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Social Security Levy to be added to all utility services 

30 Oct 2022

  • Treasury confirms 2.5% will be passed on to consumers
The Ministry of Finance admits that the new 2.5% Social Security Contribution Levy (SSCL) will apply to all State-owned utility service providers and is likely to in turn be passed on to the consumer. Speaking to The Sunday Morning Business, a source from the Fiscal Policy Department of the Ministry of Finance confirmed that State-owned utility service providers such as the Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), and National Water Supply and Drainage Board (NWSDB) had not been exempted from the SSCL in terms of the provisions of the Social Security Contribution Levy Act No. 25 of 2022. Responding to a query on whether the CPC and the NWSDB would be subject to the SSCL, the source stated: “They have not been exempted from the tax. This isn’t a new development; they were subject to the tax from the very beginning when the act was passed.” This was also confirmed by Treasury Deputy Secretary R.M.P. Rathnayake, who told The Sunday Morning Business that as per his knowledge the 2.5% SSCL would apply to all utility service providers. He further confirmed that this 2.5% tax was likely to be passed to the consumer. Meanwhile, Public Utilities Commission of Sri Lanka (PUCSL) Chairman Janaka Ratnayake stated that electricity supplied by the CEB was subject to the SSCL, as per the SSCL Act. Thereby, this tax will be charged with effect from 1 October 2022 on the purchase of electricity by all parties including consumers who receive electricity from the CEB. The PUCSL Chairman explained: “Different parties in the electricity industry, including electricity consumers, have made inquiries about how the SSCL will affect the electricity industry. As electricity tariffs were revised recently, we suggested that the Ministry of Finance exempt electricity consumption from this tax, however the Ministry has informed us that according to the relevant act, the CEB electricity supply is subject to this tax. Accordingly, the CEB will take steps to tax the purchase of electricity from all parties who purchase electricity from the CEB from 1 October 2022 onwards.” Speaking to The Sunday Morning Business, Ceylon National Chamber of Industries (CNCI) Chairman Canisius Fernando criticised the decision to pass the SSCL on to consumers, stating that it would impose an unbearable burden on the general public, which was already subjected to significantly high indirect taxes and would soon be subjected to direct taxes as well. He further pointed out: “With this increase in electricity tariffs, overheads of businesses will go up and profitability will be eroded. Therefore, they will obviously increase the prices of their commodities. The brunt will be borne by the consumer, impacting the day-to-day life of consumers. Once the proposed direct taxes on the minimum threshold of persons earning Rs. 100,000 monthly is imposed, the general public will simply not be able to survive.” Fernando further questioned the Government’s decision to decrease the thresholds for income tax in a bid to increase tax revenue, when it could be achieved through proper and improved tax administration. “There are around seven million companies registered with the Registrar of Companies. However only around 10% of these companies are paying taxes. There are many large companies which are avoiding paying taxes through various mechanisms. The Inland Revenue Department is not monitoring this properly,” he charged. He further pointed out that the Government’s decision to impose direct taxes with such low thresholds considering the recent increase in Value Added Taxes (VAT) was improper and callous. – By Shenal Fernando   


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