Sri Lanka’s Budget proposals for the next year presented in parliament by the Minister of Finance Ravi Karunanayake has proposed several concessions to the public and industries.
“The progressive tax rates applicable to individuals will be removed by increasing the tax free allowance to Rs 2.4 million per year (Rs 200,000/- per month) and any balance will be liable at the standard rate of 15% (flat rate)”
Review – Changing of Income tax (PAYE) threshold to 200000 from 62500 is a gift for employees but really a bad decision from Government income prospective. It’s like excluding 90-95% from Income Tax. We are an outcome of Free Education. So why cant we pay a small Direct tax to Government ? No one asked to change it. Why are you ignoring Direct taxes on Employees and going for unwanted corporation taxes ? I think imposing 1% tax after 50001, 2% from 100001, 3% from 150001 and 15% as suggested from 200000 is reasonable.
“Presently stamp duty is levied at 1.5 percent for purchases using a credit card. I propose to remove stamp duty on credit cards for local purchases and stamp duty for foreign purchases will be increased to 2.5 percent”
“We are moving into a sophisticated cash management system. To discourage cash transportation in line with security considerations, I propose to impose following charges on cash withdrawals (Less than 1 million : No charge, Between 1 million and 10 million : 2 percent, Above 10 million : 3 percent)”
“I also propose that the fee on bank drafts should not exceed Rs.150 per draft”
“For the same reason, I propose all employers to instruct their employees to open bank accounts for the purpose of remitting the salaries”
“Honorable Speaker, to keep a better track of all statutory payments, I propose each Company to maintain a dedicated Bank account for direct debit purposes”
Review – The 1.5% stamp duty on Credit Card for local purchases has been abolished while a 2.5% is to be taxed for Foreign Purchase. I think this is a positive decision to improve the usage of Credit cards and to spend within the country. Also the removal of withholding tax on interest income makes a 2.5% saving of your interest income. However It’s considering to your statutory income and taxable as at given thresholds
Imposing a charges on cash withdrawals to discourage cash transportation. 2% from 1 million and 3% from 10 million. However by fixing LKR 150 for Bank Drafts, Gov is suggesting to go for that option instead of Cash withdrawals. It can be a good for some reasons (to trace end point of money for possible tax income), but giving a negative signal for savings. I think without imposing a charge, Government can restrict withdrawal limit for each transaction.
If government needs to know the actual Salary Payments and lodgements to trace the Revenue, They can use banking system to findout the Money in and out of companies, imposing strict laws when disclosing corporate payments. In one hand, they are giving up the Tax income by increasing PAYE threshold but in other hand trying hard to findout a way to get an additional income
“Company Registration Fee : Every company registered with the Registrar of Companies will be subjected to an Annual License fee of: Private Companies Rs 60,000, Public Quoted Companies Rs 500,000, Other Rs 100,000 (Including companies non – functioning) and payable to the Registrar of Companies)”
“Company Registration Fees: The present rates will be revised with effect from January 1, 2016”
“Voluntary liquidation of a company: Rs 250,000/- will be charged on liquidation”
“All business entities should be registered with their respective local councils at a nominal fee of Rs 100/- per year”
Review – Annual License fee of 60,000 for Private Companies and 500,000 for Public quoted companies has been imposed as a new proposal. I think it is a discouraging factor for business startup specially for sole traders who willing to go for private company format. We are inviting foreign investments to Sri lanka by offering tax holidays and concessions but creating a negative signal for private company startup for locals. I think we need to offer tax holidays (1-3 years) for new company startup and take them into tax net as sole trader self assessments are not disclosing that much of taxable profit.
This fee is applied for Non Functioning companies as well. For those who voluntary liquidating has to pay 250000 for the liquidation. This can be a fair charge for quoted companies but how a small trader can afford these fees when liquidating on a loss ? Government has to address these kind of issues and make some exemptions for small entities and loss making scenarios.
“Honourable Speaker, the vehicle permit schemes have been politicized and misused and have created a huge revenue loss over Rs 40 billion a year to the government. I propose to abolish all the vehicle permits granted under different schemes, including to Parliamentarians. However, I ensure all government officers will be financially compensated for the benefit foregone”
“Thus, re-evaluation of current pension has become a priority, while undertaking that the government will continue with the existing pension scheme for the government employees, a new contributory pension system will be introduced to new recruits to the public sector from 01 January 2016 which would ensure a pension at their retirement. The contributions will be directed to a Public Pension Fund”
Review – Even though I’m not in favor of this budget, Changing Pension eligibility for future Government Employees and no more permits for them (including parliamentarians) makes me really happy. However government has to introduce the same pension policy for private sector by using EPF fund (not EFT). That will end up the inequality, irregularity and injustice for the people from same country, who working same time, same skills and so many same things.
DZONE Related Article – Common pension scheme for Sri Lanka
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