broad basing not happening the same old people have to re pay tax and endure the inconsistencies in tax policies. He said the tax should be simplified and placed on a consistent policy so that corporate and individuals can plan around it. He said that although it is fully understood that the government needs to increase its revenue that was always the case all the time. Hence consistency should have been maintained to avoid making big shifts which does not go well with planning.
Although a lot is spoken about broad basing, super gains tax and ill-gotten wealth it is a question whether the same old tax payers would be hammered in order to basically support the rest of the economy. Alles also said it is important that when taxes are increased significantly they must be channeled into the right areas.
“We as bankers and industry must get together and make all plans necessary to stay afloat, stay stable if we are to play a meaningful role in the revival of the Sri Lankan economy and its people,” he told the post budget forum.
by Daily News Sri Lanka
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