A Tax System

The word 'Tax' has been come from the Latin word 'TAXO'. It conveys that it is a mandatory financial charge or some other type of levy imposed upon a tax payer. A tax payer could be an individual or other legal entity. It is imposed by the governmental organization in order to fund various public expenditures. A failure to pay taxes, along with evasion of or resistance to taxation is punishable by the law.

Taxes consist of direct or indirect taxes and may be paid in money as its labor equivalent.

Most countries have a tax system in place to pay for public/common/agreed national need and government function. Some levy a felt percentage rate of taxation on personal annual income, some on scale based on the annual income amounts and some countries impose almost no taxation at all or a very law tax rate for a certain area of taxation. Some countries has changed their tax both on co-operate income and dividends, this is often referred to as double. Taxation has the individual shareholders receiving this payment from the company will also be levied some tax on the personal income.

When we are referring to our country tax profile the standard tax rate is 28%. Tax rates from 10 % to 40 % also apply to profits from specific businesses and management of business is exercised in Sri Lanka. Resident companies are taxed on worldwide income, whereas a non-resident company is taxed only on income derived from Sri Lanka.

The most popular tax in Sri Lanka is 'VAT'. Changes to Sri Lanka's VAT that passed into law on 1 November 2016 include an increase of standard VAT rate to 15 % (from 11 %), changes in registration thresholds, the removal of VAT exemptions on healthcare services, telecommunication services, lease or rental of residential accommodation etc.

The concept of taxation is also important to businesses because the government can fund this money back into the economy in the form of loans or other funding forms. Taxes help rice the standard of living in a country.

Cite this page