- Introduces 25% one-off surcharge tax
- Increases financial services tax by 3%
- Introduces 2.5% social security levy
Eyeing a Rs.254 billion boost in the tax income, the government yesterday proposed to levy a one-off 25 percent surcharge on large companies, 3 percent increment on VAT charged on banks and financial services providers and a new social security levy on companies with over Rs.120 million in turnover.
Finance Minister Basil Rajapaksa delivering his maiden budget speech in Parliament yesterday announced that the individuals and companies who have earned a taxable income of over Rs.2 billion in the 2020/2021 financial year would be subjected to the surcharge in 2022.
He pointed out that these large companies have made record earnings so far and hence, this surcharge wouldn’t be an excessive burden on them.
Meanwhile, the VAT charged on supply of financial services by banks and financial service providers (finance companies and insurance firms) is proposed to increase to 18 percent, from the current 15 percent, during next year.
The government expects to collect additional Rs.14 billion from this VAT increase next year, which is required to be paid on a monthly basis.
Rajapaksa stressed that these entities would not be permitted to pass this proposed VAT increase to the consumer.
In addition, he also proposed to impose a 2.5-3 percent levy on the turnover of companies with an annual turnover of over Rs.120 million,
in order to establish a new fund named “Social Security Contribution”, which aims to rebuild the pandemic-hit economy.
The proposed broad-based levy is set to come into effect from April 1, next year, with a projected collection of Rs.140 billion for the year.
These three proposed revenue proposals in the budget 2022 are projected to collectively bring in Rs.254 billion worth of fresh tax income for next year, as the government targets a Rs.1.98 trillion tax income, including Rs.496 billion in income taxes for the year.