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COPF slams Treasury for delaying imposition of VAT on foreign digital and software providers

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Harsha de Silva

The Committee on Public Finance (COPF) told officials from the Ministry of Finance that the state was suffering a substantial revenue loss due to a delay in imposing VAT on foreign digital and software providers.

COPF Chairman Harsha de Silva, MP, said that had also created an unequal playing field for domestic digital and software providers.Even local travel booking agents were subject to VAT, while websites such as Booking.com had been exempted, the COPF said.

The Ministry officials said they were awaiting the introduction of a new law to impose VAT on foreign service providers.The COPF members said the officials had to put in place a mechanism to collect taxes and create an equal playing field until the new law was made.

The COPF also deliberated on the Social Security Contribution Levy (Amendment) Bill. The amendment to the Act, lowering the turnover threshold of registration for the Social Security Contribution Levy from Rs. 120 million to Rs. 60 million per annum, effective from 01 January 2024, had been approved by the Committee.

However, the chair raised concerns about the need for maintaining two separate tax structures.He suggested consolidating the taxes under the VAT, which would result in an average effective rate of 22 percent when combined with the Social Security Contribution Levy. In response, the Ministry of Finance said their objective was to meet revenue targets and that they intended to use that approach pending transition to a more streamlined tax system.

Furthermore, the COPF also queried the Officials about the progress of recovering the lost revenue resulting from the initial ‘sugar scam’, as highlighted in the report by the Auditor General. Officials contended that it should not be classified as a tax loss, but rather as tax foregone due to the reduction of the special commodity levy from Rs 50 to 25 cents. Despite that explanation, the Committee asked the officials to furnish data on certain companies that had disproportionately profited from the tax adjustment.

The COPF Chairman raised questions regarding the Government’s inability to recover the outstanding forgone tax, especially in light of substantial tax hikes such as those on PAYE and VAT affecting the average Sri Lankan. Officials said they had been able to reclaim only 30% of the improperly accrued tax through corporate tax, leaving the remaining 70% uncollectable within the existing tax framework. The COPF urged officials to explore options for retrieving the entire forgone tax revenue or propose new legislation to address such scenarios in the future and prevent their recurrence. While both the VAT (Amendment) bill and the Social Security Contribution Levy were endorsed by the Committee, the Chairman dissented, expressing the aforementioned concerns.



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The sun will be directly overhead Colombo, Awissawella, Talawakelle, Dimbula, Galakumbura and Dambagalla at about 12:12 noon today [07]

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On the apparent northward relative motion of the sun, it is going to be directly over the latitudes of Sri Lanka during 05th to 14th of April in this year.

The nearest areas of Sri Lanka over which the sun is overhead today (07th) are Colombo, Awissawella, Talawakelle, Dimbula, Galakumbura and Dambagalla at about 12:12 noon.

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MoU on Defence a significant new addition to Ranil-Modi consensus

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Thuyakonttha

Defence Secy says a decision was taken at 2023 Defence Dialogue

Contrary to claims that the MoU/agreements finalised during Indian Prime Minister Narendra Modi’s state visit here were in accordance with an understanding between former President Ranil Wickremesinghe and PM Modi in July 21, 2023, the MoU on Defence Cooperation is a new addition.

A joint statement issued on July 21, 2023, soon after the conclusion of Wickremesinghe’s visit, didn’t refer to an MoU on defence cooperation.

Premier Modi disclosed the decision to enter into an MoU on 16 Dec., 2024 at a joint press conference addressed by him and President Anura Kumara Dissanayake.

A media statement issued by the Indian High Commission in Colombo quoted the Indian PM as having said that President Dissanayake and he had agreed that the two countries’ security interests were interconnected. “We have decided to quickly finalise the Security Cooperation Agreement.”

