VAT revenue up by Rs 72.7 bn YoY | Page 2 | Daily News

VAT revenue up by Rs 72.7 bn YoY

The VAT revenue collection has increased by Rs 72.7 billion during January to April 2017, a significant YoY growth of 90.9% compared to same period in 2016.

This has been as a result of the increased VAT rate and removal of some VAT exemptions in late 2016, a report tabulated by the Economic Intelligence Unit of the Ceylon Chamber of Commerce said.

VAT revenue exceeded the estimated revenue target for first four months by LKR 27.6 bn and accounted for 40.2% of the 2017 annual VAT revenue estimate. This is a significant improvement compared to the level of 28.2% recorded in 2016 VAT revenue performance hints that it is a potential source for bringing more than the forecasted level of one fifth of tax revenue for 2017. VAT amendments the implementation of RAMIS automation, and further measures to improve compliance can further boost revenue from of VAT in 2017.

“Excise revenue is likely to remain week with the subdued demand for motor vehicle imports and high duty rates on alcohol and tobacco products,” said the report.

Excise revenue grew by 4.9% YoY, an increase of LKR 7.3 bn during first four months of 2017. This accounted for 26.9% of the 2017 annual excise revenue estimate, much lower compared to the level of 32.6% recorded in 2016.

Excise revenue during first four months was largely impacted by the LKR 47.7 bn fall in excise tax collections from liquor, cigarettes and tobacco due to the prevailing high duty structure.

Motor vehicles accounted for 41% of total excise revenue but indicated a weak YoY growth of 7.7% despite the low base effect. Number of Import units of major motor vehicle categories such as motor cars, three wheelers and goods transport vehicles contracted for the second continuous year during first four months of 2017.

Although there has been a surge in motor bike imports and a marginal increase in passenger vehicle imports, it is unlikely to provide the expected level contribution to revenue with excise revenue from motor vehicles and other category falling behind revenue estimate by LKR 6.2 bn during the first four months.

Earnings from non-tax revenue in Q1 2017 accounted for 16.4% of the projected annual revenue for 2017.

This is a marginal improvement from the share of 14.2% recorded in 2016. However, it is important to note that non-tax revenue in 2016 was largely dependent on revenue from CPC and therefore remains vulnerable to external shocks that could arise from increased oil prices.

Hydropower generation in Q1 2017 was the lowest compared to Q1 of the past three years, while CEB Coal and CEB Thermal Oil generation were at their highest levels. This is expected to give a boost to CPC sales in 2017 and increase its contribution to revenue, despite the negative consequences the prevailing drought could have on overall economic activity.

Revenue from income tax increased by LKR 19.6 bn during first four months of 2017 aided by a substantial increase of LKR 16.3 in ESC revenue, following the upward revision of the ESC rate, removal of exemptions and the maximum ESC liability rate in 2016.

The proposed Inland Revenue bill is expected to go through committee stage amendments in Parliament and be passed during August 2017. Income tax related proposal of National budget 201713 are expected to be implemented along with the new Inland Revenue bill.

The provisions of the IR Bill such as introduction of a three-tier income tax structure for companies, removal of exemption on various direct tax sources, and re-introduction of Capital Gains Tax, etc., has the ability to bring a substantial direct tax revenue to the Government.

However the realisation of revenue will be dependent on the date from which the bill is made effective. If, as is indicated now, the Act will come into force from 1 October, the results will be seen by Q4 2017 itself.

More broadly, the Government expects these reforms to provide a significant boost to the revenue generated via direct tax sources, an important step towards achieving Government’s policy of a more balanced tax regime of 60% from indirect taxes and 40% from direct taxes.


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