By Vidura Prabath
Policy changes are imperative with ever fluctuating economic situation during COVID 19 Outbreak. The success of the pace of recovery depends crucially on necessary policy changes when COVID 19 has put the world economy in doldrums and a precarious situation that is expected to last for quite a long period. Tax payers are facing difficulties especially with the enforcement of island wide curfew and closing down of the relevant offices. The Sri Lankan government is facing tough times having to invest heavily on COVID 19 prevention. The prevailing situation has left many services collapsed including tax services. It is also government’s main source of revenue and this backlash if not addressed immediately can affect the economy badly.
Department of Inland Revenue is responsible for maintaining and processing of Taxation in Sri Lanka. It mainly includes excise duties, value added tax (VAT), income tax and tariffs. Tax revenue is identified as the primary constituent of the government’s fiscal policy. The concept of taxation is important to meet the demands of a country. If not for taxes, government’s contribution for various sectors such as healthcare, education, governance, infrastructure, transport and housing would not be possible. But the ongoing situation in the country has also caused major implications on Taxation incurring policy changes.
Reaction from the Department of Inland Revenue
The latest announcements coming from Department of Inland Revenue are based on providing relief for tax payers amid the COVID 19 Outbreak. The notices issued by the department include Extension of the Submission date of transfer Pricing Disclosure Form (TPDF) until 30th April 2020, extension of the VAT payments for the months of February and March 2020, Vat deferment facility, Temporary VAT, Submission of VAT return until 30th April 2020. In another mandated notice issued by the Inland Revenue Department to all divisional secretaries and liquor license holders, describes the renewal of temporary tax clearance certificates relating to Liquor licenses. Withholding Tax (WHT) Payments for the months of February and March 2020 have also been extended till 30th April 2020.
Policy changes continued
Compound stamp duty payment and return for the quarter end as of 31st March, 2020. This tax payment covers any person issuing insurance policies, any authority issuing licenses, any service provider on the presentation of a claim, demand or request for the payment of any money on the use of a credit card, any employer employing more than one hundred persons accepting receipts for payments made to the employees. Taking into account the prevailing situation of the country, these payments submission too have been extended till 30th April 2020. In addition, all VAT registered persons are encouraged to use e-filing facility through IRD portal, e-Services to submit the VAT return.
Importance of these policy changes
The extension of taxation period is a timely measure and an important one to withstand the current situation. This initiative plays a key role in preventing this health emergency from turning into a major economic crisis. These policy changes will not only benefit the tax payers, but will also help to come out of the economic shock. This is a huge relief on the part of tax payers who would otherwise be paying penalties for being late on tax payments.
Act accordingly
Managing Tax obligations is vital for any company’s growth. Therefore it is essential to get necessary advices and knowledge on taxation by consulting a professional tax service provider. It will help any company or business to grow with pragmatic strategies that address tax risks. Not only managing taxation, planning new business strategies to address this pressing situation too are important at this stage.
The pendulum might not swing back fully once the outbreak has fully relented. The finance sector might have to face the consequences for a longer period. Therefore, it is crucial to be prepared for any situation given the magnitude of the crisis and try to come out of the economic shock.
This article is based on a timely notice issued by Ernst & Young (EY) on Department of Inland Revenue’s recent Tax update. EY is a global leader in assurance, tax, transaction and advisory services striving to support businesses grow with years of business expertise and strategies on policy implementation.
