New inland revenue act satisfies needs of IMF

July 21, 2017

The proposed Inland Revenue Act has been compiled by the IMF and presented to parliament for approval says the Leader of the JVP Anura Dissanayaka.

He said this at a press conference held at the head office of the JVP at Pelawatta yesterday (20th). Members of the Central Committee of the JVP Northern Provincial Councilor Wasantha Samarasinghe and Western Provincial Councilor Sunil Watawala too were present.

Mr. Dissanayaka addressing the media said, “The new proposed Inland Revenue Act has been compiled by the IMF and presented to parliament for approval. Earlier, the Governor of the Central Bank stated the act has to be approved to get a second instalment of the line of credit by the IMF. An announcement issued by the Central Bank on the 8th states, “Following the Executive Board’s discussions of the review, the IMF has commended the stable macroeconomic and financial condition of Sri Lanka despite severe weather events and global market volatility. The IMF has also welcomed the fiscal consolidation measures implemented by the Government, particularly the submission of the new Inland Revenue Act to the Parliament.” This indicates the act has been compiled by the IMF. Officials of the Department of Inland Revenue, trade unions, tax paying citizens or audit institutions in our country have not mediated in compiling this act. The pact is the same pact compiled by the IMF to Ghana with a few changes. It is not one that has been compiled taking the interests of officials of the Department of Inland Revenue, tax payers and those interested in taxes. The act presents legal amendments that tally with the plundering economic policy followed by the IMF throughout the world.

The act has been introduced as one that the government promised to introduce to the Department of Inland Revenue as well as to other financial sectors. The clauses in the act go beyond tax amendments introduced in the budget. The act introduces a large number of tax amendments that have adverse effects on the country and the people. The 10% tax that is levied when investing from the EPF has been increased to 14%. As a result funds of more than 2.5 million members of IMF would be slashed.

Also, tax reliefs that had been given for the development of various sectors have been completely removed. Despite, the tax levied on the income from stage plays had been given a tax relief of 50%, the new act has removed the relief. Also, writers and publishing institutions had been given a 50% tax relief for the income from their first publications, the proposed act has removed it. The musicians had their income from the creations exempted from any tax. However, the proposed act removes this concession. The new proposals remove the tax relief given to new inventions.

The aid to university students, presents awarded by the President, the benefits the insured senior citizens get once the insurance is matured had been exempted from tax. However, all of them are taxed by the proposed Act. Accordingly, everything in the cultural, inventive and educational sectors has been brought under tax schemes.

The10% tax levied for agricultural implements has been raised to 14%. The 12% tax levied for small and medium scale industries has been raised to 14% and the 10% tax levied from lottery wins has been raised to 14%. The tax amendment act has presented more tax amendments that what is included in budget proposals.

The Pay As You Earn (PAYE) Tax from those who are employed has been raised. In the earlier budget professionals who earn 1.2 million per annum had been given a tax relief. The amendment was not presented to parliament or approved. However, the proposed act has brought down the annual nontaxable income to Rs.500,000. As such, all professionals who earn more than Rs.500,000 would be taxed. Also, the tax rates for the taxable income were 4%, 8%, 12%, 16% etc. However, the new act increases the 16% ratio to 24%. Also, professional institutions such as the Institution of Engineers Sri Lanka, Sri Lanka Banks’ Association, Universities, Medical Council, Sri Lanka Institute of Printing, the Energy Conservation Fund have been brought under the tax scheme.

Also, the income earned by Sri Lankans supplying services to foreign institutions or income obtained supplying services abroad were exempted from tax. For, the foreign exchange earned and the experiences and know how the professionals get is very important for our economy. However, all these sectors have been made taxable. However, income received by a foreigner serving in Sri Lanka has been exempted. The government, instead of encouraging Sri Lankans supplying services to foreign institutions, encourages foreigners to take the place of Sri Lankan professionals. This move has been proposed to encourage foreigners who would come to Sri Lanka through EYCA agreement the government is waiting to sign with India. As such, we have a doubt whether the government in Sri Lanka is that of Sri Lankans or westerners.

The Department of Inland Revenue has to explain the reasons when it rejects any reports of income submitted by tax payers. It would confirm the rights of the tax payers. However, the new Act has given the authority to reject reports by tax payers without submitting any reasons. This is very unjustifiable. The Taxpayers’ Association of Sri Lanka has filed a case against this. Also, the Department of Inland Revenue consists of a commissioner general and officials below him. However, according to clauses in 2006 Act, other officials too have been given certain authority. This would make administration efficient. However, the new Act nullifies the authority of other officials and the whole authority is centred on the commissioner general. The commissioner general has been given unlimited authority and all other officials have been made submissive to him. It is a hindrance to the efficiency of collection of taxes. The commissioner is also given powers to appoint outsiders for the process. This would also allow the commissioner to appoint a private company for the process of collecting taxes. This is a move to give the authority the government had to collect taxes to private companies. This is the need of the IMF. The functions of the Department of Inland Revenue could be handed over to private companies through this Act.

Also, any official committing a tax fraud could be investigated only by the Commission to Investigate Allegations of Bribery or Corruption. However, the proposed Act contains a clause that states any official committing such a fraud could be fined Rs.1 million or one-year prison sentence or both. Also, the Commissioner has been given powers to settle the matter without going to a trial. This has made all officials under the commissioner submissive to him. As such, the proposed Act obstructs administration and hinders efficiency. It is difficult to understand the Act as certain words that do not occur in our glossary of terms have been included in it as it is a translation of the English version of the Act prepared to Ghana. It is very clear that the Act has not been compiled targeting Sri Lanka.

The records received by the Department of Inland Revenue are very confidential. They would be available only to the Bribery Commission, Attorney General or the Minister under special provisions. The tax payers are given this protection to prevent their confidential information from being made available to wrong persons. Information of income of any establishment is confidential. However, the Act presented by the government states exchange of tax information or come to an agreement with foreign companies is possible with the recommendation of the Minister. This deprives the protection for the tax payer. It is a threat to businessmen.

At present, the Department of Inland Revenue carries out its tax collecting process using a special software. This software was created by a company in Singapore. The Department of Inland Revenue has spent Rs. 5000 million for this. This process carried out tax collecting very efficiently. In creating this software the legal regulations of the Act in 2006 were followed. However, due to the bringing in of a new Act in place of the earlier one, it would not be possible to use the software created spending Rs.5000 million. A new software would have to be created. Of course, IMF has agreed to make available a loan for this. When considering all these facts it is very clear that the new Act is a need of the IMF. As such, this Act should not be passed in Parliament.

The 2006 Act should be made more efficient by adding amendments. However, there is no need to bring in a completely new Act. The only necessity of bringing in a new act is to prepare legal background to manipulate the economy of our country according to the needs of the IMF. This is why IMF releases the loan instalment when the Act is presented to Parliament. When the government wanted to present the Act in Parliament we asked the government to have a discussion with relevant sectors. However, Prime Minister Ranil Wickremesinghe was adamant that the act should be put to Parliament.

It was because of IMF pressure. Ranil – Maithri government should be responsible not to the IMF but to the people in our country. Hence, this act should be defeated. The JVP is prepared to defeat the Act. This Act goes beyond the budget. Hence, we would take all the measures to create a dialogue in the country and nullify it.”