Ceylon Today Editorial

VAT on doctors’ fees, trade

30 September 2016

 

Government opens itself to be cheated from collecting legitimate revenue by unscrupulous traders because of the introduction of the deemed VAT input clause in the proposed VAT hike Bill.

Cheating the government is cheating the ordinary people of the country. Nonetheless, deemed VAT from other sectors has been removed.

Under the proposed VAT hike Bill, where the VAT rate is planned to be increased from the current 11% to 15% and which will also encompass the wholesale and retail trades and the health sector, which, currently is exempted from VAT, the Bill is expected to be submitted to Parliament next month.

Suresh I. Perera, Principal Tax and Regulatory, KPMG Sri Lanka (an audit firm), speaking at a tax seminar organized by CGMA at its Colombo office yesterday said in most jurisdictions VAT is not charged on the wholesale and retail trades and also on the health sector.

The proposed amendments however, make such categories liable to VAT, with certain exemptions in the health sector.

Perera said under the VAT jurisdiction deemed VAT is bad in law. Deemed VAT input tax has come about after traders protested against the proposed VAT hike. Deemed VAT input tax under the proposed new regime, however, makes it possible to claim VAT input tax from non VAT registered suppliers, who, ipso facto are not liable to pay VAT.

Under the proposed amendment, traders who make a quarterly turnover of Rs 12.5 million will be liable to pay VAT. And, under normal VAT laws, even if a VAT registered retailer buys a good from an unregistered supplier for say Rs 90, adds a profit of Rs 10 to that purchase, thereby making his sales price sans VAT Rs 100 and if the new VAT hike has come into force, then his selling price including the new VAT would be Rs 115. Of this price, Rs 15 will go to the Inland Revenue Department (IRD) and the balance to the retailer's pocket.

But under the deemed VAT input tax law, where the retailer would only have to remit the difference between the VAT output tax and the VAT input tax, if in the event the item is purchased from an unregistered VAT supplier for Rs 90, it is still presumed that the price of Rs 90 for which it was procured from the supplier would have a VAT input component of Rs 11.74 (15% of Rs 90).

After adding the profit of Rs 10, thereby taking the retail price up to Rs 100, followed by the inclusion of the VAT output tax of 15% on the Rs 100 value, the item then would be sold to the consumer for Rs 115. Whereas under the normal VAT law, Rs 15 from this transaction would be remitted to IRD, however, under the deemed VAT law, if the original supplier is an unregistered VAT supplier, then only a mere Rs 3.26 will be remitted.

This would deprive the government of legitimate VAT revenue of Rs 11.74, or 78.27% of legitimate VAT revenue. The Rs 3.26 figure is the difference between the VAT output tax (Rs 15) and the VAT input tax (Rs 11.74).

Similarly, in respect of the health sector which currently is non VATable, nonetheless, under the proposed amendments, doctor's charges will be liable for VAT. Under the proposed amendments, OPD, dialysis and diagnostic services as well as medical drugs will however, be VAT exempt.

Perera further said under the proposed VAT amendments, retrospective laws are also included in the agenda. Retrospective legislation is bad in law, he said. The proposed VAT hike will be retrospective from 2 May 2016, on which date it originally came in to effect, but which was invalidated by the Supreme Court (SC) on the grounds that it hadn't been passed in Parliament.

Perera also said that retrospective legislation would also apply in respect of the VAT threshold for other business activities other than the wholesale and retail sectors. For instance, the threshold of VAT on other supplies such as services and manufacturing is planned to be changed from Rs 3.75 million to Rs three million per quarter with retrospective effect from 1 April 2016.

That means that once the new VAT law comes in to effect such suppliers in the interim will be out of pocket.

One good piece of legislation is that the deemed VAT, other than on the VAT input tax on trade has been removed in the proposed new law.

Previously, there was a maximum limit of 25% on supplies under the deemed VAT tax regime. Deemed VAT is against VAT principles, said Perera. It's the duty of the IRD to make each and every assessment and not presume anything to be deemed, he said.

Daily News Editorial

GL, the political weathercock

30 September 2016

 

Former Minister Prof. G.L Peiris has taken up cudgels on behalf of our security forces these days. Peiris claims that our war heroes are going to be compromised through an alleged reversal of the Sinnarasa verdict. He also seems to say that they (war heroes) would be an endangered species once foreign judges are brought down to sit in judgement over them. Peiris who had been a regular caller on the Malawatte Mahanayake is not convinced on the advise proffered by the prelate to fellow JO comrade in arms Wimal Weerawansa that the President and the Prime Minister had assured him that nothing of the kind is being contemplated. He (Peiris) also said that there is also already a mechanism to lodge anonymous complaints against the war heroes. The former law professor’s, concern for the war heroes is touching indeed but for the fact that in a different avatar he didn’t give a tuppence for the safety and security of the country’s war heroes.

Peiris was a powerful Minister in the UNP government when he led a delegation to conduct talks with LTTE representatives in world capitals. Rightly or wrongly these parleys were dubbed ‘peace talks’. The UNP government may have had a genuine feeling that these talks would succeed, given that it was underwritten by the Co-Chairs and, what is more, in anticipation of the US 4.5 billion dollars aid promised if the talks bore fruit. The rest, as they say, is history. But Peiris, now taking a holier than thou stance, is the last person who can claim to speak on behalf of the security forces. He cannot take the position now that there is a foreign conspiracy to punish our security forces when these were the very foreign forces that comprised the Co-Chairs when he led the government delegation for ‘peace talks’.

It was the perennial accusation of the then Opposition that the compromises arrived at these ‘peace talks’ were heavily weighted in favour of the LTTE. His current boss Mahinda Rajapaksa was among the most vociferous critics of these ‘peace talks'. That he (Rajapaksa) too continued for a while from where Peiris left off is entirely another matter.

