In this insightful discussion, tax experts N. R. Gajendran and Suresh Perera analyze how the new reforms will affect the general public and the broader economy.
N. R. Gajendran, highlights that while the government has promised to provide relief to individuals who were unfairly taxed, the practical implementation of this promise is fraught with challenges.
The government has proposed a mechanism to refund withholding taxes deducted from those whose incomes fall below the taxable threshold, but this system has been inefficient in the past.
Instead of relying solely on refunds, Gajendran suggests that a more effective approach could be the introduction of a "Self Declaration system".
This would allow individuals to obtain a certificate from the tax department confirming they are not liable for tax, preventing unnecessary withholding.
He notes that a more streamlined and transparent system, possibly leveraging digital tools and self-declaration, would better serve the interests of taxpayers and make the process more efficient.
Meanwhile Suresh Perera concurs, adding that the core issue with the withholding tax mechanism is that it relies on the taxpayer to claim refunds, which is often a tedious and inefficient process. He advocates for a solution that ensures taxes are only levied on those who are actually liable from the start, reducing the need for complex and delayed refund procedures.
Perera also suggests the introduction of a tax ombudsman to address grievances, which could help resolve disputes and ensure fairness in tax collection.
He further emphasizes the importance of improving the administrative capacity of the Inland Revenue Department to ensure accurate and efficient tax collection, which would prevent situations where genuine taxpayers are penalized.