Finance Minister Basil Rajapaksa has explained and assured the Cabinet of Ministers that 11 funds including the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF) will be exempted from the one-time tax surcharge of 25% proposed in the 2022 Budget.
It had been proposed in the 2022 Budget to impose a 25% Surcharge Tax on individuals or companies earning an annual taxable income of Rs. 2,000 million or more.
It is to be a one-time tax payable by high value taxpayers in 2022 for their income in the tax year of 2020/21 while the objective of this special tax was to raise the necessary revenue to finance the Government expenditure programs for the year undisturbed.
Concerns were subsequently voiced by experts, opposition politicians as well as members of the government itself that the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF) would also be subjected to this 25% surcharge tax as any fund that exceeds Rs. 2 billion taxable income would be subjected to this surcharge tax.
However, making a special statement to Ada Derana today the Minister of Finance Basil Rajapaksa said he assured the Cabinet during its meeting this evening that 11 funds including the EFP and the ETF will not be subjected to this surcharge tax.
He said that clearly at the time the government expected to generate a revenue of around Rs. 100 billion from this surcharge tax and that accordingly they identified 69 companies and individuals who will be subjected to this tax.
He said that at no point did they expect to include the EPF or ETF into this tax. Rajapaksa said there are 11 funds including the EPF and ETF and that they never intended to include any of them into this tax surcharge.
“However, the Inland Revenue Act No. 24 of 2017 of the previous government has identified these 11 funds as income tax paying institutions. Therefore, there was an opinion among the public that this would be a surcharge.”
He said that they have explained in the Cabinet meeting that all 11 funds will be exempted from this tax.
Ceylon Chambers urges govt to reconsider
Meanwhile the Ceylon Chamber of Commerce today also noted serious concerns on the provisions of the Surcharge Tax Bill that has been gazetted recently to implement the budget proposal on same.
The Chamber said it provided many alternative recommendations for the implementation of the Surcharge Tax by considering either an income tax surcharge of 10% from all taxpayers, an income tax surcharge at varying rates depending on the level of income, credit to be carried forward for paying the one-off tax or the imposition of the tax on a prospective basis.
Any of these alternatives could have raised the targeted revenue while minimizing the burden on the private sector during this extremely challenging period in the country, it said.
Further, the Chamber in its representations, specifically requested to avoid application of the Surcharge Tax at Group level considering its unfair impact on smaller subsidiaries and minority shareholders. This method of application at the Group level could be a serious deterrent to local and foreign investors who consider entering into joint ventures with large conglomerates, it emphasized.
Therefore, the Ceylon Chamber of Commerce requested the Government to reconsider some of these provisions before it is submitted for approval by Parliament and extends its support to develop alternative proposals to ensure the revenue targets are met. – ada derana