February 23, Colombo (LNW): Finance Ministry officials informed the Committee on Public Finance (COPF) that the revenue loss incurred from the initial ‘sugar scam’ should be classified as tax foregone instead of a tax loss. The officials made this statement during their appearance before the COPF on Tuesday (22).
The COPF members pressed the officials for data on specific companies that disproportionately benefited from the tax adjustment, amounting to Rs. 1.4 billion from six companies, with an additional six companies yet to be investigated.
Additionally, the COPF revisited the Value Added Tax (Amendment) Bill, which removed all VAT exemptions in November 2023. The committee inquired why the Finance Ministry had not adopted the recommendations made by the COPF regarding the VAT Amendment Bill. The COPF recommended reconsidering VAT exemptions for medical equipment, ambulances, high-protein agro foods for children, and agricultural items.
The VAT (Amendment) Bill increased the tax from 15% to 18% and decreased the threshold for VAT registration from Rs. 80 million to Rs. 60 million per annum, effective from January 01, 2024, aligning with the government’s goal to increase revenue to 14% of GDP in Sri Lanka.
The committee also questioned the delay in implementing VAT on foreign digital and software providers, creating an unequal playing field for domestic providers. Despite concerns raised by the COPF chair, Dr. Harsha de Silva, officials mentioned the need for a new law, set to come into effect in April 2025.
Furthermore, the COPF deliberated on the Social Security Contribution Levy (Amendment) Bill, which lowers the turnover threshold for registration from one hundred and twenty million rupees to sixty million rupees per annum, effective from January 01, 2024. The amendment was approved by the Committee.
