The laws will be strictly enforced to eradicate the trade mafia generating profits without registering with the Inland Revenue Department, State Minister of Finance, Ranjith Siambalapitiya warned.
State Minister Siyambalapitiya further outlined the government’s plan to expand the tax base, anticipating a rise in the direct tax percentage to 40%.
He made the observations while participating in a special VAT awareness conference at the Ministry of Finance yesterday, organized by Saman Ratnapriya, the Director General of Presidential Trade Unions, for the benefit of civil society activists, government officials, political activists, trade union leaders, and journalists.
State Minister Ranjith Siyambalapitiya further said these challenging times affect everyone, regardless of their economic status, as incomes decrease and expenses rise.
The government acknowledges these difficulties and recognizes the necessity of its ongoing program to address the country’s problems.
Increasing government revenue is crucial for economic development, and to achieve this, the government aims to expand the tax base. The direct tax percentage has already risen from 20% to 30%, with plans to further increase it to 40%. The government also enforces strict laws to combat the trade mafia, preventing them from making unfair profits through fake bills without proper registration with the Inland Revenue Department. Additionally, there is potential to reduce indirect taxes in the future, he said.
Also addressing the conference, Tax Consultant of the Finance Ministry’s Finance Department Tanuja Perera said businesses are required to remit VAT to the Inland Revenue Department monthly, with the amount charged from the 1st to the 31st of January due by the 20th of February.
“Failure to do so may result in legal action under the VAT Act by the Ministry of Finance. Displaying the Inland Revenue Department’s issued license is mandatory for shops eligible to charge VAT. Invoices, following a format set by the Commissioner General of Inland Revenue, must be issued to consumers after VAT is applied. Strict enforcement is in place against fraudulent businesses collecting money without proper VAT registration, with penalties and collected VAT funds pursued by the government, Perera added.
Meanwhile, Director General of Trade Unions to the President, Saman Ratnapriya, said the VAT amendment has sparked heated discussions in today’s society, particularly since President Ranil Wickremesinghe introduced it in the 2024 budget in his capacity as the Finance Minister.
“This budget serves as the economic blueprint for the current year, and without meaningful societal discussions, turning its proposals into reality becomes challenging. That’s why seminars on VAT are organized.
“Numerous misconceptions surround this VAT amendment, notably the increase from 15% to 18%. While the tax has risen by 3% for existing goods, some items have gone from 0% to 18%. Additionally, due to tax adjustments, certain products experience a lower-than-expected VAT increase of 18%. To navigate these complexities, a thorough societal discourse on this VAT amendment is crucial,” he said.
Also speaking at the conference, K. K. I. Eranda from the government revenue unit of the President’s Office said that government inefficiencies in VAT collection have been identified, impacting the potential contribution to the economy.
“Proper VAT collection could add 6% to the gross domestic product, but currently, only 2% is realized. Three primary areas of tax leakage have been uncovered: businessmen not remitting collected taxes, irregularities by officials, and losses due to tax exemptions. Addressing these leakages is crucial for stabilizing the economy.
“In the first half of 2019, VAT was at 15%, reduced to 8% in 2020, and maintained for the next three years. However, the economic downturn persisted, indicating that the VAT reduction alone did not stimulate growth. To revitalize the collapsed economy, a VAT increase of 18% is proposed.
“Currently, around thirteen thousand businesses are registered for VAT collection, with the government aiming to increase this number to fifty thousand in the future,” he added. (NewsWire)