Sri Lanka delays removal of VAT from retail trade

ECONOMYNEXT – Sri Lanka has delayed the removal of value added tax from wholesale trade and the increase in a turnover tax (nation building tax) until changess are approved by parliament, the finance ministry said.

But a ‘deemed VAT’ charged from shops owned by citizens on foods which are not liable to VAT will be removed.

Under discriminatory laws, enacted by the Rajapaksa regime, LakSathosa, a network of shops built with people’s money and run by rulers are not liable to VAT, despite having a turnover above the liable threshold.

It can pocket the difference between the retail price and VAT in an indirect subsidy at the cost of revenue to the state.

Removal of VAT from wholesale and retail trade was considered a regressive move by some observers. In modern economies the organized retail chains are a key cog in the tax system.

Motor vehicles for which letters of credit were opened before a budget in January will also be allowed to be cleared at the old rates, the finance ministry said.

The outcry by helpless citizens over sudden tax rises, stem from violating principle of ‘taxation by consent’ which led to the establishment of the Magna Carta in UK and the ‘Royal Prerogative’ in tax laws and other laws.

Sri Lanka hatches taxes in secret as if by ‘Royal Prerogative’ and hikes them by midnight gazette, while citizens are sleeping in a practice that became widespread especially during the 1970s, in direct contravention to basic principles of parliamentarism and freedom involving ‘taxation by consent’.

In Britain taxation by royal prerogative was explicitly outlawed by the Bill of Rights of 1689 which said that the…"execution of laws by regal authority without consent of Parliament is illegal".





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