Members of the Ceylon Chamber of Commerce are expressing serious concerns about the provisions of the Supplementary Tax Bill which was recently published to implement the budget proposal on this matter.
In its immediate reaction to the budget, as conveyed by the post-budget release to the media and in numerous post-budget forums in which House leaders participated, the House highlighted the impact retrospective taxes would have on confidence investors. After receiving several proposals from members, the Chamber, with the advice of its steering committee on taxation, made specific recommendations to the Minister of Finance regarding this proposal.
The Chamber pointed out that the retroactive tax was arbitrary in nature while raising issues of marginal relief and double taxation on group company dividends. The Chamber is pleased to note that the concern relating to the double taxation of dividends has now been resolved. However, other concerns were unfortunately not taken into account.
The Chamber provided many alternative recommendations for the implementation of the surtax considering either an income tax surtax of 10% of all taxpayers, an income tax surtax at varying rates depending on the level of income, a credit to be carried forward to pay that -excluding tax or the imposition of the tax on a prospective basis. Either of these alternatives could have increased targeted revenues while minimizing the burden on the private sector during this extremely difficult time in the country.
The Chamber, in its representations, specifically asked to avoid the application of the additional tax at the group level given its unfair impact on small subsidiaries and minority shareholders. This method of application at the Group level could have a serious deterrent effect on local and foreign investors who are considering setting up joint ventures with large conglomerates. The Ceylon Chamber of Commerce urges the government to reconsider some of these arrangements before they are submitted for parliamentary approval and extends its support for the development of alternative proposals to ensure revenue targets are met.