By Bandula Sirimanna
Sri Lanka plans to unveil a “progressive” tax on vehicles, luxury and semi luxury goods, and imported food items in a bid to increase revenue and bridge the 2016 budget deficit.
The new tax rate on these luxury goods and vehicles is yet to be finalised, official sources said adding that it is likely to be around 5 per cent.
The 2016 Budget to be presented on November 20 is aimed at increasing tax to GDP ratio to a 14 to 15 per cent from 10.5 per cent at present.
VAT on vehicles at the import and selling point which was removed from the 2015 budget presented by the Rajapaksa regime and a new tax levied at the point of sale, will be re-introduced, a senior Treasury official said.
He said that the government is also considering the possibility of abolishing VAT on goods and services and bring it under the new “progressive tax” which will be levied on invoices.Motor traders said that the new policy will further increase the prices of vehicles and affect sales making it difficult for small motor dealers to survive.
Motor traders will recover the new tax money from buyers and the end result would be a vehicle price hike, Director of Lekhraj Automobiles (PVT) Ltd, Mahen L. Ganwani told the Business Times.He disclosed that small and medium scale importers of vehicles are under severe pressure with the new requirement of an annual licence fee of Rs.1.5 million introduced in the 2015 budget for brand new and used vehicle importers.
“This licence fee is unbearable for small and medium importers who cannot even pay heavy import duties at present.” he added.
Sri Lanka plans to unveil a “progressive” tax on vehicles, luxury and semi luxury goods, and imported food items in a bid to increase revenue and bridge the 2016 budget deficit.
The new tax rate on these luxury goods and vehicles is yet to be finalised, official sources said adding that it is likely to be around 5 per cent.
The 2016 Budget to be presented on November 20 is aimed at increasing tax to GDP ratio to a 14 to 15 per cent from 10.5 per cent at present.
VAT on vehicles at the import and selling point which was removed from the 2015 budget presented by the Rajapaksa regime and a new tax levied at the point of sale, will be re-introduced, a senior Treasury official said.
He said that the government is also considering the possibility of abolishing VAT on goods and services and bring it under the new “progressive tax” which will be levied on invoices.Motor traders said that the new policy will further increase the prices of vehicles and affect sales making it difficult for small motor dealers to survive.
Motor traders will recover the new tax money from buyers and the end result would be a vehicle price hike, Director of Lekhraj Automobiles (PVT) Ltd, Mahen L. Ganwani told the Business Times.He disclosed that small and medium scale importers of vehicles are under severe pressure with the new requirement of an annual licence fee of Rs.1.5 million introduced in the 2015 budget for brand new and used vehicle importers.
“This licence fee is unbearable for small and medium importers who cannot even pay heavy import duties at present.” he added.
VAT may be replaced by old BTTThe Ministry of Finance is considering replacing the Value Added Tax (VAT) with the old Business Turnover Tax (BTT) or Turnover Tax which was discontinued before 2000, sources said.
“There’s a discussion going on currently on whether to replace VAT with BTT,” a Ministry source told the Business Times. The source said that the Ministry is concerned on issues pertaining to low revenue as many businesses evade VAT payments. “The revenue has dropped drastically over the years owing to VAT,” he said, adding that it was introduced to mitigate the cascading effect on domestic consumption goods and services.(Duruthu)www.sundaytimes.lk
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