Cabinet gives...

However, several stakeholders including the country’s premier bushiness chamber, Ceylon Chamber of Commerce (CCC) expressed concerns on the proposed levy due to its cascading impact, in particular on low- margin businesses.

“The proposed Social Security Contribution will also have an adverse impact on low margin businesses, including those subject to price controls and financial intermediaries while also having a cascading impact. As such, we recommend to consider sourcing this revenue through established measures such as VAT or the previously abolished Nation Building Tax,” the Ceylon Chamber said.

Originally, the government was expecting to collect Rs.140 billion from the proposed levy for the year. However, the Colombo-based independent thinktank, Verite Research estimated that the potential revenue from the levy would be limited to Rs.84 billion for the year.

Meanwhile, the Finance Ministry noted that it has collected Rs.59.6 billion from the first installment of 25 percent retrospective Surcharge Tax on individuals or corporations with taxable income exceeding Rs.2 billion for the fiscal year 2020/2021. The second installment is due by 20th July this year. The government expects to collect Rs.100 billion from the one-off, retrospective tax.

In addition, the government expects to collect Rs.125 billion additional tax income for the year from recently introduced tax increases.

According to Prime Minister’s Office, the sweeping tax cuts granted in 2019 combined with the effects of the pandemic have caused an annual loss of around Rs.600 billion – 800 billion in tax revenue to the State coffers, ultimately resulting in Sri Lanka having the lowest revenue-to-gdp ratio in the region.