The government aims to increase its tax base by 30% to over 60 billion rupees in 2014, that means some more money needs to depart your pockets to the government coffers in the new year. Let’s look at them one-by-one:
Finance sector will need to pay 2% “nation-building tax”
President Rajapaksa said in his budget speech that the increase in taxes on banks as the budget aims to spur growth, shrink the budget deficit and expand the stock exchange in Colombo. A 2% ”nation-building tax” (NBT) that some industries already pay will be extended to banks and financial institutions he said. The banks will have to pay the NBT on corporate revenue. So how does this affect the people who bank at banks? Well there are no definitive studies on the subject related to Sri Lanka, but according to those who have done studies on this type of thing in other markets, loans might become a tad more expensive and if you work at a bank you might see cuts in your operational budget as banks try to tighten their belts.
You will pay more for your calls
The telecommunication levy which stood at 20% will be increased to 25%. The government says with the move aimed at increasing revenues from a growth area. Hey, someone’s got to pay for those new ministers right? With the Telecoms levy, a 2% CESS, and other applicable taxes the government now takes more than a quarter of every rupee you spend on calling someone. Although happily, the new tax is not applicable to broadband. So maybe it’s time to Skype more.
Duty on motor vehicles increased
Used car importers were left shocked due to therevised depreciation value of cars proposed in the Budget 2014. Under the revised system of taxation, the tax table on the import of a vehicle used between six months to a year will be the same as the amount levied on a brand new imported vehicle. Although the budget technically has not increased any tax on motor vehicles, the change in the customs duty levying system on imported vehicles means significant increases in the cost of re-conditioned vehicles. According to Mahinda Sarathchandra, the president of the Vehicle Importers’ Association of Sri Lanka, the average price impact of the duty adjustment will be between Rs 250,000 and Rs 1.4 million on motor vehicles.
Import Duty on cheese, cereal, facewash and a bunch of other products.
If you have a favorite brand of cheese, cereal, chocolate or face-wash that’s not made in the country, you will pay more for that in 2014. The government says this is to promote ‘local value addition’. See the full list from President’s budget speech:
|Commodity||Levy per Kilogramme|
Property tax imposed on foreigners
Doing things against foreigners always seems more patriotic. Introducing the new land laws for foreigners the President emphatically declared to parliament that. ”We will not allow any land to be sold outright to foreigners,” ”We will charge 15% tax up front on the value of lease agreements with foreigners. They can lease, but not buy land in Sri Lanka.” A treasury source said foreigners who already own land will not be affected, but they will not be allowed to transfer ownership to non-nationals. Earlier in 2013 the government announced a complete ban on the sale of real estate to foreigners.
Supermarket tax increased
TheGovernment expects to raise Rs. 15 billion in revenue off the supermarket tax. The imposition of VAT on wholesale and retail trade which was introduced as a ground breaking change to the VAT law in the previous budget has now been extended to such businesses having a turnover exceeding Rs. 250 million per quarter. This is a reduction of the threshold from Rs. 500 million to Rs. 250 million per quarter thereby expanding the VAT net to medium scale wholesale and retail traders as well.
In a move to further tax this sector, the eligibility to claim exemption on goods, specifically exempt under the VAT law, sold by a wholesaler and retailer would be restricted to a maximum of 25% of the total sales. This means that even if the majority of the items sold by a wholesaler or retailer are specifically exempt from VAT such exemption would not be allowed in full on the sale of such items but would be limited to only 25% of the total sales of that entity. In other words you will pay more at that Super Market ques and retail shops in 2014.
What’s going down
Taxes reduced on pet food
In a move to show the public that the President cares for us all, the tax on pet food has been reduced. Prime Minister DM Jayaratne had to make a gaffe on this one. When questioned about the tax reduction on dog food, the Prime Minister first thought it was about vehicles, and then ‘recovered’ to say how a policemen was bitten by a horse when the officer was investigating a property of DS Sennanayake, and why if there was dog, things would have been worse. You cannot make these things up.
Tax holiday at Colombo stock exchange
The president said he wanted to give companies in finance, insurance and manufacturing an incentive to list their shares on the Colombo Stock Exchange. He offered those that float next year a 50%reduction in corporate tax for three years. The corporate tax rate stands at 28%. The CSE now has 288 listed companies. According to Reuters, A two-year 50% tax holiday announced a year ago as an incentive to list has not brought results. Only two companies joined the exchange in 2013.
Duties decreased on Pens, Bow ties and Perfume
The import duties on designer brands of apparel including pens and bowties have been removed. The government says this is to help promote Sri Lanka as an up-market shopping destination. The opposition’s take however was this was the government catering to the super-rich. The other “Luxury items” with decreased taxes include Perfume which will now be taxed at 7.5% down from 30% of general import duties. The government clearly wants you to look good and smell good, while you queue up at the super market to pay for all those cheese you didn’t need.
Printers are now Duty Free
“IT supportive” printers can now be imported without any import duties, which is a relief for people who wants to print stuff. Earlier, the duties for printers stood at around 15%, depending on the type of printer.
NBT and Local Government tax exemptions
LP Gas distribution, paying from a foreign currency at a duty free shop now comes without the Nation Building Tax. Small traders in business with a turnover less than 50,000 a month will also be exempted from local authorities levy, which although small, is something.(Republic Square)