The membership of the Ceylon Chamber of Commerce notes serious concerns on the provisions of the Surcharge Tax Bill that has been gazetted recently to implement the budget proposal on same. In its immediate reaction to the budget as conveyed by the post-budget release to the media and in numerous post Budget forums where the Chamber leadership participated, the Chamber highlighted the impact retrospective taxes would cause on investor confidence.
After receiving several member proposals, the Chamber with guidance from its Taxation Steering Committee made specific recommendations to the Minister of Finance with regards to this proposal.
The Chamber highlighted the retrospective tax to be arbitrary in nature while raising the issues of marginal relief and double taxation on dividends of group companies. The Chamber is pleased to note that the concern with regard to double taxation on dividends has now been addressed. However, other concerns unfortunately have not been taken note of.
The Chamber provided many alternative recommendations for the implementation of the Surcharge Tax by considering either an income tax surcharge of 10% from all taxpayers, an income tax surcharge at varying rates depending on the level of income, credit to be carried forward for paying the one-off tax or the imposition of the tax on a prospective basis. Any of these alternatives could have raised the targeted revenue while minimizing the burden on the private sector during this extremely challenging period in the country.
Further, the Chamber in its representations specifically requested to avoid application of the Surcharge Tax at Group level considering its unfair impact on smaller subsidiaries and minority shareholders. This method of application at the Group level could be a serious deterrent to local and foreign investors who consider entering into joint ventures with large conglomerates.
Therefore, the Ceylon Chamber of Commerce earnestly requests the Government to reconsider some of these provisions before it is submitted for approval by Parliament and extends its support to develop alternative proposals to ensure the revenue targets are met.