Private sector says transparency and accountability should complement tax hike

• Ceylon Chamber calls for greater restraint, accountability and transparency in govt. spending
• Acknowledges rationale behind recently proposed higher tax rates
• Urges need to prioritise spending on areas that are critical to public
• Says visible steps to curb corruption essential to motivate taxpayers
• Calls for significant reform in tax administration and improving capacity of key revenue collecting agencies

While acknowledging the rationale behind the recently proposed higher tax rates, the Ceylon of Chamber of Commerce yesterday urged the government to show greater restraint, accountability and transparency in government spending. 

“While the tax hike will invariably impact businesses and private sector employees adversely in the current context of high inflation and negative economic growth, it is the widely held perception of the tax revenue not being fully utilised for the benefit of the people, that is likely to drive public opinion on this matter,” the Ceylon Chamber said in a statement.

“Hence, it is imperative that the government effectively communicates the actions it is taking to reduce government expenditure and prioritise spending on areas that are critical to the public,” it added.

The premier business chamber pointed out that as part of the fiscal reform agenda, the focus should be in terms of rationalising and curbing government expenditure wherever possible. 

“In 2021, 31 percent of the recurrent expenditure was on public sector salaries, of which 30 percent was spent on Provincial Councils while 34 percent was absorbed by defence, policy and public security.

These must be relooked at in terms of the current priorities of stimulating growth and the need to reallocate expenditure towards spending on more critical areas like public education, health and research and development. 

In addition, greater accountability, transparency and governance of existing government expenditure along with visible steps to curb corruption are also essential requirements to motivate taxpayers in knowing that their contribution is being well spent,” the statement noted. 

The Ceylon Chamber of Commerce also pointed out that to drive higher tax collection, the existing taxpayer base needs to be widened further, so that the burden does not fall on the current base consisting of a small number of corporates and the salaried workforce to a large extent. 

“This will require significant reform in tax administration and improving the capacity of key revenue collecting agencies to reduce the leakages and ensure greater compliance. The policymakers should make better use of digital solutions to link the existing government agencies and efforts like the introduction of a Digital ID should be prioritised in this regard,” it noted. 

The business chamber also stressed the fiscal reform agenda would need to be complimented with genuine efforts to unlock growth and investment opportunities through state-owned enterprise reform, improvement in the ease of doing business and investment climate and providing a more conducive trade policy environment for exports to flourish. 

“This will ensure that growth does not stagnate in the next few years and there will be opportunity for the private sector to reinvest and create more economic activity that will stimulate tax collection,” it said.

“As the premier body representing the private sector, the Ceylon Chamber of Commerce stands ready to assist the government in driving a progressive reform agenda. We hope that the improvements made to the fiscal framework will steer forward the discussions with the IMF and help mobilise financing to address the current shortfalls in external cash flow,” it added.