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Wednesday, 19 January 2011

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Nation Building tax amendments

I wish to congratulate the Government for the following amendments made effective January 1.

1. The abolition of the Provincial Council Tax BTT.

2. Reducing NBT rate from 3 percent 2 percent.

3. Making entire NBT payable as an allowed expenditure for tax purpose instead of having a portion disallowed.

4. Including wholesale and retail trade in NBT system but permitting 50 percent rebate so that effective rate is 1 percent like BTT.

This is a correct measure towards reducing the number of taxes and making tax system very effective.

However there is a drawback in this arrangement. It is true by reducing the threshold from 650,000 per quarter to 500,000 makes more people become liable for NBT. However several present BTT payers will escape NBT liability.

In the past BTT did not have any threshold. Now by permitting Rs 500,000 even the number of present BTT payers will become exempt from NBT which results in reduction of revenue income making. The Government should not expect to collect maximum revenue from large companies only. Large Taxpayers Unit (LTU) if correctly checked small and medium enterprises would give better income than LTU enterprises).

Tax burden should not be placed only on companies which are liable for VAT, NBT, ESC and Income Tax. I could remember upto July 31, 2002 the Defence Levy of 7.5 percent was paid by non GST payers till the introduction of VAT on August 1, 2002.

Therefore I make the following suggestions.

1. All present BTT payers should pay NBT after January 1, 2011 no change.

2. Threshold for wholesale and retail trade should be 100 percent per quarter.

3. A new NBT unit be introduced to collect NBT as the number of files would be increased now.

4. A survey should be taken to identify wholesale and retail traders liable for NBT islandwide.

5. Special attention should be drawn on disguised income earners such as

a. Small hotels, restaurants, eating houses and bakeries

b. Tutories, music and dance teachers

c. Hair dressing salon, beautician and laundries

d. Caterers, cake decorators, suppliers of milk to offices

e. Meals on wheels sale of cooked food via vans

I am certain that there will be strong criticism against my suggestion. It should be noted that targeted tax revenue for 2011 should be reached to continue the concession granted or otherwise additional taxes will have to be imposed.

The tax burden should be shared by all on an equitable basis for the benefit of the nation. I hope the Trade Ministry and policy planners would take corrective measures.

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