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Govt. lost Rs. 560 mn revenue due to tax concessions for listed companies 

5 months ago

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  • 13 companies enjoyed 50% tax concessions in 2021/2022 
  • LOLC General Insurance paid only Rs. 170 mn in taxes despite Rs. 1.2 bn profit
  By Imesh Ranasinghe The Government of Sri Lanka missed out on Rs. 560 million in corporate income tax in the financial year 2021/22 from 13 companies that enjoyed a 50% tax concession for being listed on the Colombo Stock Exchange (CSE) in 2021, financial statements of the listed companies revealed. As per the financial statements of the said 13 companies to which the concessions were granted for being listed on the CSE between May-December 2021, First Capital Treasuries PLC and Capital Alliance PLC recorded losses for the financial year 2021/22, while Lanka Credit and Business Finance PLC LOLC General Insurance paid deferred taxation charges. Some of the major companies that enjoyed higher taxation benefits include LOLC General Insurance PLC, which had earned a profit before tax (PBT) of Rs. 1.2 billion and had only paid Rs. 170.6 million under the concessionary tax rate after paying Rs. 413.5 million as taxes in 2022. Prime Land Residencies PLC had made a PBT of Rs. 1.8 billion and had paid Rs. 162 million as taxes from Rs. 289 million in 2020 and Cooperative Insurance PLC paid Rs. 97 million as corporate income tax from a PBT of Rs. 933 million after paying Rs. 260 million as taxes in 2020. However, speaking at a webinar held by the Ceylon Chamber of Commerce (CCC) in October, Ernst & Young Sri Lanka Partner – Tax Sulaiman Nishtar said that the proposed amendments to the Inland Revenue Act No. 24 of 2017 will seek to end the three-year 14% concessionary corporate taxation rate granted to these companies, but added that committee-stage amendments to the Act may allow the companies to continue being taxed at the concessionary rates. Due to the concession granted in 2021, the CSE witnessed a record Rs. 124 billion in capital-raising, where the capital raised was a combination of Rs. 84.4 billion via debt and Rs. 39.4 billion in equity, as the CSE saw 28 new listings, including 14 debt Initial Public Offerings (IPOs) and 13 equity IPOs. However, speaking at an event in October, Softlogic Stockbrokers Head of Research Mahesh Udugampola said that corporate earnings of listed companies are expected to move upward by 30% year-on-year (YoY) in 2022, which is a slowdown from the 80% increase in corporate earnings in the first half of 2022. If this is to happen, the collective PBT of the 13 companies for 2022/23 would be Rs. 6.8 billion. Thus, if the concessionary tax rate at 14% is continued the Government will lose roughly Rs. 1.1 billion in tax revenue in 2023 due to the difference between the tax rates, as other companies will be taxed at 30%.  

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