Sweeping changes in income tax system from April 1

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Sunday, 18 March 2018 20:05

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Sweeping changes in income tax system from April 1

Enhanced fines and penalties, including an increase in jail terms, and new areas of taxation, are among the highlights of the new Inland Revenue Act to be implemented from April 1, a senior official said. The Inland Revenue Department’s Deputy Commissioner General, Nadun Guruge, told the Sunday Times there would be key changes relating to income tax to achieve the Government’s target of Rs. 800 billion a year.

Under the new Act, those evading payment of tax, making false statements, and delaying payments could be given increased jail terms from one year to two years, compared to the current six months. A 1.5 percent monthly interest on the due payments too will be imposed on those defaulting tax payments.

Officers who fail to protect confidentiality of taxpayers could also face a one year jail term or Rs one million fine or both. This has been introduced for the first time. The IRD’s Senior Deputy Commissioner A.M. Nafeel told the Sunday Times that a series of other penalties had also increased. Accordingly the failure to register or notify the changes of a taxpayer’s name, address, place of business and making false or misleading statements would be an offence liable to a fine of Rs 50,000.

The penalty for underpayment due to negligence or fraud also has been increased. Failure to maintain proper records will make the person liable to a penalty of Rs 1,000 a day. Under the Capital Gain Tax system which is being reintroduced after 15 years, if a person sells a land owned by him or her, the person will be liable for the tax. Accordingly, the person will be liable to pay 10 per cent based on the value of the land as at September 2017 after excluding stamp fees, legal fees and related fees for the transaction. However, if a person sells a house the tax will not be applicable.

Senior citizens above 60 years of age will be liable to pay a five percent withholding tax on the interest gained above Rs 1.5 million annually.
One of the main benefits of the new scheme will be the raising of the level of taxable employment income from the current Rs. 700,000, inclusive of vehicle and medical allowance, to Rs. 1.2 million a year. Under the proposed scheme the government also has offered tax exemptions to semi-government institution employees.

The IRD’s target is to increase the revenue from direct taxes from the current 20 percent to 40 percent by 2020 and reduce the revenue from indirect taxes from the current 80 to 60 percent.

sundaytimes.lk