By: Staff Writer
January 13, Colombo (LNW): Pensioners in Sri Lanka are facing significant challenges in claiming refunds for the Withholding Tax (WHT) deducted from their bank deposit interest. While the government has implemented a refund mechanism, several difficulties hinder the smooth processing and relief for retirees:
Complex Documentation and Process: Pensioners must gather various documents, such as bank statements, to prove that WHT has been deducted. Banks usually provide an annual summary, but the process of filing a tax return and applying for a refund can be daunting, particularly for those not well-versed in tax procedures.
Reports indicate that with the increase in the Withholding Tax on deposits held in banks, a significant amount of deposits has been withdrawn from the banks.
It is noted that a portion of these funds is being redirected towards investments in the Colombo Stock Exchange and other ventures, with depositors feeling anxious.This situation has also contributed to the rise in the Colombo Stock Exchange.
As a result of the withdrawal of fixed deposits from banks, a crisis regarding liquidity in the banking and non bank financial sector is currently unfolding.
This crisis is affecting not only banks but also several other major companies.
Delays and Administrative Bottlenecks: Many pensioners face frustration due to delays in processing their refunds. Mistakes in documentation or system glitches can further complicate the process, leading to additional stress for retirees who are already financially vulnerable.
Increased Administrative Burden: Both the pensioners and the government must deal with an administrative load. Filing tax returns, verifying WHT deductions, and processing refunds can be time-consuming and cumbersome, particularly if many pensioners are involved. This can create bottlenecks and delays in disbursement.
Financial Stress Due to Uncertainty: The lack of clarity regarding the exact timeline and process for receiving refunds can cause financial strain for pensioners. Many retirees rely on their bank deposit interest for daily living expenses, and any delay in refunding WHT can disrupt their financial stability.
Risk of Fraud: The refund process could potentially be vulnerable to fraud if not carefully monitored. Pensioners may find themselves at risk of being misled or manipulated due to their limited understanding of tax laws and refund procedures.
Lack of Understanding of Tax Mechanisms: Many pensioners may not fully understand how WHT applies to their interest income, leading to confusion and financial stress. The complexity of tax systems and the specific rules for retirees can contribute to a lack of awareness and frustration with the system.
Given these challenges, the government is under pressure to ensure that the refund mechanism is streamlined, transparent, and user-friendly to prevent further hardship for retirees.
