SC to convey decision on retrospective NBT to Speaker

By S.S. Selvanayagam

The Supreme Court yesterday heard the submissions made on the Nation Building Tax Bill and will convey its special determination to the Speaker of the Parliament in due course.

The bench comprised Chief Justice K. Sripavan and Justices Anil Gooneratne and Prasanna S. Jayawardane.

A public interest litigant activist filed a petition in the Supreme Court challenging the Nation Building Tax Bill, complaining that it imposes retrospective tax liability.

Dharshana Weraduwage appeared for the petitioner. Additional Solicitor General Farzana Jameel appealed for the State and Attorney General.

Petitioner P. Liyanaarachchi contends that the Bill or any part thereof is inconsistent with the Constitution and is seeking the special determination of the court.

The Nation Building Tax (Amendment) Bill was published in the supplement (issued on 19 August 2016) to Part II of the Gazette of the Democratic Socialist Republic of Sri Lanka and has been placed on the Order Paper of Parliament on 7 September 2016.

The petitioner states that the Clauses 1, 2(2) (a) (iii), and 2 (2) (b) of the Bill are an infringement of Articles 12 (1), 13 (6), 27 (1), (2) (a), 04, 03, of the Constitution and duly require the approval of the people at a referendum by virtue of the provisions of Article 83.

He stated that the said clauses were imposing retrospective tax liability on the registered taxpayers as well as others who will fall liable with the reduction of the threshold turnover from 3.75 million to 3 million per quarter with effect from 2 May 2016 and with the said liability it will subject the defaulting persons to many penal sanctions under and in terms of many Acts.

The mentioned clauses are fundamentally contrary to the principles of turnover taxes, whose mandates are founded and rest upon the principles of fiscal neutrality. The reduction of the threshold will negatively affect the market, generating discriminations among equal suppliers and negatively affect their market positions, he stated.

The identified clauses attempt to ratify or revive many acts of nullity, of many state authorities, institutions, agents and many other persons which are already subject to judicial scrutiny and interim relief by way of many fundamental rights petitions and vehemently try to render invalid the outcome of the said cases and infringe the public trust, separation of powers and the rule of law, which are the holding pillars of the Constitution, he said.

Clause 4 (2)(b) of the said Bill is a vehement infringement of Articles 12(1), 27(1), (2)(a), 04, 03 of the Constitution and duly requires the approval of the people at a referendum by virtue of the provisions of Article 83, since the said clause repeals the NBT exemption, which was applicable to the telecom services until 2 May 2016, he explained.

The mentioned telecom services are already and continue to be subject to, among other taxes, a 25 % telecommunication levy which is being imposed in terms of the provisions of the Telecommunication Levy Act, No. 21 of 2011 (as amended) up to that time, he asserts.

The said Act was specifically enacted to impose the said levy for the existing taxes of Value Added Tax and Nation Building Tax, which ceased to be applicable to telecommunications bills with effect from 1 January 2011, he said.

The tax is applicable up to that time and will continue to be applicable and was revised to 25% with effect from 1 January 2014 as per the amendment Act 11 of 2014 for the said Act. He asserted that this tax would continue to be applicable among other taxes to the mentioned services for the 2016 fiscal year.

The services are subject to double taxation, which is contrary to law, ethics, reasonableness and government policy and it is a denial of the legitimate expectations of the citizenry and a denial of the rule of law and public trust, which is an infringement of Article 12(1), read with Articles 3, 4.

Clause 5 of the said Bill is a violation of Articles 12(1), 27(1), (2)(a), 4, 3, of the Constitution and duly requires the approval of the people at a referendum by virtue of the provisions of Article 83, since the clauses attempt to ratify or revive many acts of nullity, of many state authorities, institutions, agents or many other persons, which are already subject to judicial scrutiny and to interim relief, including many fundamental rights petitions and infringes the public trust, separation of powers and rule of law which are the holding pillars of the Constitution.

He is seeking a special determination from court ruling that the Bill is inconsistent with one or more Articles of the Constitution and that in whole or in part requires the approval of the people at a referendum in addition to the two-thirds approval of Parliament.