Speaker Karu Jayasuriya pledged to ensure that Parliamentary protocols and procedures would be strictly implemented with regard to the Value Added Tax (VAT) (Amendment) Bill, which is currently being redrafted by the Government.
Speaking to Nation, Jayasuriya said that he was presently waiting for the government to come out with proposals to the Bill, as it was up to the government to do so, subsequent to the submission of which he would take necessary steps to ensure that procedures as laid down in the Constitution and the Standing Orders of the Parliament were followed.
The Supreme Court informed the Parliament this month that the VAT (Amendment) Bill was null and void, as no proper procedure had been followed when presenting it to the Parliament,“I conveyed the Court’s ruling to the Parliament,” he added.
It was reported that the Government had already commenced work to redraft the Bill and would present it to the Parliament in the near future.
Meanwhile, academic economists called on the Government to refrain from increasing Value Added Tax (VAT) from 11% to 15%.
Economists meanwhile called for the reduction of the wide ranging exemptions from VAT provided to over 500 goods and services. They proposed that the tax base should thereby be expanded.
Professor at the Department of Economics of the Faculty of Arts of the University of Colombo, Prof. K. Amirthalingam however said that such was not a long term solution for the Government’s problem of desperately seeking revenue.
VAT is an indirect tax and therefore a regressive one.
In development, the role of direct tax goes up while simultaneously the role of indirect tax decreases, yet even though this has happened in India, Uganda, Kenya, Pakistan, Bangladesh, the United States of America, Canada and Malaysia, such has not taken place here, he noted, adding that since the 1980s, our direct tax earnings are nearly 18% to 20%.
He highlighted that there was a large scale evasion and avoidance of tax.
“VAT is considered a money machine. The USA does not charge VAT as they believe it would generate way too much income. In Sri Lanka, the income from VAT is on the decline. VAT has not been performing. How long are we going to wait? Regressive taxes increase the burden on all citizens irrespective of their income level. Rather than increasing the tax rate, the Government should as a short term solution increase the tax base,” he mentioned.