A welcome step

The decision by President Ranil Wickremesinghe who is also the Finance Minister to expand the tax net to the widest possible extent is not only a welcome step but also a fair move by those who unfailingly pay their taxes and contribute to strengthen the economy. This should have been thought of much earlier by the country’s rulers.

Had this been done, the economy would have not plunged into its present parlous state and the have-nots too would have received a better deal. Instead, the taxes of certain business owners were slashed drastically in return for financing the election campaigns of certain rulers, at a tremendous cost to the economy, the burden of which the public is still suffering.

Widening the tax net to its widest possible limit was inevitable since the Government had embarked on a massive programme to provide relief to around one-third of the population experiencing dire poverty since the International Monetary Fund (IMF) has ruled out the printing of currency as one of its conditions for the bailout package.

With the widening of the tax net, an additional one million new taxpayers will be brought into the fold and with the new tax regime introduced recently to tax all those drawing an income over Rs. 100,000 monthly, the total number of taxpayers now stands at 3 million. The decision to bring all professionals including lawyers and even judges into the tax net will certainly now ensure a level playing field.

Accordingly, all doctors registered with the Sri Lanka Medical Council, accountants, engineers, bank executives, architects, motor vehicle owners, land owners etc. will now be obliged to pay taxes. This is done on the basis of identifying clearly those who are capable of paying taxes. Before this, no serious move was made to make such identification, resulting in those eligible to be taxed getting away while others less deserving getting caught in the tax net.

The decision to make all those over 18 years of age to register with the Department of Inland Revenue too is a good move and is followed by most other countries although this does not mean that they all will be taxed. Such registration would come in handy when seeking employment.

Up until now, taxes were paid by only a few while a vast number got away unscathed to the great detriment of the economy. Now that all potential taxable income earners have been identified there should be no room left for tax evasion. The Government must ensure transparency in all transactions if the exercise is to achieve the intended results. Particularly, no opportunity should be given for hiding the true income of those eligible to pay taxes. As it is there is no opportunity to ascertain the fees charged by lawyers from their clients nor what is charged by a doctor from his/her patients.

Recently, MP Mahindananda Aluthgamage revealed in Parliament that 90 percent of the ‘Wine Stores’ in the country did not pay even a red cent as taxes. If the MP is to be believed what a loss this could be to the country’s economy given the colossal sums earned by the liquor industry? Equally, a large sum could also be lost to the country by permitting a flourishing moonshine industry that does not pay taxes.

The Government must think of ways to roping in all potential tax revenue avenues that hitherto had escaped the net. There is also a need for devising a foolproof method to correctly ascertain the value of the transactions entered into by the parties involved. Severe penalties should be imposed on those attempting tax evasion or even imprisonment as is done in other countries. There should also be no political involvement in bailing out tax defaulters. Ideally the new tax law should be backdated in order to rope in politically favoured businessmen who were granted tax concessions that led to economic ruin.

Steps should be taken to unearth all hidden wealth and taxes imposed accordingly. Recently the names of certain relatives of prominent politicians were much in the news as regards wealth that has been stashed away in overseas banks. All measures to widen the tax net and rope in the maximum eligible to be taxed will be of little use if big-time crooks are allowed to escape due to their political connections. It will be grossly unfair to tax only those earning their income by genuine means while turning a blind eye on the favoured few who had amassed ill-gotten wealth.

All income sources of whoever they may be should be probed and accounted for, if the new tax law is to have any effect. There are the progeny and kith and kin of political leaders who had not done any job during their lifetime freely flaunting their luxury lifestyles and owning palatial residences which they could not have afforded under ordinary circumstances. The new tax law to have any real benefit should be applied even handedly and not selectively. If not, those who are liable to pay taxes under the new arrangement would feel aggrieved and find ways to evade taxes.