President Ranil Wickremesinghe in his capacity as Finance Minister, presenting the 2024 Budget, which is the 78th Budget of the country, to parliament yesterday. Prime Minister Dinesh Gunawardena looks on
- Govt. turns tough on those who fail to file tax returns
- Non submitters of tax returns to be prosecuted
- Makes Certificate of Tax Identification Number mandatory on several activities
- Budget 2024 proposes to raise revenues by 45%, reduce deficit to 7.6% of GDP
Although the budget speech presented in parliament yesterday seemingly lacked revenue proposals, it introduced a slew of measures to improve tax administration and revisions to the existing tax policies, a key area which was highlighted by the International Monetary Fund (IMF) in its first programme review.
President Ranil Wickremesinghe in his capacity as the Finance Minister presented his second major budget and the third since assuming the portfolio last year to increase the State revenue by 45 percent to Rs.4, 127 billion in 2024 and expenditure by 33 percent to Rs.6,978 billion resulting in a budget deficit of Rs.2,851 billion or 9.1 percent of the Gross Domestic Product (GDP).
While this includes Rs.450 billion that will be set aside to recapitalise the State banks, the projected deficit reduces to 7.6 percent of GDP, down from 8.5 percent estimated for 2023.
The government about a fortnight ago ratified to increase the Value-Added Tax (VAT) from its current 15 percent to 18 percent, effective from January 2024, to address the revenue gap the IMF has pointed out as part of its programme review, which led, among other things, for the multilateral lender delay the second tranche of programme money.
The 2024 budget evidently showcases the government’s intention to be tough on those who fail to file tax returns, particularly with its plans to make the submission of the certificate of Taxpayer Identification Number (TIN) mandatory for a list of activities such as opening a bank account, registering a motor vehicle and obtain approval for a building plan.
The budget also said the government would introduce a special penal provision to prosecute those who have not submitted tax returns and information required by the tax officials. Further, the documentary evidence called by the tax officials but not submitted within a reasonable time period will also not be allowed to submit during the hearing at the Tax Appeals Commission.
“Relevant Provisions in the Tax Appeals Commission Act, No.23 of 2011, will be amended as well”, the budget said.
Moreover, the present tax treatment on salary arrears will also be changed to remove the excessive tax liabilities of the employees effective from January 1 next year.
The government also said a special tax return requirement would be introduced for the deduction of 2.5 percent of withholding tax levied on the sale of any gem sold at an auction conducted by the National Gems and Jewellery Authority.
“Exemption under the Inland Revenue Act will be allowed subject to such return information.”
The budget further said the current treatment of Unit Trusts shall continue to apply subject to the mandatory requirements of furnishing information specified by the Commissioner General such as details of income, exempt amounts and withholding tax details to every unit holder before August 30 following the year of assessment.
“Any Unit Trust which has not complied prior to that date will be deemed as a Unit Trust that does not conduct an eligible business,” it added. Apart from the above administrative and policy revisions proposed to enhance income tax collection, the government also proposed several measures to the Excise Department as well as the Department of Sri Lanka Customs in order to improve tax collection by the two revenue collecting institutions. For instance the government proposed to introduce an online license issuing system at the Excise Department while a sophisticated software solution would be developed at the Customs to enhance risk management capabilities at the department. The government expects to raise Rs.3, 820 billion as tax revenue in 2024, significantly up from Rs.2, 596 billion estimated for 2023.