ECONOMYNEXT – Sri Lanka which has a population of 22 million only had 137 persons who paid income taxes above 5 million rupees and there were only 3,020 value added tax files, ruling party legislator Mahindananda Aluthgamage said.
Sri Lanka had 5.8 million households and there were 293,305 tax files in 2020 and 120,000 had filed returns in 2021. About and 58,000 had paid tax.
Of the total 28,621 individuals had paid less than 10,000 rupees, 22,368 had paid 100,000 rupees or less, and 5,493 had paid 500,000 rupees or less, Aluthgamage told parliament.
Of the rest, 1,456 persons had paid 10 million rupees or less.
“Only 137 persons had paid taxes above 5 million rupees.”
In countries like the US income tax is the main source of revenue. People can pay income tax because import duties are near zero (usually 5 percent or less) and there is no value added tax.
In Europe value added tax is close to 20 percent but there are no import duties. In Sri Lanka import duties are high for ordinary people, but the government gets only a part of it because billon of rupees taxes are diverted to domestic protectionists through what is known as tax arbitrage.
High rates of import duty on top of VAT also encourage under invoicing customs scams corrupting the system.
Minister Aluthgamage alleged that a customs official who criticized him in public owned a vehicle sale. Vehicles are among items that are taxed at rates close to 300 percent.
Sri Lanka in 2021 had 105,000 registered companies, and 60,721 had income tax files, he said.
It was not clear how many companies were active.
Income tax returns were submitted by 35,029 companies and 15,069 had paid taxes, Aluthgamage said.
In 2021, 82 percent of the corporate income taxes were paid by 342 companies.
Aluthgamage who was former agriculture minister is currently without a portfolio said he was able to do the research because he had no ministry of four months. (Colombo/Sept21/2022)