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| Monday, 27 December 2004 |
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World Bank recommends transparent tax system for Lanka By Ramani Kangaraarachchi The recent World Bank Report on Development Policy Review has recommended a transparent tax system for Sri Lanka to meet the (FMR) Fiscal management Responsibility goals which include a simplified income tax on a wider base, keeping concession to minimum, a uniform low custom tariff duty, a well focused set of excise taxes and a fully consolidated single rate retail level VAT on the widest possible base According to the report it is necessary to raise the tax GDP (Gross Domestic Product) up to 16-17 per cent by 2006 to achieve above mentioned goal. The main challenge in crafting tax policies in Sri Lanka is to reverse the massive decline in the tax GDP ration and to do it in the manner which is supportive of growth and efficiency. The challenge is daunting, given the sharp drop in trade taxes from 6 to 2 percent GDP since 1990, stagnation of income taxes at around 2.5 percent of GDP and incomplete transition from the complex system of turnover taxes and special levies to a consumption VAT which has lost at least one percent of GDP. The report has also said that tax policies and their administration need greater attention if the tax GDP ratio is to be raised to at least 16 percent of GDP by 2006. The broad direction of policy changes is indicated in the ensuing brief discussion, organised by major taxes. |
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