Professionals, step forward | Daily News

Professionals, step forward

Apparently, there are two things in life that one cannot escape: death and taxes. Nearly all countries levy taxes on personal income as well as goods and services. These funds in turn are used for welfare and development. In this sense, taxes can be termed as an investment for the future.

But Sri Lanka faces an uphill struggle to broad base its tax revenue. Until very recently, there were only 400,000 direct tax payers out of a total population of nearly 22 million. This means that we have to rely mainly on indirect taxes such as Value Added Tax (VAT) on various goods and services (indeed, in some countries it is known as Goods and Services Tax or GST) to meet the revenue targets. In fact, almost 80 percent of the tax revenue comes from such indirect taxes. It is these funds that are used for education, health, infrastructure development, poverty alleviation and other welfare measures.

The goal is to have at least one million tax payers in the medium term, which is not impossible at all. Around 69,000 new tax files have been opened after the new Inland Revenue laws were passed recently, but this is not adequate. The silver lining in this statistic that most of the new tax payers have come forward voluntarily. This trend should continue. However, judging by the number of new luxury cars on Colombo’s roads alone, there should be many more people capable of paying taxes.

True, the Government can track down those who evade paying taxes, but it would be far better if this becomes an entirely voluntary exercise. Sadly, many professionals including lawyers, doctors, tuition teachers and architects who have benefitted from the country’s free education system do not give back by paying due taxes, Finance and Mass Media Minister Mangala Samaraweera has said. We have to agree with his assessment. There are also many instances when they go abroad without serving their Motherland which leads to a revenue loss as well as brain drain.

A mechanism must be evolved to collect tax revenue from large-scale tuition classes and other untaxed/unaccounted activities. A consultant doctor who earns Rs.1,000 from each channeling patient collects around Rs.30,000 per day, at the rate of 30 patients a day. Coupled with the monthly Government salary, the income of such a consultant would easily exceed Rs. 500,000 per month. It is only fair that he or she is called upon to pay a tax component to the Treasury. After all, the people have contributed to their education through the indirect taxes imposed on goods and services, from a cake of soap to a restaurant visit.

Furthermore, some professionals in certain sectors enjoy perks that are not given to any other sector. The duty free car permit for public servants is one such perk. Under this permit, a Government servant can bring down a car completely duty free. Hence, a car that costs around Rs.8 million in the open market will cost only around Rs.3 million under a permit. Permits are issued every five years, which means that some government servants will never pay duty on a car until they retire or even afterwards. This is how the Government recognizes and rewards their hard work, but do they think about the people the same way? For example, the doctors strike at the drop of a hat, depriving the poor people of healthcare, while the rich can go to private hospitals (where the strikers have no qualms about working or channeling).

In this context, the Finance Ministry has decided to reject a proposal by the Government Medical Officers’ Association (GMOA) to provide doctors with an income tax ceiling of 12 per cent along with other concessions. Minister Samaraweera has however decided to increase the Distress Availability Transport (DAT) for specialist doctors but no tax relief would be granted. This is a laudable decision.

The equation is rather simple - if more people pay direct taxes, fewer people will need to pay indirect taxes. Minister Samaraweera has expressed a willingness to reduce VAT by another 2.5 percent over the next few years as the number of direct taxpayers rise at least until we can see a ratio of 60:40 (Indirect: Direct) among taxpayers.

Things are moving firmly in this direction, according to the statistics released by Minister Samaraweera. In just two months since the implementation of the new Inland Revenue Act, total Government revenue has increased by 8 per cent - from Rs.256 billion in June 2017 to Rs.276 billion in June 2018. In May 2018, the Department of Inland Revenue had made Rs 5 billion more in income tax revenue than May of last year.

These are positive signs that show a brighter future for Sri Lanka. Eliminating waste and corruption must also be a priority for the authorities, since the funds that go for these nefarious acts can then be used for development and welfare projects. While taxes are not the only means of Government income, they do play a major role. The onus is on those who can, to pay their taxes on time.


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