by Naomal Goonewardena
I am a lawyer by profession who also happens to have an interest in the subject of tax. My tax liability and income tax payments for the year of assessment 2023/2024 would be more than 300% of that in 2021/2022. Not great by any means.
I have been watching in silence the continuous agitation by professionals in particular with regard to the Inland Revenue (Amendment) Act No.45 of 2022 (“2022 Amendment”) and the additional tax which is payable thereunder by individuals. Almost all of the arguments against the increased tax is accompanied by an implied threat that the high tax rates would accelerate the rate of migration of professionals from the country and the dire consequences which would arise therefrom.
It would be pertinent to analyze the marginal tax rates which have been applicable for individuals from the year 2000 to present and the level of income at which the highest marginal rate would have become applicable. The last column set out above is indicative of the level of income which a person should have on a monthly basis after which he would be liable to pay income tax at the maximum rate specified in the table.
The aforesaid table is clearly indicative that for the period 2000 -2010 the marginal rates of tax were relatively high and therefore, largely comparable to what is going to apply from 2023 onwards. The real problem seems to be that from 2011 onwards, the rate of tax for professionals in particular has fallen down dramatically (other than for 2018/2019) with the result that professionals for all intents and purposes have “forgotten” to pay tax.
The enhanced threshold at which the maximum tax was applicable even at the lower rate increased dramatically from 2020 – 2022 and that seems to be the starting point for any entitlements which are now being spoken of. For example, during this period a person with an income of Rs. 500,000 per month would have only paid about Rs. 10,000 per month as income tax (i.e 2% of income). This is clearly unacceptable. The aforesaid table is clearly indicative that society in general has borne the brunt of this for the benefit of professionals at large very specially between 2011-2017. In my view there is absolutely no justification for professionals to be given any tax concessions which are not available to the other tax paying persons in this country.
I am well aware that in view of inflation in particular, affordability of the tax is in question. The personal reliefs and the level at which the maximum marginal tax rate would apply are also debatable. The real question is as to whether a person having an income of approximately Rs. 300,000 per month should or should not be contributing tax at the rate of 36% on his excess income in the context of large segments of our society being unable to eke out a bare existence for their very survival.
It is easy to say that a large part of government revenue is either wasted or subject to corrupt practices. However, the reality seems to be that major part of government revenue goes towards debt service (i.e interest expenses on borrowing) for which we are all responsible, government salaries and pensions. It is also ironic that persons who are the beneficiaries of these expenses or who have failed miserably in their basic obligation to ensure price stability are also among those who are agitating for a reduction in revenue by way of reduced tax.
It is a fallacy for employees who are subject to Pay-As-You-Earn (PAYE) tax to think that in view of the automatic deduction that they are subject to more tax than others or that other individuals in society who are liable to tax do not pay their tax. The latter pay their tax through the quarterly payment mechanism under the Inland Revenue Act of No.24 of 2017 (“IRA”). The often quoted reason for being reluctant to pay tax is that large parts of society are evading tax and therefore, one should not pay taxes. This in my view is too simple a presumption and it is for any person who says that there are other tax evaders to take the necessary steps to report them specifically to the authorities in a manner that they could share the tax burden of all. However, based on my professional training, pointing to other tax evaders and providing that as a justification for not paying your own taxes is an argument unworthy of a professional.
With regard to migration, the following table illustrates the marginal tax rates for individuals in the countries which are often mentioned as being attractive for migration by professionals.
Subject to any differences arising from permissibility of expenses in computing the taxable income, it is clear that any migrant would walk into higher taxes. The migrant would not dare to evade tax in those countries either since the migrant will be summarily thrown out or put behind bars. If a professional wishes to migrate, please do so but do not cite excessive tax in your home country or insufficiency of personal reliefs in computing your taxable income, since any reasonable man in those countries would think that such arguments are hollow to say the least.
We are a Highly Indebted Poor Country (HIPC) and each of us must understand the implications of this. Whichever political party is in power, the government needs revenue. We have exercised our franchise and elected idiots in the past. In 2015 we voted for public sector salary increases which were totally unrealistic which drained the public coffers. In 2019, we the professionals voted for tax cuts, pocketed the additional monies and deprived the State of its due share of revenue. It is now pay-back time for the professionals. In the short term, the increased tax rates should be bearable and in the medium and long term will become palatable.
