The Hon. (Dr.) Anil Jayantha

¶ 01 Mr. Deputy Speaker, with respect to VAT, the ultimate objective is that from the origin of a product or service in Sri Lanka—starting from raw material to the final consumer—value is added at different stages, and the Inland Revenue Department administers a mechanism that captures tax at each such value addition using a technical process. We do not want to reduce efficiency by repeatedly re-registering persons or to change tax rates unnecessarily.

¶ 02 Since 2002, VAT rates have fluctuated unnecessarily, shifting the burden onto the final consumer—at times 20%, then 15%, then 12%, then 8%. These fluctuations reveal weaknesses in revenue management. The lesson is to keep the system simple, fair, clear, and predictable over time. Rather than introducing distortions or unnecessary changes now, our task is to improve administrative efficiency under the existing rates, strengthen enforcement, bring those outside the net back in, and move towards a fair tax regime. We believe we can establish this in the near future. I assure the House that while 18% is relatively high in our region, our aim and target is to reduce it gradually.

¶ 03 Mr. Deputy Speaker, for items under VAT—especially essential food items—our aim in these Amendments is, where possible, to exempt such items. We expect everyone’s cooperation. Government agencies involved and international agencies providing technology are working with us towards this goal, as is the Government itself. I also appeal to the public: if we all pay what is due in good faith, without evasion and fraud, then under lower rates and a lower overall tax incidence, the country can still raise more revenue and move forward.

¶ 04 In addition to this Bill, we also discussed the Aswesuma benefits payment scheme today, including proposals to increase payments, extend time periods, and thereby grant more relief to low-income groups facing hardship.

¶ 05 Mr. Deputy Speaker, with that, I conclude. Only a few Amendments are needed to this small Bill. We observed the teams that worked on these changes; the officers concerned put in great effort and commitment. This allowed us to correct defects, omissions, and lapses that had occurred. I am not claiming we already have a perfect, world‑class VAT system. But we are moving forward, and these Amendments lay the foundation for moving towards a sound VAT regime.

¶ 06 Thank you, Mr. Deputy Speaker.

¶ 07 Question put, and agreed to. Bill accordingly read a Second time.

¶ 08 Resolved: “That the Bill be referred to a Committee of the whole Parliament.” - The Hon. (Dr.) Anil Jayantha

¶ 09 Considered in Committee. [THE HON. DEPUTY SPEAKER in the Chair.]

¶ 10 Clause 1 ordered to stand part of the Bill.