Mahinda seeks parliament backing to defeat VAT Bill

Former President Mahinda Rajapaksa has sought parliament support to defeat the Bill to increase and broaden the application of the Value Added Tax (VAT) which will be taken up in parliament on 11 August.

Rajapaksa says the the draft legislation seeks to revive and give legal effect to all the objectionable features of the VAT reforms that were suspended by the Supreme Court last month.

“The new VAT Bill seeks to increase the VAT rate from 11% to 15%, to bring the small and medium retail and wholesale trade and the private health care services within the ambit of VAT and to mandatorily require all establishments with a turnover exceeding Rs. 33,000 a day to register for VAT. A tax on health care is in effect a tax on ill health. The more serious the illness, the more revenue the Government will make from that patient. Everyone knows that those who make use of private health services are not only the rich,” he said.

Rajapaksa said that traders and small businessmen countrywide, opposed the 15% VAT imposed on the wholesale and retail trade because it will cause an increase in the prices of goods when it is passed onto the consumer and lead to reduced sales.

He said that previously the VAT on the retail and wholesale trade was limited to large establishments with a turnover of more than Rs. one million a day. But when the threshold is brought down to Rs. 33,000 a day, that brings even small establishments within the ambit of VAT. When retail sales drop as a result of increased prices, that leads to a chain reaction whereby the manufacturers who supply the goods don?t get enough orders to be able to break even.

“The small and medium sector has already suffered a reduction in turnover due to the general economic slowdown after the yahapalana government came into power. It was reported in the press that even the profitability of many large listed companies had declined in 2015. The fear is that the reduction in sales which will result from the VAT increase will destroy the small and medium sector. We have heard that due to the widespread opposition to VAT, the government is contemplating reducing the VAT rate and increasing the Nation Building Tax (NBT) rate. The public should be aware that VAT and NBT are both taxes imposed on turnover and the threshold for registering for both taxes is Rs. 33,000 and they are applicable to virtually the same goods and services so no difference will be made as far as the public is concerned by reducing the VAT rate and increasing the NBT rate,” he said.

Teh former President said that attempts at deception must be resisted and the VAT on ill-health and the VAT on the small and medium retail and wholesale trade should not under any circumstances be allowed to be passed into law. (Colombo Gazette)