With income tax reduction from 28 percent to 14 percent
Five year tax exemption on agro industry
In order to promote agricultural production in the country for exports and consumption purposes, the government has decided to provide a 5 year tax exemption to agriculture based small and medium industries. In addition, the annual income tax rate on processing industries using local agricultural commodities are to be reduced from 28 per cent to 14 per cent.
Further, as measures to ease the serious hardships to small holder business operations, it is proposed to raise the threshold for the application of ESC Economic Service Charge from Rs. 12.5 million per quarter, to Rs.50 million per quarter.
These relief measures have been taken on the instructions of the President and the Minister of Finance and Economic Affairs, are aimed at providing highest priority to agricultural development.
Accordingly, the government is of the view that every effort should be taken to make use of the 2018 /19 Maha cultivation season as a new beginning.
Therefore, agricultural income generated specially by small scale entrepreneurs in the cultivation of any agricultural produce such as tea, spices, coconut, rubber, paddy, fruits, vegetables, etc., are to be exempted from income taxation for a period of 5 years.
With the introduction of several changes to the tax system by the previous government, Sri Lanka’s business community, particularly the small and medium entrepreneurs, those engaged in professional and other services and agricultural activities, have been confronted with complex taxation and heavy tax burdens. In addition to the imposition of high income taxes on wage income and other remunerations, interest and rent incomes, tax burdens had also increased through high tax rates and reduction in tax free thresholds for the implementation of Value Added Tax (VAT), Nation Building Tax (NBT) Economic Services Charge (ESC), withholding taxes, etc. People are looking for a simple, broad based, low tax rates, a transparent tax system and a simplified tax administration. Such a system of taxation is important to provide an environment conducive for doing domestic business in the SME sector, professional and other services and agricultural activities. While formulating a simple tax system takes some time, Prime Minister Mahinda Rajapakse, Minister of Finance and Economic Affairs, proposes at this stage to introduce some specific measures towards providing incentives that would enable SMEs and small sector business activities to revive rapidly.
Furthermore, the climate has become extremely favourable for full scale cultivation of agricultural crops in both the plantation sector as well as non-plantation agricultural activities such as paddy, grain, fruit and vegetables and as such, the government has already taken measures to reduce fertilizer prices, write off interest and penalties of agricultural credits and reduce income tax rates on agricultural income by such entrepreneurs.
The President and the Minister of Finance and Economic Affairs are in complete agreement that the highest priority be given to agricultural development and accordingly, the government is of the view that every effort should be made to make use of the 2018 /19 Maha cultivation season as a new beginning to raise agricultural production in the country for exports such as tea, spices and other exportable crops as well as for domestic food consumption and for industrial raw materials. In this context, full scale cultivation using all cultivable land and increase in agricultural productivity to get maximum yields would be incentivised.
Therefore, following measures are proposed for implementation:
a. Agricultural income generated specially by small scale entrepreneurs in the cultivation of any agricultural produce such as tea, spices, coconut, rubber, paddy, fruits, vegetables, etc., to be exempted from income taxation for a period of 5 years.
b. Income tax rate and profit on processing industries using local agricultural commodities to be reduced from 28 percent to 14 percent.
These two proposals would encourage entrepreneurs in agriculture to engage in cultivation activities and increase the supply to local processing industries and improve the market supply for both export and domestic consumption. It also noted that several tea factories are operating below capacity as local production is not adequate and therefore it is important that tea production be increased as a priority.
c.The previous government has increased the ESC from 0.25 percent to 0.5 percent and reduced threshold level to Rs.12.5 million. This had imposed serious hardships to small holder business operations. Therefore, it is proposed to raise the threshold for the application of ESC from Rs. 12.5 million per quarter to Rs.50 million per quarter.
d Recognizing the priorities attached by this government to environmental friendly renewable energy sourced power generation, it is proposed that expenditure on the transition to renewable energy sources including the installation of solar panels, tea, rubber, coconut, rice and other agricultural processing factories be recognized as deductible expenses in the computation of taxable profits.
