Sept 24, Colombo: The Ministry of Finance in a communique clarified that the net income of small businesses and artistes up to 500,000 rupees will be exempted from taxation under the new Inland Revenue Act.
Accordingly, with the implementation of the government's new tax act, the annual net income obtained by artists in literature, arts, music, and stage and film sectors from their productions, after deducting the costs incurred for the workers, including payrolls or other payments, will be tax free up to 500,000 rupees.
Accordingly, the artistes, who have been given special tax concessions and limits so far, will be taxed in the same manner as the common people earning taxable income.
Similarly the self-employed Individuals and small businesses will receive tax exemption up to 500,000 rupees from their annual profits, the Finance Ministry said.
Following the initial exemption of 500,000 rupees of net income, the additional annual profit up to 600,000 rupees will be taxed at a 4 percent rate. The next 600,000 rupee annual profit bracket will be taxed at 8 percent, after which, tax rate will be increased by 4 percent for every 600,000 rupees increase in net income.
The new tax system will be effective from the 1st of April 2018.
The Ministry of Finance said under the complicated taxation system used in the country now, different sectors has been given various tax concessions without a rational base and it has resulted in a disparity in income.
As a result, 20 percent of the population receiving the maximum income enjoys 54 percent of the economic benefits creating an inequity in the distribution of benefits of the economy to the public.
The new tax act has introduced a method to simplify the tax system abolishing tax concessions given in various sectors and levy taxes on the income level of all citizens alike.
The new Inland Revenue Act has been prepared according to the principles of good governance and accordingly, under the new act, taxes will be levied not according to the social level or the profession of the citizen, but on the basis of the income and profit they derive from the economic activity they perform, the Ministry said.
The new tax act, which has prepared the background to levy taxes from the President as never happened in the country in its history, will not disproportionately grant special treatment or relief to any sector or any individual, the communiqué said.
Since the new tax laws are clearly defined in the new tax act and transparent for everyone to equally receive tax relief, the new tax act will help to achieve the good governance principles by preventing revenue disparities in society, the Finance Ministry said.