Sri Lanka It's Happening

June 8, 2006

Sri Lankan finance ministers firmly believe in subsidizing everything. Right now there is a huge subsidy on fuel but the government has not paying the subsidy due to the Indian Oil Company. Their pumps are about to go dry. Because of all the subsidies, the government is finding it difficult to pay the bills, when that happens they come up with all kinds of outlandish taxes.

One such outlandish tax that has just been introduced is a 1% stamp duty on credit card transactions. The government is encouraging people to pay in cash. Surely the minister of finance would know that merchants recieving cash would find it easier to dodge income taxes?

What's really astonishing is that though credit card transactions are taxed in this manner, debit cards are not taxed in this manner. What is the logic?

Every where in the world governments try not to impose taxes on money that has already been taxed. Most people using credit cards would have a portion of their salaries automatically deducted as 'Pay As You Earn' tax. The goods purchased with the credit card would be subject to Value Added Tax. So the credit card holder is in fact paying additional taxes on twice taxed goods.

Posted by raditha at June 8, 2006 10:48 AM