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Harsha finds many drawbacks in VAT system, ‘including lot of confusion even at highest echelons’

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Harsha de Silva

By Rathindra Kuruwita

There is a lot of confusion over the amendments to the Value Added Tax (VAT), and it will take a long time for the authorities to address the teething problems in the relevant software systems, Samagi Jana Balawegaya (SJB) MP, Harsha de Silva says.

Dr. de Silva pointed out that there was still a lot of confusion even at the highest echelons about the amendments to VAT. “Even the Colombo Tea Auction was suspended because they have no idea as to how VAT would affect their operations. We also need to ensure that the software at the IRD is ready. I think we will take some time to address technical issues that will arise,” Dr. De Silva said, noting that the amendment to the VAT regime was not that complicated. Goods and services that were taxed at 15 percent have been increased to 18 percent. Moreover, 97 items that were exempt from VAT previously were now subjected to VAT, he said.

“But people need to be better educated on how they should pay VAT. A company that has a turnover of over Rs 60 million a year must be registered for VAT. So, people might wonder if they have to pay VAT, if they buy a milk packet or an exercise book from a supermarket and whether they do not need to do so when they buy one from a roadside shop,” Dr. de Silva said.

“It is obvious that traders are taking advantage of this confusion,” he said, adding that traders were only acting as an agent for the government when they collected tax from the consumer.

“They can’t pocket the money so collected. They have to hand over that money to the state. There are also many issues in the efficiency in collecting taxes by government agencies. These loopholes will allow corrupt businesspeople to manipulate the VAT system,” he said.

The SJB MP added that Sri Lanka had a history of VAT frauds. Those between 2002 and 2004 had cost the Inland Revenue Department dear, he said.

“The government said that from 01 January 2024, everyone over 18 had to obtain a Tax Identification Number (TIN), which had to be produced when opening a bank current account, securing approval for a building plan, registering a motor vehicle or renewing a revenue licence, and registering land or a title to land by the buyer. The government informed us so in November. But this week the government has given a one-month grace period. So it’s obvious that the government has not done enough to ensure compliance,” Dr. de Silva said.

The coming year would be extremely difficult for the average Sri Lankan given the government’s target to double the revenue from VAT compared to the previous year, he said.

The government was planning to collect about Rs 1,400 billion from taxes in 2024, he said.In 2023, the government had sought to rake in about Rs 700 billion from VAT, Silva said.

“So, the government is planning to collect double that amount in the current year. It is obvious that the average Sri Lankan family would be severely affected by the enhanced VAT,” he said.

“Before 01 January 2024, the VAT was not imposed on diesel and petrol. The government has imposed an 18 percent VAT on them. These products were subjected to the Ports and Airports Development Levy (PAL) of 7.5 percent before, and this levy has been repealed. So, the actual increase in taxes due to the application of VAT to diesel and petrol is 10.5 percent.”

The SJB MPs said that there were Sri Lankan companies that produced software for Sri Lankan companies. Their products were now subjected to VAT. But if the software came from overseas it was not subjected to VAT, he said.

“This is a big problem. We must help the local companies. We, members of the Committee on Public Finance, tried our best to resolve this issue. Our proposal was that the government must not consider where the software originated from. We asked it to consider where the software was used. If the service is used in Sri Lanka, it should be subjected to VAT. The President then asked the Treasury Secretary to implement our proposal,” he said.



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Sun directly overhead Kokkuvil, Nallur, Kodikamam and Nagar Kovil at about 12.11 noon today (28)

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The sun is going to be directly over the latitudes of Sri Lanka during 28th of August to 07th of September due to its apparent southward relative motion.

The nearest places of Sri Lanka over which the sun is overhead today (28) are Kokkuvil, Nallur, Kodikamam and Nagar Kovil about 12.11 noon.

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Eight politicians in drug kingpin probe

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Police to arrest and question four former ministers, others over links to Basik

By Norman Palihawadane

Police are investigating alleged links between suspected major drug trafficker Shiran Basik and a number of prominent politicians, with eight of them due to be arrested and questioned as investigators widen their probe into his financial dealings and network of associates, police headquarters, according to a senior police officer.

Among those set to face questioning include a sitting MP, four former ministers, and at least one of them is a female. Police are also investigating allegations that Basik provided large sums of money to politicians during election campaigns and extended other financial and material benefits to political figures.

Investigators are also looking into claims that two politicians were provided with facilities to construct houses and hotels, while efforts are under way to establish the extent of political support and assistance allegedly provided to Basik.

The Colombo Central Crime Investigation Bureau (CCIB) is expected to question the politicians based on information reportedly disclosed by Basik during interrogation. Two electoral organisers are also expected to be taken into custody as part of the ongoing investigation, according to police sources.

Meanwhile, statements are being recorded from managers and employees of several businesses allegedly linked to Basik, while investigators continue to examine information and records recovered from his mobile phone.

