New Inland Revenue Act not so friendly PwC

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By 2017-10-17

By Zohara Ghaffoor

PricewaterhouseCoopers (PwC) warned that local businesses predominantly engaged in exports will suffer an increase in taxation under the new Inland Revenue Act (IRA) and expressed concerns regarding double taxation in certain situations and the overall impact of IRA on Unit Trust businesses.

According to the IRA evaluation done by PWC, tax rates have been increased to 14% for companies predominantly conducting the business of export, agriculture, educational services and tourism promotion. SMEs have also taken a hit through the increased taxation of 14%, while PWC also stated that 'other businesses' are subject to a staggering 28% tax.

Unit Trust management companies will be struck hard by the new Act, said PWC partner Ratnayake, adding that they would be subject to a 10% tax on gains from realization of investment assets, while a 28% tax will be imposed on other income earned.
However, safeguarding the Government's point of view, Ceylon Chamber of Commerce Chairman R. Theagarajah said the overall philosophy behind this act was to address a critical......issue that most international lending agencies were pointing out – which was the fiscal deficit of the country and the domestic debt as a percentage of national wealth.
He said, "You can see where we are and the gap we have to address," pointing out that the debt to gross domestic ratio of Sri Lanka was 84%, in comparison to Nigeria's 20% and Bangladesh's 40%.

Meanwhile, Gajma & Co. Partner N. R. Gajendran expressed his doubts as to whether the Government had incorporated the main objectives of simplification, ability to pay, convenience, efficiency, transparency and the ease of doing business.
However, Theagarajah said, the question was whether they had achieved the original intent of a larger group of contributors, or whether the same group of people would end up paying more. He said that revenue leakage should be plugged up and the Government had to increase transparency by communicating to the public how the money will be allocated.

The Inland Revenue Act, which is to take effect from 1 April 2018, appears a paradigm shift from the previous one. Professionals say it will encompass complexities, while increasing the contribution of taxations to GDP, making it a critical supplement to the Prime Minister's vision of FDI and the promotion of export orientation, while reducing non-essential and non-productive expenditure.




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