Private sector calls on Govt. for policy consistency

Friday, 3 February 2017 00:00 - - {{hitsCtrl.values.hits}}

Hopeful over proposed National Tax Council, insists on providing it with mandate to advise Govt. on policy framework
Says reintroduction of the WHT would have negative impact on economy
Insists on increasing dividends, identifying different sectors to mitigate adverse affects on stock market

By Charumini de Silva

The private sector yesterday called on the Government to maintain a consistent policy framework to support a stable macro environment, highlighting that the ad hoc policy implementation created uncertainty among investors.

“The whole private sector is looking for policy consistency. The matter is that the policy keeps changing from year to year and drastically,” Laugfs Group Finance Director Dilshan Perera said at a panel discussion held on the ‘Latest Developments in Taxation’ in Colombo.

Sharing private sector perspectives on the proposed National Tax Council, he said they hope that the council would be given the mandate to advise the Government on the policy framework and qualified professionals would man that council.

“We have had various studies done in the past 25 years and many presidential commissions have been held, but unfortunately we didn’t see them being implemented. It is ad hoc,” he added.

However, while acknowledging that the establishment of the National Tax Council was encouraging, Perera emphasised that the proof of the pudding was in the implementation.

Royal Ceramics Lanka Head of Finance and Treasury Haresh Somashantha said that the Government’s proposal to reintroduce the withholding tax (WHT) in a situation where the country was aiming at an economic surge was a step in the wrong direction, claiming that it would have a negative impact.

“I think they shouldn’t have reintroduced the WHT in the first place. If you do a calculation, 5% WHT on the income and 0.5% on Economic Service Charge (ESC) for a service oriented company, 5.5% on their turnover is significant. To recover this 5.5% they need to have at least 40% profit before tax (PBT), but I don’t think any service sector is earning 40%. Therefore, this is technically wrong,” he explained.

He asserted that WHT on interest income and dividends would also have a negative impact on Government securities therefore it would also have to borrow it at a higher rate and depend on the foreign borrowings.

Noting that the capital market is already down for the last 10 months, where foreign investors are exiting, Somashantha added that increasing the dividends and identifying different sectors was going to be negative for the capital market.