Top economist says budget has moved away from creating simplified tax system

The 2017 budget has moved away from creating a simplified tax system for the country, according to Dr.Saman Kelegama, Executive Director of Institute of Policy Studies, a State-funded economic policy think-tank in Colombo.

“Any budget should lead to the simplification of the taxation structure. But once again we see specific taxes coming, like the Financial Transactions Levy, Carbon Tax, SIM Card Tax, Teledrama Taxes, and so on and so forth. The more the taxes, the more complicated it becomes,” Dr.Kelegama told a post-budget forum, yesterday.  The budget also introduced excise duty on non-potable alcohol, a tax on filing court cases, and an economic service charge on vehicle imports. 

Dr.Kelegama noted that a 2010 Presidential Taxation Commission had recommended that the 25 taxes prevailing at that time be simplified initially to 16 taxes, then down to 10, and finally to 8 taxes. Dr. Kelegama noted that the budgets that followed had made progress in this direction. 

“So we have been moving in that direction with the removal of the Social Responsibility Levy, Debit Tax, Road Infrastructure Levy etc.,” he said.  The 2017 budget has removed the Simplified Value Added Tax, and the cess on 100 export items. 
According to experts, investors and traders are at times confused about the vast number of taxes, fees and para-tariffs that they have to pay to different government agencies, the constant changes to applicable tariffs and tariff rates, and the lack of a single platform that can notify them of all liable payments. 
Further, in addition to the numerous taxes, various industries, goods and services are exempted from taxes, or are provided tax refunds. 
Inland Revenue Department Director General Kalyani Dahanayake said that the complex taxes and the equally complex tax holidays are affecting revenue collection. 
“(Sri Lanka’s) Tax efficiency has been low relative to other countries. It has been widely accepted that large number of tax exemptions and holidays, and the complex tax structure have negatively impacted even the tax administration,” she said.
 The 2017 budget has removed tax exemptions on many industries, but has also introduced various tax exemptions. (CW)