-3.6 C
Tuesday, December 5, 2023

Social Contribution Tax to be a cascading tax  – The Morning

Must read



  • Fiscal Policy Dept says each party will be taxed based on margins


By Imesh Ranasinghe 


The proposed Social Security Contribution (SSC) Tax will have a cascading effect through the supply chain, as each party in the chain will be taxed based on their margins.

Speaking before the Committee on Public Accounts (COPA) on 15 June, Treasury Fiscal Policy Department Director General Kapila Senanayake said that the SSC would have the same tax base as the Nation Building Tax (NBT) was removed under President Gotabaya Rajapaksa’s directive in December 2019.

However, he added, the difference between the two taxes is that SSC will have a cascading effect.

The SSC Bill, which was approved by Cabinet on 14 June, imposes a 2.5% tax rate on importers, manufacturers, service providers, wholesalers, and retailers whose turnover exceeds Rs. 120 million per annum. 

According to Senanayake, in this scenario, for example, the importers with liable turnover (after removing exceptions) over Rs. 120 million per annum will be taxed 100% at a rate of 2.5% and as you go through the supply chain, the wholesaler will be taxed at 1.625%, retailer at 0.62%, and the distributor at 0.25%.

The SSC tax was introduced according to the resolution passed in Parliament under the 2022 Budget proposal to establish a Social Security Fund. The Government expects to raise Rs. 140 billion per year through this tax.

The Ceylon Chamber of Commerce (CCC) issued a statement soon after the tax announcement, stating that the proposed social security contribution will have an adverse impact on low-margin businesses, including those subject to price controls and financial intermediaries, which will also have a cascading impact on all other businesses. 

It noted that the private sector understands the need to identify new revenue measures to bridge the budget deficit, given the impact of the pandemic on the economy, in terms of maintaining mainstream corporate tax rates and investment incentives that have been in effect from the end of 2019, due to Budget 2022. 

Further, according to Senanayake, the Government is expected to earn a revenue of Rs. 135 billion from all the taxes increased recently (VAT, Corporate Tax, Telecommunication Levy, Personal Income Tax and SSC), which will be in effect from 1 October (except VAT and Tele Levy which is already increased).

- Advertisement -spot_img

More articles

0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments
- Advertisement -spot_img

Latest article

Would love your thoughts, please comment.x