brand logo

Move to amend tax laws: Positive move or cause for concern? 

24 Jul 2021

  • Tax amnesty bills common feature in many govts., but have failed: Dr. Wijewardena  
  • Country will face noticeable repercussions with FATF in future: Dr. de Silva  
  • JVP announces moves to challenge proposed Bill by resorting to legal action  
  • Anti-money laundering laws in place not changed in proposed Bill: Cabraal 
By Yoshitha Perera  Under the vision of “Vistas of Prosperity and Splendour”, the Government has aimed to introduce four key aspects in the budget proposal for 2021; namely, encouraging economic activities, a simple tax system, tax relief, and eventually reducing the cost of living.  On 14 July, the Government had published a Tax Amnesty Bill including a provision that it would provide assurance for persons who voluntarily disclose taxable supply, income, or assets without investigation, prosecution, and penalties.  However, this move has been criticised by the Opposition and academics in the finance sector.   The provisions of the proposed Tax Amnesty Bill will apply to anyone who has not disclosed any taxable supplies, income, or assets in a VAT return for any tax period ending 31 March 2020 or earlier, in accordance with any legal requirements, or on 31 March 2020, in the income statement of any assessment year ending on or before the date.  The Bill provides for a person who intends to invest an amount equivalent to the undisclosed taxable supply, income, or assets, immediately, to invest such amount in the purchase of shares issued by a resident company; Treasury bills or Treasury bonds issued by the Central Bank on behalf of the Government of Sri Lanka; any quoted debt securities issued by a resident company in the country; or any movable or immovable property. This can be done on or after the effective date of this law, but before 31 December 2021.  If a person cannot immediately invest the available amount in Sri Lankan rupees or foreign currency, the amount will be deposited in a bank account on or after the effective date of this law, but before 31 December 2021.  If a person who applies to the law intends to disclose any supply, income, or undisclosed taxable assets, with actual or personal property, is excluded, he will be obliged to pay a voluntary disclosure tax at a rate of 1% of the above amount or income, or based on investment or deposit. The cost of the above-mentioned goods, or any real property or personal property, is subject to voluntary disclosure tax.  The Bill also stipulates that the Commissioner General of the Debt Department will cancel any fines or interest calculated in accordance with the provisions of any specific law related to taxpayers and the payment due date is on or before 31 December 2020, or if the taxpayer paid the total amount of outstanding taxes on or before 31 March 2022, in accordance with the above-mentioned legal provisions.  The Government has stated that the new Bill is to encourage entrepreneurs to disclose and invest in undisclosed income and assets.   According to the 2021 budget proposal, it implements legal provisions to exempt the above-mentioned investors from paying taxes, fines, or interest, and only pay 1%.  This law does not apply to anyone who is under investigation or legal proceedings for any undisclosed supplies, income, or taxable property, or anyone who has been convicted of a related crime.  Sharing views with The Sunday Morning on the Government’s move to introduce the Tax Amnesty Bill, former Deputy Governor of the Central Bank Dr. W.A. Wijewardena said that in Sri Lanka, this has been a common feature of all the governments.   He said: “The first Tax Amnesty Bill was introduced by Dr. N.M. Perera in 1971, subsequently by former Finance Minister Ronnie de Mel during President J.R. Jayawardena's time, Nanina Marikkar again during J.R.’s time, D.B. Wijetunga introduced this in President Premadasa’s time, and former President Chandrika Bandaranaike Kumaratunga also came up with a Tax Amnesty Bill.”  Dr. Wijewardena added that tax amnesty bills have been a common feature of all the governments that have been in power in Sri Lanka and in all those previous cases, it was a failure because of two reasons. He said: “Reason number one is nobody trusted the Government of Sri Lanka. Whatever promises were given in the Tax Amnesty Bill that the money that is being declared will be kept secret by the government authorities, there was no faith or trust in the people about the integrity of these state authorities. As a result, they didn’t want to bring it here.  “Another reason is, during President Premadasa’s time, Sri Lanka introduced a Swiss Bank numbered accounting system for the first time, where anybody can bring in money and keep it in a numbered account and therefore, there were no problems for them to escape from their respective government.”  He added that Sri Lanka also introduced the Certificate of Deposits (CD) which were issued by the Public Debt Department of the Central Bank to any person.   “Anyone can buy the CDs from the Public Debt Department and there is no name on the certificate. Eventually, the Department will pay the value of the CD on maturity to whoever who presents it to the Department.”  Dr. Wijewardena said the US administration has categorised these as money laundering mechanisms.   He said: “Due to these aspects, in 1995, during former President Chandrika Bandaranaike Kumaratunga’s period, the US Government said Sri Lanka was actively promoting money laundering mechanisms and they didn’t import apparel from our country.”  Stating that a similar situation would occur with the present Government if the new Tax Amnesty Bill becomes law, Dr. Wijewardena said that Sri Lanka would be categorised as a country that promotes money laundering.        Highlighting the fact that the Government is desperate for foreign exchange, economist and Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva said that it is one reason that the Government would implement the Tax Amnesty Bill.   He said: “This is a way to justify it. The Government can ask patriotic people to bring money and they won’t ask any questions, but the actual issue is that the country doesn’t have money.”  He said that there are various individuals who want to launder massive amounts of money and these would be the reasons behind implementing these tax laws.   “This will be a unique opportunity for people who have a large amount of foreign currency through various undeclared accounts around the world to bring them in.”  Dr. de Silva is of the opinion that the Government’s move would bring noticeable repercussions with the Financial Action Task Force (FATF) in the future. Meanwhile, the Samagi Jana Balawegaya (SJB) and the Janatha Vimukthi Peramuna (JVP) filed two separate petitions on 23 July against the proposed Tax Amnesty Bill at the Supreme Court. SJB MP Eran Wicramaratne, filing the petition, argued that the 1% tax imposed for disclosing previously undisclosed taxes is lower than the tax liability of people who have already settled tax payments. He also noted in the petition that granting such amnesty for individuals who did not disclose their taxes would legalise the fraud committed by them. The petitioner, sharing his views, said the provisions cited on the Bill would encourage further tax evasion and would not bring any benefit to the state. However, speaking to The Sunday Morning, State Minister of Money and Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal said that according to the new Bill, anti-money laundering moves have not been changed.   He said: “Hence, there is no possibility or danger of violating any laws pertaining to money transfers, forex transactions, tax evasion, etc.”   

Kapruka

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!


More News..