A fillip to the economy

IF there's one thing in life that is certain apart from death, it is taxes. However unpalatable they may be, it is an irrefutable fact that taxes help develop the economy and the country itself.

Taxation is one of the main components of Government revenue, on par with export earnings and expatriate remittances.

An increase in tax revenue should thus be greeted as good news for the country all around.

According to the latest Department of Fiscal Policy statistics, revenue from income tax, Value Added Tax (VAT) and excise tax has increased considerably during the first nine months of this year over the corresponding period of 2005.

Income tax revenue (comprising corporate tax, personal tax, Economic Service Charge and interest income) alone has recorded a 62 per cent improvement. Revenue from import duties and the Port and Airport Development Levy too has increased.

Obviously, this rise has not occurred automatically. The Government's new taxation policy decisions and a general streamlining of the tax collection system have led to this gain in no small measure.

Several such measures were introduced in both Budget 2006 and Budget 2007 presented by President Mahinda Rajapaksa.

The increased commitment on the part of the staff of main revenue earning departments such as Inland Revenue, Customs, RMV and Excise is another factor. In other words, increased vigilance and efficiency has netted in more funds to the Treasury.

Although Sri Lanka has a population of 20 million, amazingly only a minuscule fraction - around 100,000 - are regular taxpayers.

Many countries with similar populations have at least a million or more taxpayers. In other words, our tax net is not wide enough to catch all those who should actually be paying taxes. This situation must change.

The tax net has to be widened to include all individuals who now evade paying income tax. New tax laws may be needed for this purpose and for nabbing big-time tax evaders. They should be severely dealt with, regardless of their standing in society.

Widening the income tax base will also enable the Government to reduce the dependency on indirect taxes such as VAT, which affects everyone, rich or poor.

It is simply not fair that some wealthy individuals do not pay their dues to the State at all while even the poorest of the poor have to bear indirect taxes.

In the long run, the authorities should aim to reduce VAT and other indirect taxes on more items and services. For example, Budget 2007 saw the abolition of VAT on electricity generation and distribution.

The Government has also given priority for accountability and transparency in the tax collection process. The country is still feeling the ill-effects of the Rs.389 billion VAT scam. No room must be left for corruption in the tax sector.

Only the State - and hence the common people - must benefit from taxes and duties. A limited number of unscrupulous businessmen and officials must not be allowed to squander these funds.

Increased surveillance should be an integral part of any measure designed to increase tax and duty revenue.

Although excise revenue from liquor and cigarettes has increased significantly, the mass-scale smuggling of cigarettes continues, depriving the Treasury of millions of rupees every month.

The same applies to the illicit liquor industry. While legitimate manufacturers and their buyers are taxed, the bootleggers enjoy a roaring trade without paying a red cent to the authorities.

More attention should be paid to this problem, which also leads to a massive healthcare bill as well. Other loopholes in the tax and duty structure must also be closed.

The revenue earning agencies of the Government must now not rest on their laurels, having made significant gains. They must work with even more vigour to make a bigger contribution to economic growth.

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