Increased government revenue is a necessity with current VAT rate of 15% and the marginal income tax rates for individuals and corporates of 36% and 30% being reasonable in a global sense. If any politicians seek your vote or mine on the basis of reducing these tax rates in the absence of alternative concrete revenue generating proposals, let us classify them appropriately as mentioned above and treat them with the contempt which they deserve.
HNB Assurance Group surpasses 20% growth mark for third consecutive year
HNB Assurance Group recorded yet another year of exceptional performance, marking the third consecutive year of achieving a growth rate exceeding 20% in terms of GWP (Gross Written Premium). The year 2023 witnessed the Group achieving remarkable financial milestones and an array of local and international awards, solidifying its position as a frontrunner in the insurance industry.
HNB Assurance Group recorded a substantial GWP of LKR 18.7 Bn, showcasing a remarkable growth of 20% compared to the previous year. Reflecting on this achievement, Rose Cooray, Chairperson of HNBA and HNBGI, expressed her delight, stating, “To me personally, the remarkable growth trajectory of the HNB Assurance Group stands as a testament to our commitment to delivering value to our stakeholders.
Both teams at HNBA and HNBGI performed an outstanding job, leaving no stone unturned, meticulously analyzing every challenge, and capitalizing on every opportunity. Our Group assets grew by LKR 10 Bn during the year, well exceeding a remarkable total of LKR 51.2 Bn. Further, investment income for the Group surged to LKR 7.2 Bn, representing an outstanding growth of 49% from LKR 4.8 Bn in the preceding year. In terms of the Group’s profits, we recorded a commendable LKR 1.76 Bn in PAT.”
“Consistency has been our main focus and certainly the cornerstone of our success”, said Lasitha Wimalaratne, CEO of HNB Assurance PLC. At HNB Assurance, our track record speaks for itself. Year after year, we’ve demonstrated and honoured our commitment to our stakeholders and most importantly to our policyholders.
“I am delighted to highlight that as a team we have effectively translated our promises into action. Our Profit After Tax (PAT) reached LKR 1.61 Bn, marking a commendable 9% increase from the previous year. Moreover, we surpassed the significant milestone of LKR 10 Bn in GWP, representing a growth of 23%, which is almost twice the industry growth rate,” he said.
Sithumina Jayasundara, CEO of HNB General Insurance said: “Despite economic uncertainties and high inflation rates, the team showcased remarkable proficiency in risk assessment and customer management. Moreover, we made LKR 4.3 Bn in claims, marking a 12% increase from the previous year, reaffirming our commitment to honouring the trust instilled in us by our valued customers.”
CEAT fortifies brand presence in Sri Lanka with three new premium Shop-In-Shop outlets
The CEAT brand’s retail presence in Sri Lanka has been further strengthened with the opening of three more premium outlets in the country – two in Colombo city and one in Hanwella, the company announced last week.
The three new CEAT Shop-In-Shop (SIS) outlets are designed to drive brand identity and enhance customer experience at leading dealer outlets. They are located at U&H Wheel Service and Paramount Tyre Traders, both at Prince of Wales Avenue, Colombo 14; and at Sakura Tyre Centre, Hanwella, a news release said.
“Part of a three-year distribution channel expansion strategy by the country’s highest-selling tyre brand, the CEAT Shop-in-Shop concept entails demarcating a dedicated area for CEAT branded tyres within existing multi-brand dealer premises. CEAT furnishes the interior, customer lobby and reception areas of this private space to augment customer comfort.
“Additionally, CEAT Kelani Holdings invests in interior branding, signage, and innovative product display racks to emphasise the tyre offerings available with the channel partner. Besides enhancing the visibility and positioning of the brand, this model is also known to increase the channel partners’ revenue,” the company said.
Elaborating on the company’s commitment to investing in premium retail concepts even in challenging times, CEAT Kelani Chief Operating Officer Mr Shamal Gunawardene said: “When the going gets tough, it is even more important to look for wins for all stakeholders. These SIS outlets add value for our customers, boost sales for our dealers and raise the brand’s presence in the market, benefiting the Company and all its stakeholders. They also ensure that the quality of the retail operation keeps pace with, and does justice to, the brand’s growth and the continuous improvement of the products.”
He said these premium retail outlets are also designed to bring special focus on providing all tyre-related services for passenger cars and SUVs, for which CEAT Kelani manufacturers a range of high-performance radial tyres in Sri Lanka.
Among the services common to CEAT SIS outlets are an extensive range of CEAT tyres at attractive discounts, specialized tyre care and technical expertise, computerized wheel alignment, nitrogen and air pumps for tyre inflation, dedicated customer lounge facilities and easy payment plans for credit card purchases. Some of the outlets also offer a wide range of alloy wheels and car batteries.
