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Surcharge tax essentially super gains tax – KPMG

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Prlincipal Tax and Regulatory Suresh Perera

The recently announced surcharge tax was likened to the earlier super gains tax framework by KPMG Principal Tax and Regulatory Suresh Perera. He went on to note that the tax in impact was similar in weightage and threshold impact along the tax spectrum.

Perera was speaking on 12 November at a KPMG organized Budget Analysis 2022 held virtually for the second year consecutively in keeping with the need to minimize physical contact amidst the COVID-19 pandemic.

On the advent of surcharge tax Perera said, “This is super gains tax in another name.” He went on to compare the two taxes side by side which showcased similarities in their impacts.

The rate of tax for the newly announced ‘surcharge tax’ is 25%. The tax will be applicable on income crossing Rs 2 billion for the year 20/21 with expected revenue of Rs 100 billion.

Perera noted however that though the earlier supergains tax had more details on its implementation the new surcharge tax raised questions on specific tax implications.

Perera said, “When this was introduced as supergains tax it was on Profit Before Tax and there were detailed rules on how a group of companies would be treated but in this proposal, details have not come.”

The earlier supergains tax was made payable in three instalments.

Perera also highlighted the Special GST tax consolidation scheme that was to take place. Likening it to tax simplification measures in India, Perera noted that the new tax would be fewer administrative hurdles in paying taxes. Perera said, “This happened in India as well because there were so many taxes and all these were consolidated into GST.”

Perera noted that the draft legislation for the new system of taxation was in place and it is expected to be applicable from the 1st day of next year. The proposed implementation of GST is expected to bring an additional Rs 50 billion in tax revenue.

The sectors liable include telecommunications, motor vehicles, cigarettes, liquor, betting, and gaming. There shall be an increased VAT on financial services but the impact of the tax shall not be borne by the customers of financial institutions. There is also expected to be a social security contribution scheme for entities with a turnover that crosses the Rs 120 million threshold with a contribution of 2.5% to help rebuild the country following the COVID-19 pandemic.


Tax revenue from GST will not fallTreasury Secretary

Dinesh Perera

Surcharge tax essentially super gains tax – KPMGTreasury Secretary S R Attygalle noted that according to Treasury estimates there was not expected to be a reduction in the revenue from the consolidation of taxes into GST. Attygalle stressed that the rates would not be revised downwards with the implementation of the new tax.

S R Attygalle stressed the importance of tax simplification and expected efficiencies with lower administrative costs by bringing about the new GST framework. Attygalle said, “There would be one tax.”

Attygalle was speaking on 12 November at a KPMG budget seminar held virtually.

Attygalle also stressed that the government plans to maintain the tax structure that was broadly announced during this government’s previous budgets. He said, “We won’t change the tax structure that we have announced. We want to have some continuity.”

Acknowledging the increased rate of taxation under the new proposals, Attygalle said with reference to the COVID-19 pandemic “Given the circumstances, no one will mind paying the taxes no one will mind paying the taxes on a one-off basis.”

Attygalle highlighted that the government expects additional revenue from the licensing of the telecommunications spectrum and the newly announced 5G spectrum. Attygalle said, “Licensing fees have been very nominal. We are proposing to have an auction. 5G will be coming in the future. All these will be auctioned and we have used very conservative numbers.”

Simplifications have been announced for customs procedures.

Monday, November 15, 2021 – 01:00

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