Sellers misleading customers: Concern over what is happening over VAT
The trend of adding ValueAdded Tax (VAT) to the tag price is rampant in Sri Lanka, as most sellers fleece gullible customers, heaping an additional tax burden on them.
Traders have been reportedly misleading customers by tacking on VAT to the tag price of both VAT-inclusive and exclusive goods or services, forcing them to pay more than what was originally displayed.
“It is illegal on the part of restaurateurs, shopkeepers, and department store owners to charge more than the VAT on the price of any food item mentioned in the menu or the tag price of a product,” a Consumer Affairs Authority (CAA) spokesperson said.
The early announcement of the proposed increase in VAT also helped traders import certain stocks in large quantities before the tax was increased on January 1.
Finance State Minister Ranjith Siyambalapitiya this week gave details on how the imports had been stepped up soon after the announcement was made. Accordingly, the figures showed a sharp rise from the first week of December to the second week of December (see graphic).
The Sunday Times learns that the VAT announcement was made in advance to convince the International Monetary Fund (IMF) about the impending revenue.
Former Parliamentarian and InterCompany Employees’ Union President Wasantha Samarasinghe said the absence of VAT-inclusive items had caused significant inconvenience to both traders and the people.
Former JVP Parliamentarian Sunil Handunnetti pointed out that taxpayers were grappling with uncertainty, anxiety, and confusion, which hindered
Pic by M. A. Pushpa Kumara their awareness, motivation, and ability to pay taxes. Reaching high tax compliance requires taking into account several variables, including people’s economic capacity, not jeopardising their livelihood, fundamental needs, and essential living standards, he said.
“Traders imported items after December’s VAT announcement and are now selling them at new VATincluded prices as they must pay taxes from January 1,” he added.
Mr. Handunnetti urged the Government to disclose the VATinclusive list and the exemptions.
The leader of the National
Movement for Consumer Rights Protection, Ranjith Vithanage, said the Government often failed to consider the needs and perspectives of the people. “Tax has increased by 3% on existing goods, with some items rising from 0% to 18% and some products experiencing a lower-than-expected VAT increase at 18%."
A thorough discourse on this VAT reform is needed to handle these complications, Mr. Vithanage recommended.
State Minister Siyambalapitiya said, “The Government acknowledges the challenges of declining incomes and increasing expenses, recognising the need for ongoing programmes to address the people's struggles.
The Government also plans to increase the direct tax percentage from 20% to 40% and enforce strict regulations against the trade mafia in an attempt to prevent unjust gains. Besides, potential future indirect tax reductions would be in line with an effort to boost the country's economic development, Minister Siyambalaptiya said.
Meanwhile, the CAA said it encouraged the people to report any VAT issues they encountered through the hotline 1977, sending the bills for what they purchased.
The CAA said it hoped to increase its daily raids in the weeks ahead, given the increasing concerns. The CAA said it would take legal action against traders who profit unfairly through phoney bills without proper registration with the Inland Revenue Department (IRD).
A CAA official said that following complaints, the CAA had instructed traders to make tag prices for products and services inclusive of all taxes.
Together with the Legal Aid Commission of Sri Lanka, the CAA has also streamlined the consumer complaints portal, eliminating the need for people to visit the CAA Head Office in Colombo for legal proceedings.
During a special VAT awareness conference held at the Ministry of Finance on Tuesday (9), the ministry's tax expert, Tanuja Perera, said businesses must remit VAT monthly, with the amount charged from January 1st to February 20th, or face legal action. "Displaying a licence and issuing invoices to consumers are mandatory after VAT is applied.”
Likewise, strict penalties are in order against fraudulent businesses that collect money without proper VAT registration.