Monday, November 23, 2015
How nice it will be to be in the Rs25M tax-paying league!
The Budget has a pleasant surprise for the Super Rich of Sri Lanka who will be paying taxes of Rs25M to the Government per annum. In order to get to that level one would have to have a taxable income of Rs 167 Million ( A little over US$1M). What is your guess as to how many will make it for the 2016/2017 Tax year? I would say, 1000 would like to get there!
That means both the President and the Prime Minister will have to find time to meet them ONE ON ONE, and then of course the VIP treatment at airports, hospitals and I am sure a whole list that the Govt. will make up to entice people currently not reporting their income, to get to the league of the Super Rich.
In ever so status conscious Sri Lanka, this was an innovative move by the Finance Minister, I dare say he consulted the PM and Pres, as they will have to meet them ALL! People will now want to be in that elite league. If you don’t enter that league you are nobody! The Govt. needs to study this subject a little more to increase the perks that will attract others to become tax payers
I am sure that there will be many who wish to enter this league and want to hob nob as part of this elite! They can sleep tight, as they will no longer have to worry about being caught out. Their deposits will be legitimate, and they will be complying with all regulations. So those currently loan sharking and those highly paid tuition masters, who don’t pay any tax, will most likely want to come in from the Cold, and become legitimate! All those with FDs in the billions will also have to disclose and the Govt. will already know who they are, that got the 10% withholding in the past.
It might suddenly become quite fashionable to pay taxes, as now it is fashionable NOT to even have a tax file, which is part of the problem, Inland Revenue is grappling with.
Please remember that Interest Income was taxed at 10% withholding, and did not come into the overall income tax return. Now there is NO withholding tax, but it will be part of your income on which you will have to pay 15%.
The best move would be for the Wealthy with loads of cash, to take it from under their mattresses, lend it to their companies, pay down the bank debt at higher rates, and lend a lot more to them at higher rates. The company can then reduce its profits by the interest paid to the lender (owner) who will pay tax at 15% on that and on his deemed dividend suffer the double tax, of the company first at 15% and then his at another 15% of the net he receives, as the Finance Bill as currently drafted does not give relief for the dividend income received.