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by Ravi Ladduwahetty

The Government will amend the Inland Revenue Act in May, enabling investors to utilise their undeclared funds now ballooning in the informal economy (Popularly known as the blackmarket) estimated at Rs. 400 billion.

The problem has reached epic proportions. There is an estimated Rs. 200 billion stashed away locally and a further Rs. 200 billion overseas Deputy Finance Minister Bandula Gunawardena told the Daily News in an interview yesterday.

These funds have been accruing through commissions from tenders, illegal land transactions, fishing, undeclared funds through gemming, import and export transactions.

The malady has further aggravated with the tax compliance dwindling with the passage been time. A few years ago, the compliance in taxation was as high as 60 per cent and now it has reduced to 35 per cent. It is projected to plunge to 20 per cent by 2004, according to Minister Gunawardena.

What the Government intends doing is to make the requisite amendments to the Act so that these investors could infuse capital into projects such as property development, small and medium scale industry, transport and investments in capital goods where there would not be any queries into the origin of the funds and to what degree of funds would be used for these projects.

The Government will present the draft legislation in Parliament later next month so that the amended laws could be implemented soon. There will be an amnesty period of 18 months where no questions will be raised about the origin of the funds. They will also not be fined for the non compliance or for delays in payments, the Deputy Finance Minister said.

However, these investors will be liable for taxation from the profits of their investments. This is considered to be a very positive move in accelerating investment.

The Deputy Minister also recalled a seminar at which the late business magnate and banker N.U. Jayawardena had addressed at which he said that the local informal economy ( the black money market) was estimated at Rs. 246 billion and the compulsion to draw from it which would usher in the much needed macro-economic equilibrium.

He said that the previous PA regime had also attempted to draw funds from the informal economy by bringing in a Tax Amnesty Law, but the anticipated returns were not forthcoming due to the defects in that piece of legislation.

Deputy Minister Gunawardena who also holds the Cabinet portfolio for Rural Economy will participate in a series of seminars in the outstations such as Kandy, Ratnapura, Matara, Galle, Matara and Anuradhapura to apprise investors of these legislative amendments and about the need to draw funds from the informal economy aimed at accelerating economic growth.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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