The manufacturer of nearly half of Sri Lanka’s pneumatic tyre requirements, CEAT Sri Lanka is considered one of the most successful India – Sri Lanka joint ventures. The joint venture’s cumulative investment in Sri Lanka to date exceeds Rs 8 billion. The company’s manufacturing operations in Sri Lanka encompass tyres in the radial (passenger cars, vans and SUVs), commercial (nylon and radial), motorcycle, three-wheeler and agricultural vehicle segments.
ComBank stays on growth trajectory in 2023 with notable Q4 performance
Accelerated lending sees loan book grow by Rs 56.8 billion in three months
Deposits surge by Rs 109.4 billion in final quarter
12-month gross income up 21.82% to Rs 341.6 billion
The Commercial Bank of Ceylon Group lent Rs 56.816 billion in the fourth quarter of 2023 at a monthly average of Rs 18.939 billion to end the year with a loan book of Rs 1.296 trillion, continuing its trend of strong lending growth in support of economic revival.
Robust deposit growth of Rs 109.408 billion was also witnessed in the three months ending December 31, 2023 at a monthly average of Rs 36.469 billion, demonstrating the Group’s strong deposit franchise and focus on financial intermediation in volatile macroeconomic conditions. Deposits grew by 8.60% YoY to Rs 2.148 trillion at the end of the review period.
The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, reported in a filing with the Colombo Stock Exchange (CSE) that total assets increased by Rs 156 billion or 6.24% YoY and by Rs 130 billion or 5.15% in the three months reviewed to reach Rs 2.656 trillion as at December 31, 2023.
Gross income improved by 21.82% YoY and by 33.44% in the final quarter to total Rs 341.566 billion for 2023, and interest income grew by 33.84% to Rs 297.646 billion, the Group said. With interest expenses increasing at a higher rate of 53.37% over the year to Rs 211.231 billion, net interest income grew by a marginal 2.07% to Rs 86.415 billion. This was however, a welcome reversal of the negative growth recorded at the end of the preceding quarter, and was made possible by net interest income of Rs 25.534 billion in the fourth quarter, an improvement of 16.85%.
“We have consistently reinforced our balance sheet strength throughout the year and reaffirmed our position as the leading private sector bank,” Commercial Bank Chairman Prof. Ananda Jayawardane commented. “Our solid performance stands as a testament to our resilience and enduring dedication to serving our customers and stakeholders with distinction. We look forward to building upon this foundation of success and charting new heights of prosperity in the future.”
Commercial Bank Managing Director/CEO Mr Sanath Manatunge noted that the Bank continued to demonstrate its unwavering strength and adaptability amidst a landscape of economic revival and reform. “As the country navigated through the aftermath of challenges flowing from the immediately preceding years, our focused strategy and commitment to stakeholder equity remained steadfast,” he said. “Embracing pivotal reforms and leveraging innovative approaches, we propelled forward, ensuring stability and sustainable value creation for all stakeholders. Our resilience and adaptability in the face of adversity is a testament to the dedication and resolve of the entire Commercial Bank team, whose unwavering commitment remains the cornerstone of our success.”
The Group posted an operating profit before taxes on financial services of Rs 38.885 billion for the full year, and Rs 10.193 billion for the fourth quarter, achieving improvements of 36.77% and 253.81% respectively, the latter due to the higher impairment provisions of the fourth quarter of the previous year.
The Group’s profit before income tax of Rs 33.927 billion for the 12 months recorded an improvement of 38.45%, in contrast to 13.56% at the end of the third quarter. With income tax for the 12 months increasing to Rs 12.027 billion, the Group reported a net profit of Rs 21.900 billion, a decline of 10.25% YoY.
Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs 31.880 billion for the 12 months, an improvement of 41.07% while profit after tax for the year reduced by 10.92% to Rs 20.461 billion.
The largest private sector bank in Sri Lanka and the first Sri Lankan bank to be listed among the Top 1000 Banks of the World, Commercial Bank operates a strategically-located network of branches and over 950 automated machines island-wide, and is the largest lender to Sri Lanka’s SME sector. Commercial Bank has the widest international footprint among Sri Lankan Banks, with 20 outlets in Bangladesh, a Microfinance company in Nay Pyi Taw, Myanmar, and a fully-fledged Tier I Bank with a majority stake in the Maldives.
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