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Only listed companies targeted to raise 114 billion rupees

By Shamindra Ferdinando

Finance Minister Basil Rajapaksa said his proposals to impose a 25% retroactive surtax on listed persons or companies that earned more than Rs 2 billion in 2020/2021 and to increase VAT (value added tax) at 18% from the current 15% would not be abandoned.

Appearing on ‘Salakuna’, a weekly political show broadcast Monday night live on ‘Hiru’ FM Rajapaksa stressed that he would not bow to pressure from those affected by his proposals. In response to Chamuditha Samarawickrema, presenter of ‘Hiru’, the FM said only President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa and the Cabinet could intervene.

FM Rajapaksa said he had discussed the issue with the Chambers and had not opposed the imposition of the surcharge for a year or two due to the devastation caused by the pandemic, although they were be opposed to random changes in taxes.

However, companies that had not been listed on the Colombo Stock Exchange were excluded from the tax net despite being also rich in cash, much to the surprise of the business sector.

Rajapaksa urged the media not to engage in a campaign to pressure the government to remove the proposals.

Introducing the budget for 2022, Minister Rajapaksa proposed (a) a one-time 25% surtax on persons or businesses with taxable income exceeding 2,000 million rupees for the 2020/2021 tax year. The government planned to recover Rs 100 billion from this tax and (b) VAT on banks and financial service providers should be increased from 15 percent to 18 percent. Minister Rajapaksa stressed that this tax should be paid monthly from January 1, 2022 to December 31, 2022 and not passed on to customers. The government expected to raise 14 billion rupees through the tax.

When some members of the opposition interrupted Minister Rajapaksa immediately after announcing the 25 percent surtax on a selected group of companies, the FM said it would like to see who represented the interests of the targeted companies.

The Inland Revenue Department indicates that the following companies are likely to be subject to the proposed single tax surcharge: LOLC Holdings (Rs. 23,075 mins), Commercial Bank (Rs. 16,940 mins), Ceylon Tobacco (Rs. 15,578 mn), ExpoLanka Holdings (Rs. 14,830 mn), HNB (Rs. 14,096 mn), Dialog Axiata (Rs. 12,034 mn), Ceylinco Insurance (Rs. 8,880 mn), Sampath Bank (Rs. 8,442 mn) , Vallibel One (Rs. 8,117 mins), Sri Lanka Telecom (Rs. 7,880), Hayleys (Rs. 7,637 mins), Distilleries Company of Sri Lanka (Rs. 6,962 mins), LB Finnace (Rs. 6,807 mins), Royal Ceramics Lanka (Rs. 6 135 mins), Central Finance Company (Rs. 5,544 mins), Tokyo Cement Company (Lanka) (5 Rs. 425 mins), People’s Leasing and Finance (Rs. 5,295 mins) , Dipped Products (Rs. 5,140mn), National Development Bank (Rs. 5,117mn), John Keells Holdings (Rs. 5,026), Carson Cumberbatch (Rs. 4,804mn), Richard Pieris and Company (Rs. 4 680 mins), Melstacorp (Rs. 4,425 mins), LOLC Finnace (Rs. 4,365 mins), Nations Trust Bank (Rs. 4,055 mins), Hemas Holdings (Rs. 3,621 mins), Bukit Darah (Rs. 3,541 mins), Cargills (Ceylon) (Rs. 3,481 mins), CIC Holdings (Rs. 3,132 mins), Haycarb (Rs. 3,047), SeylanBank (Rs 3,039 mins) .), Lanka Walltiles (Rs. 2,960mn), Nestlé Lanka (Rs. 2,947mn), DFCC Bank (Rs. 2,745), Ceylon Guardian Investment Trust (Rs. 2,721mn), Citizens Development Business Finance (Rs. . 2,554), Lanka Tiles (Rs. 2,475 mins), Lion Brewery Ceylon (Rs. 2,471 mins), Singer Sri Lanka (Rs. 2,452 mins), Ceylon Cold Stores (Rs. 2,334), CT Holdings (Rs 2,288 mins), Chevron Lubricants Lanka (Rs 2,225 mins), Commercial Leasing and Finance (Rs. 2,216 mins), Access Engineering (Rs 2,173 mins), Teejay Lanka (Rs 2,139 mins), Pan Asia Banking Corporation (Rs. 2,048) and Commercial Credit and Finance (Rs 2,005).

Former Samagi banker and lawmaker Jana Balavegaya Eran Wickremaratne strongly opposes the budget proposal. Asked about his position on FM Basil Rajapaksa’s decision and whether the latest proposal is similar to the tax imposed by the UNP but not enforced, MP Wickremaratne told The Island: “The private sector is not averse to paying taxes. They want a predictable tax environment so that they can plan and execute business plans. A single tax is arbitrary and unpredictable. It destroys business confidence. This weakens planning as well as the confidence of foreign investors in the country.

Referring to the abolition of the one-time super earnings tax declared in 2015 but never implemented, SJB legislator Dr Harsha de Silva stressed that two wrongs do not do a good.

Sources said the cash-strapped government could also have targeted unlisted companies. However, policymakers had conveniently restricted the target group from the listed group.

Responding to questions from “Salakuna,” Minister Rajapaksha strongly defended the sharp tax cuts imposed immediately after the change of government in 2019. The minister said a sharp tax cut saved many private companies, including the one which employed the team of journalists “Salakuna”. The minister said so when Chamuditha Samarawickrema claimed that the government had caused unnecessary revenue problems by reducing a range of taxes amounting to well over Rs. 500 billion.

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