Peiris, who now laments the fate that awaits our war heroes at the hands of foreign powers, nevertheless, soldiered on, jetting from one world capital to another to hold discussions with the Tiger representatives that included Anton Balasingham, Pulitheevan and Rudrakumaran. That was only for starters.

One of the conditions laid down by the LTTE at these ‘peace talks’ was that the security forces should be confined barracks leaving the LTTE cadres free movement to do, what they called, political work. GL as the chief government negotiator had no qualms of agreeing to this condition that compromised the honour and stature of our security forces, a much worse ignominy than being taken before the Hague for war crimes. Peiris may now claim that he was doing the bidding of the government. But given his hardline position adopted now, on behalf of the war heroes, what the good professor should have done is tender his resignation.

Peiris, who is today weeping buckets for the dire fate awaiting our war heroes at the hands of foreign judges, maintained a deafening silence when the war winning army commander was summarily thrown behind bars by a local kangaroo court. Prof Peiris speaking to the media, referring to the demand of the Chief Minister Wigneswaran to evict the security forces from the North and put a halt to Buddhist shrines being built in the North stated no one would have dared to make such statements under the Mahinda Rajapaksa rule.

But he conveniently forgot to mention how his former boss took to his bosom an LTTE mass murderer who was not only responsible for the gunning down of a bus load of novice Buddhist monks and the massacre of 600 policemen but also the attack on the Sri Dalada Maligawa, the holy of holies of the Buddhists.

Peiris, who today has posited himself as the virtual spokesman of the security forces, kept mum when the Milennium City Long Rangers safe house harbouring intelligence officers who provided vital information to the security forces that saved many of their lives, was raided and the whole operation exposed. How many members of the forces perished subsequently, as a result of this betrayal, one can only guess. One cannot also recall Peiris making even a murmur of protest when the LTTE positioned their heavy artillery within the range of the Trincomalee harbour, in Manirasakulam, that gravely endangered national security, about which, Peiris today is showing great concern.

The former Minister, as all Sri Lankans by now know, is a ‘seasonal’ politician or what is known as a weathercock. He keeps changing and shifting positions depending on whose side he is on. It is no secret that GL was entertaining hopes of entering Parliament on the UPFA National List and in fact made overtures to the present government after the general election. Had he been accommodated there is no doubt that the former law professor, who had earned the sobriquet kokatath thailaya (the oracle) would certainly have been singing a different tune today.

The Island Editorial

Sinners stoning one another

30 September 2016

 

Northern Province Chief Minister C. V. Wigneswaran has apparently got setting the cat among the pigeons down to a fine art. This time around, he has drawn heavy flak for some incendiary remarks he made at a recent agitation campaign in the North.

The Tamil National Alliance (TNA), which is at loggerheads with Wigneswaran and his allies, has dissociated itself from the protest. But, the question is whether the TNA does not subscribe to Wigneswaran’s main demand—a federal set-up in a re-merged North-Eastern Province.

Big guns of the Joint Opposition (JO) also lost no time in tearing into Wigneswaran for his espousal of extremism and what they call anti-Sinhala rhetoric. There is no way anyone can justify his deplorable utterances reeking of racism and it is only natural that he has drawn so much of flak. However, where were those who are now bashing him when southern extremists unleashed ethnic violence in Aluthgama in 2014? If only they had condemned and taken action against the sick elements responsible for that incident, which was one of the reasons why the Rajapaksa government came crashing down a few months later!

Some UNP heavyweights have also taken on Wigneswaran. They have seen red because their reconciliation project has suffered a heavy blow from his campaign. Interestingly, as one may recall, these UNPers once grovelled before Prabhakaran and granted all his wishes, having shamelessly recognised him as the sole representative of Tamils. They did not utter a word in protest against his mindless terrorism which snuffed out thousands of lives and turned the entire country into a hellhole. It was also on their watch that the 1983 anti-Tamil pogrom was carried out. Never have they tendered an apology for that carnage which they did precious little to stop. Now, flaying the Northern Province Chief Minister for advocating separatism they are promising to bring about racial amity through reconciliation! The JVP, which plunged the country into two bloodbaths in the name of a macabre cause, is also fulminating against Wigneswaran for his recent statements.

Here, one sees sinners stoning one another!

It is hoped that the critics of Wigneswaran will not lose sight of the bigger picture. The LTTE is active in many parts of the world in spite of its defeat here seven years ago. Its fronts are operating openly in the developed world having as they do key politicians and opinion makers in their pocket. Tamil Nadu is a hotbed of LTTE activity.

The real problem is not Wigneswaran, who is only a ventriloquist’s dummy. Maneka Gandhi, in her column in this newspaper, recently wrote about some parasites which turn their hosts into malleable Zombies willing to do as they say. Extremists are capable of doing that to mainstream politicians. Several Tamil politicians once acted just like Wigneswaran. Time was when TNA leader R. Sampanthan functioned as Prabhakaran’s de facto spokesman.

Wignewaran is only part of the problem which is a collective of separatist outfits bent on achieving their Eelam dream. This secessionist movement is far more powerful than individual politicians or even political parties. That’s why it has survived even the decapitation of the LTTE. Unless Wigneswaran does as he is told, he will lose his position to someone else. This is what the government ought to take cognizance of without barking up the wrong tree, if it is to ensure that national security won’t be jeopardised.

President Maithripala Sirisena, in his recent address to the UN General Assembly, declared that his government would never allow the county to be plunged into another war. How does the government propose to tackle a possible situation where the genie Wigneswaran et al are trying to release gets out of the bottle? It will have to remain eternally vigilant and refrain from lowering its guard and demoralising the armed forces for political reasons. Mere rhetoric and bashing Wigneswaran won’t do!