President Dissanayake, in his address, didn’t refer to the proposed MoU on defence cooperation. The Presidential Media Division quoted President Dissanayake as having said that they exchanged views on cooperation in the fields of defence and security, power and energy, training and capacity building, education, agriculture and social security.

However, retired Air Vice Marshal Sampath Thuyakonttha, who signed the MoU on Defence Cooperation, in his capacity as the Defence Secretary, said that they had agreed to strengthen defence relations through an MoU during Defence Dialogue in 2023.

Responding to concerns expressed in some quarters about the MoU at issue, Thuyakonttha, a veteran Mi 24 helicopter gunship pilot, emphasised that the agreement on the MoU had been reached in keeping with the instructions issued by the Secretary to the President in January this year.

In addition to the MoU on Defence Cooperation, the two sides finalised six other MoUs/agreements. They dealt with Implementation of HDVC interconnection for import/export of power, cooperation in the field of sharing successful digital solutions implemented at population scale for digital transformation, multi-sectoral grant assistance for Eastern Province, cooperation in the field of health, medicine, etc.

India, Sri Lanka and UAE have agreed to develop Trincomalee as an energy hub.

Milinda Moragoda, who served as Sri Lanka’s High Commissioner in New Delhi during the August 2021-Oct 2023 period and played a critical role in negotiations, stressed the pivotal importance of going ahead with the MoU/agreements.

In response to The Island queries regarding the latest developments, Moragoda said that the progress made on the economic integration and connectivity side was extremely encouraging. Especially, the concrete steps taken to establish connectivity in power, petroleum and the development of Trincomalee as an energy hub, he said.

“The fact that trilateral cooperation between India, Sri Lanka and selected third countries will become part of our future development strategy, with the formal entry of the UAE as a partner in the Trincomalee energy hub initiative is a very important step forward.”

Moragoda said: “The establishment of a framework to share successful digital solutions between India and Sri Lanka is also another positive development.

“It is critical that both parties now focus on the speedy implementation of all the agreements that have been reached.

“Future consideration should be given to developing road and rail connectivity as well.

“We should all understand and absorb that the physical connectivity that would be established in power, petroleum and other sectors will link us directly to India, the Middle East and Europe making us potentially a key global hub at a pivotal point in world history.

“The understandings that have been reached with India could become critical for Sri Lanka’s immediate economic survival and development as we cope with the monumental disruptions taking place in the international economic environment and geopolitical sphere at the moment.

“Sri Lanka is in an extremely vulnerable position and will have to very quickly work out a survival strategy through which we can diversify our foreign income and investment sources while arriving at an understanding with the US in the short term.

“As we enter an era where geoeconomics will become more important than plain economics, the agreements reached during the visit of Prime Minister Modi could help lay an initial foundation for Sri Lanka’s future developmental direction.”

By Shamindra Ferdinando

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Harsha says govt. grabbed credit for what he initiated

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Dr Harsha de Silva

Dambulla cold storage facility:

SJB Colombo District MP Dr Harsha de Silva has said he is happy that the government is continuing with his projects after changing their names.

Speaking to the media after Indian Prime Minister Narendra Modi had inaugurated a 5,000-metric-ton cold storage facility in Dambulla, Dr de Silva said the construction of that facility had been initiated in 2019 with a grant from India, during his tenure as Minister of Economic Reforms. The name of the project, Prabhaswara, had been changed, he claimed.

Dr de Silva said he had not been informed of the opening of the storage facility.

He said a plaque had been installed with names of the Indian prime minister and President Anura Kumara Dissanayake inscribed on it in violation of the NPP’s pledge that the names of its leaders would not be displayed in that manner.

Dr de Silva that he was genuinely happy about the opening of the country’s first agricultural storage complex capable of controlling temperature and humidity.

 “Due to the collapse of the Yahapalana government, we were unable to complete the project. Later, those who came to power had no desire to finish the work. I believe that this government will ensure that farmers will benefit from the business plan we developed.

by Dhammika Salwathura

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