e.In view of the setbacks in economic activities during the past 3 years owing to sharp reduction in private sector credit facilities, high interest rate policies, high taxation at all levels, many entrepreneurs, particularly those who engaged in household level businesses and small and medium sized businesses, have not been able to service their borrowings from banking and financial institutions on a regular basis. As a result, not only the borrower, but also their guarantors have been listed as defaulters in the Credit Information Bureau (CRIB) which has led banks to curtail or suspend credit facilities to such borrowers and guarantors. It is in this background that the Economic Revival Package announced on November 1, 2018, included extending support to the farmers and small paddy millers by way of writing off the interest and penal interest on loans taken during the last 3 years, up to a maximum of Rs.50 million from commercial banks.
While accelerated support was provided to the agriculture sector enabling them to seize the good weather conditions, it is acknowledged that other sectors including Tea small holders, SME’s in construction, apparel, manufacturing, etc., are also faced with a situation in which their growth has been stymied with lack of access to markets, credit etc. In this context, the Treasury has already been directed to design a package that would support SME entrepreneurs in the short run to be able to access finance and revive their businesses.
f. As a relief to the consumers, taxes on Watana would be waived/removed by Rs. 10 per Kg. In addition, the government has already reduced fuel prices and taxes and prices of several other commodities, to reduce the cost of living, particularly, for low income families, according to a Statement by Ministry of Finance and Economic Affairs.
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UNF will form broad coalition:Dr. Senaratne
The UNF will form a broad coalition and its name and logo would be unveiled at an elaborate ceremony very soon, said UNP MP Dr. Rajitha Senaratne.
He said so addressing a media briefing held in Parliament yesterday. “We challenged the UPFA to show at least 85 in their favour, but they were unable to do so. By next week, we would show them a majority of over 122. Due to International pressure and internal pressure by intellectuals and the clergy, the government has fallen into immense trouble. Today, they were well behaved as they had no other choice. This is the first time that I have seen a government group walking out of Parliament. This is a historical victory,” he said.
Meanwhile, MP Sajith Premadasa said that this illegal administration should be dissolved immediately. “We have to bring in a Prime Minister and Government that has a majority in Parliament. We have to bring in stability and ensure that we have a diligent and conscientious approach to ensure social and economic prosperity to the people. That is of utmost importance. Every time a clock ticks, a modern time bomb is created and with its explosion, millions of Sri Lankans would be left destitute.”
When questioned as to what solution the UNP had in order to resolve this crisis, Premadasa said so far no solution had been reached, but as a first step, the UNP had shown that they have the majority. He expressed hope that those taking decisions would have the intelligence and need to take proper decisions for the betterment of the country.
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State Officers duty bound to carry out Govt. orders:Minister Gunawardena
Dharma Sri Abeyratne
Internal Trade and Investment Promotions Minister Bandula Gunawardena said that State officers are duty bound to carry out the orders and directives of the government.
State officers would not be affected by carrying out orders issued by the government when those officers work within the provisions of the Constitution, he added.
“They will not be trapped by carrying out the orders of the government as they work within the provisions of the Constitution,” he added.
Minister Gunawardena was addressing the media and government officers of the Import and Export Control Department in Colombo, yesterday.
He further said that ministers have been appointed under the provisions of the Constitution by the President. However, if there is any doubt about such appointments, anyone could go before the Supreme Court to get an interpretation concerning such ministerial appointments.
Addressing further, he refuted the allegation levelled by the Opposition that there was no Government nor Prime Minister and no Cabinet in the country.
“If there is no government, we say that there won’t be a parliament,” he said.
Minister Gunawardena questioned as to who were responsible for the issues face by the government officers, if they do not carry out orders issued by the government.
“If the Import and Export Controller does not carry out the orders of the minister, the Institute would collapse. Government officers would not fall pray by carrying out the orders of the responsible Minister who had been assigned within the provisions of the Constitution,” the Minister added.
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