Tax reforms soon

Lakshmi DE SILVA

New tax reforms will be presented to Parliament in November based on D.E.W. Gunasekera's report. There are around 25 taxes in operation which makes the entire tax system complicated, Institute of Policy Studies Executive Director Dr. Saman Kelegama said.

Making a presentation on Sri Lanka's economic recovery to sustainable growth at the Sri Lanka Foundation Institute yesterday, he said the Presidential Taxation Commission had submitted its Interim Report in November 2009. The final report will be submitted in June 2010 with a number of recommendations to widen the tax base, lower the rates, and make it more business and people- friendly. The tax base in Sri Lanka is small. Tax revenue dominated by indirect taxation amounts to 80 percent. Direct taxation amounts to 20 percent while eight percent of the labour force pays taxes. The tax system would be much healthier if indirect taxes were reduced to 60 percent and direct taxes increased to 40 percent, Dr. Kelegama said. Government revenue amounted to 14.6 percent of GDP when the potential revenue was close to 20 percent GDP. In Malaysia it is 21 percent of GDP, he said.

A vote on account for May, June and July and an interim budget for the next quarter of the year would be presented in Parliament. The budget for 2011 would be presented in November.