Basik, 48, was brought back to Sri Lanka on August 14 after being arrested in Dubai and deported. He was taken into custody by officers of the Criminal Investigation Department’s Airport Unit at Bandaranaike International Airport and subsequently handed over to the CCIB for further investigation.

Police initially obtained a 72-hour detention order to question Basik before securing approval to detain him for 90 days.

Basik, a resident of Dehiwala, is facing investigations over alleged large-scale drug trafficking as well as firearms, and unlawful assembly of weapons-related offences. Police are also examining whether he had any involvement in recent prison-related incidents and have said information has emerged linking him to the 2012 Welikada Prison riot.

The investigation has also expanded to Basik’s alleged assets and business interests in Sri Lanka and overseas.

Police have said information uncovered during questioning indicates that Basik had claimed ownership of five hotels along Colombo’s Marine Drive. Investigators have also identified two houses and two mobile phone shops in Boralesgamuwa allegedly linked to him.

A court has ordered a comprehensive examination of bank accounts linked to Basik, with the Financial Intelligence Unit of the Central Bank of Sri Lanka to conduct a review of his financial accounts. A separate investigation into his wealth and properties is being conducted by the Illegal Assets Investigation Division.

Investigators are also examining claims that Basik owns properties, including hotels and vehicles, in several European countries, as well as a high-value vehicle in Dubai. These claims remain subject to further investigation.

Basik had left Sri Lanka for Dubai in 2018, where police said he lived a lavish lifestyle while operating businesses. He was arrested by UAE authorities before being deported to Sri Lanka.

During initial questioning, Basik told investigators that Dubai police had stopped and searched him at a shopping mall and examined his mobile phone. He claimed that footage relating to Iranian missile and drone attacks was found on the device and that he was subsequently questioned over alleged links to Iran.

Police are continuing to examine the circumstances surrounding his arrest and deportation, as well as the information contained in his mobile phone and other evidence gathered during the investigation.

The ongoing probe is being conducted under the supervision of Senior DIG Ranmal Kodituwakku and SSP Kamal Ariyawansa.The allegations against Basik and the politicians named in connection with the investigation have not been established in court, and the investigations remain ongoing.

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CJ first SC judge to benefit from 22A, if enacted: BASL

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The Bar Association of Sri Lanka (BASL) has opposed the proposed “Twenty-Second Amendment to the Constitution”, saying it raises serious concerns over judicial independence and the rights and interests of the public.

In a statement signed by BASL President Rajeev Amarasuriya and Secretary Nalin De Silva, the association said it had challenged the constitutionality of the proposed amendment before the Supreme Court.

The BASL noted that the Chief Justice would be the first Supreme Court judge to benefit from the proposed amendment if it becomes law. It also referred to widespread speculation that the amendment was being expedited to facilitate an extension of the incumbent Chief Justice’s tenure, which is due to end on December 1, 2026.

Full text of the statement:

“The Bar Association of Sri Lanka (BASL) has taken a principled position opposing the Bill titled the “Twenty-Second Amendment to the Constitution” on the basis that it raises serious concerns regarding the independence of the Judiciary and the rights and interests of the people. Accordingly, the BASL has challenged the constitutionality of the proposed amendment before the Supreme Court.

“It is observed that it will be the Honourable Chief Justice who will be the first Judge of the Supreme Court who will benefit from the 22nd Amendment, if this Bill is enacted into Law.

There is widespread belief that this amendment is being rushed to facilitate the extension of the tenure of the Honourable Chief Justice which would otherwise complete on 1st December 2026. In this backdrop, in the recent past, we have witnessed allegations being made in Parliamentary Proceedings as well as on Social Media concerning the Judiciary including the incumbent Chief Justice.

“During this period, the BASL has also been subjected to unfounded attacks on social media and other platforms.

“The Judiciary, like every other institution exercising public power, must remain subject to legitimate scrutiny and accountability. Judgments, judicial conduct and the administration of justice may properly be subjected to fair, informed and responsible criticism. Where credible concerns or allegations arise regarding any member of the Judiciary, including the Chief Justice, they should be examined objectively and addressed through the appropriate constitutional and parliamentary processes which are in place, with due regard to fairness and due process.

“At the same time, everyone must exercise responsibility when making allegations concerning individual judges, lawyers and others. Personal attacks based upon unsubstantiated allegations can undermine public confidence in the administration of justice and affect the independence and integrity of the judicial process and the system of justice

“Judicial independence is not intended to shield any individual from legitimate scrutiny or accountability. It is a safeguard for the people, ensuring that disputes are determined impartially and that individual rights, the Rule of Law and the constitutional order are protected.

“The BASL therefore calls upon all organs of the State, all parties concerned and the media to respect the role of the Judiciary and the system of administration of justice, while ensuring that any genuine concerns are addressed fairly, responsibly and through the procedures established by the Constitution and the law.”

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