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“Our income is declining year by year. It is 10.8 percent of GDP this year.” “If we move in that direction it will be hard on government’s salaries and pensions,” “Sri Lanka will be in danger if the country moves ahead in this manner, so we have to make a change,” “To change we should find innovative ways to introduce new taxes for those who are not paying taxes but not tax the same people who pay every day.” A tax is a financial charge or other levy imposed upon a taxpayer by the state or the functional equivalent of a state to fund various public expenditures. However most of the state owned enterprises where the tax payers’ money is largely utilized are loss making entities. The up coming budget has increased the island’s tax revenue target to 602 billion rupees for 2016 from 516 billion rupee target in 2015. Karunanayake said Sri Lanka needs to modernize the current tax system and widen the tax base in order to increase the revenue flow to the government. “What we should do is expand the tax base with higher compliance,” Karunanayake said. “In the same time we need to modernize the system in a humane manner. That system should be equal to everyone,” “With the new administration there is no political interference, so you have the freedom to think wisely from where the country do not get taxes,” “You (Inland Revenue Department) should go into every corner of the country and see where and whom can be taxed. Tax systems should not only target Colombo. Even though most people in some regions do not have the capacity to pay, some can.
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You have to investigate it and come up with a new tax structure to capture this.
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” He added the Inland Revenue department will get a new building through the coming budget.
He is right. There are lots of people in Anuradhapura, Ratnapura, Kurunegala and Hambantota who have now got the capacity to pay their fair share. The Swedish and Norwegian model of indirect taxation is also a good one, as the taxes are based on actual consumption which is more efficient. You get reliable payers to collect the tax on the behalf of the government, the cost of litigation is less, and the collection is every month rather than every year.
Tax revenue of 10.8% of GDP vs 30% – In developed nations there are a higher percentage of formal registered enterprises contributing to GDP. In Sri Lanka it appears that there is a very large percentage of self employed persons, small businesses and the informal sector who do not pay taxes and it is hard to net them as they are run by a single person. It will be interesting to know what the GDP contribution of this lot. They one can compare the tax contribution from this group of small business people, doctors, lawyers, tuition teachers etc etc.
He is only looking at financing the waste, why not try to cut down govt expenditure that are paid to overstaffed government departments and unwanted ministries