Inland Revenue sets Rs. 792 b revenue target for 2018 | Sunday Observer

Inland Revenue sets Rs. 792 b revenue target for 2018

The Inland Revenue Department, (IRD) the country’s revenue collection body has set a target of Rs. 792 billion in revenue collections for 2018 which is a 30 % increase over last year’s tax revenue, Inland Revenue Department Commissioner General Ivan Dissanayake said.

Tax revenue last year stood at Rs. 602 billion, a 30 % increase over the previous year’s revenue of Rs. 462 billion. The revenue collector hopes to enhance the tax base this year by netting in more tax payers to boost revenue for the country.

“We will open more tax files this year of those earning an income exceeding Rs. 500,000,” Dissanayake said. The Inland Revenue Department opened 25,000 tax files last month and plans to open 250,000 files by end of this year.

“Our aim is to open over 2 million tax files by 2020,” the Commissioner General said. The IRD plans to boost revenue collection from With Holding Tax, Capital Gains Tax and the PAYE (Pay as you earn) tax under the new Inland Revenue Act which came into effect from April 1.

The Revenue Administration Management Information System (RAMIS) has been effective in the revenue administration according to the Commissioner General/

“RAMIS has been in revenue administration and management. We hope to interface the system with over 30 government agencies to collect information to enhance the tax base,” Dissanayake said. The revenue collector is confident that it could achieve the 60: 40 direct to indirect tax ratio which is currently 18: 82. The new inland revenue Act is focused more on increasing the direct tax component by removing the exemptions granted under the old Act for income.

“Those exempted under the previous Act will now be liable to income tax and all businesses will be brought under a level playing field,” the Commissioner General said.

Under the New Act all establishments come under either 14 percent or 28 percent tax rates. Establishments earning less than Rs. 500 million per annum is liable to 14 percent while others come under the standard rate of 28 percent.

“We have not entitled individuals or non company entities to the 14 percent granted for Small and Medium Enterprises considering the low level tax slabs of 4, 8, 12, 16 and 20 percent given to individuals,” Dissanayake said.

Accordingly individuals and partners have been excluded in the first Schedule from the applicability of the tax rate of 14 percent for SMEs.

Tax experts said over 70 percent of economy of Sri Lanka is bed rocked on SME businesses, which are mostly carried on by individuals or partnerships. The 14 percent Tax Rate for the SME should be applicable for an Individual or for a Partner of a Partnership. As it is, only the companies are entitled for the reduced Tax Rate of 14% if it is a SME. He said professionals have been excluded in the definition of SME in Section 195 of the IRA.

Professionals have been encouraged to return to the country and there is no just and equitable reason to exclude them if they conduct a business and are within the definition of SMEs entitling them to the 14 percent tax rate. Small and medium time tax payers will benefit as employees earning up to Rs. 100,000 per month are exempted from income tax whereas in the previous Act the exempt limit was Rs. 62,000 per month.

Under the old Act an employee earning Rs. 150,000 a month is liable to a tax of Rs. 5,500 whereas in the new Act he or she has to contribute only Rs. 2000 per month which is a saving of Rs. 3,500.

As far as other tax payers (non employees) are concerned previously, beginning from the second Rs.500,000 slab a tax of 4, 8, 12. 16 and 20 percent was applicable but under the new Act the Rs. 500,000 slab has been increased to Rs. 600,000.

With regard to the implementation of the new Inland Revenue Act the Commissioner General said as far as the new Act is concerned we have only passed few weeks and have still not received any payment. The first PAYE tax is due on May 15. When we receive the payment we can would know the effect of the new Act.