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Golden Key Credit Card Company depositors who have not paid taxes on their interest earnings or had invested untaxed `black’ money seeking high interest may find themselves in trouble with the taxman, well informed sources said.
Senior Central Bank sources said that the CB has not gone into the company’s books. ``Given that it has been publicly stated that there has been a fraud, and a complaint has also been made, it may be a matter for the CID or police,’’ these sources said.
There has yet been no accurate fix on the extent of deposits held by the company with various figures varying from Rs. 6 billion to Rs. 26 billion being floated around.
At a news conference last week, Central Bank Governor Ajith Nivard Cabraal, asked why the bank, as the regulator of bank and non-bank financial institutions, had not been able to detect an emerging catastrophe in good time, explained that the CB didn’t regulate all deposit takers.
``For instance Elephant House may retain a customer deposit against their soft drink empties,’’ he said. ``That doesn’t mean that we will regulate that.’’
Expanding on that the Governor said yesterday that there are companies that pay interest on deposits they hold against their property – be they empty bottles or gas cylinders. But they are not in a financial services business that would be regulated.
``Sometimes they do pay interest on such deposits as Golden Key did against credit card spending,’’ he said. ``A landlord, for instance, may pay interest on rental or security deposit paid by a tenant.’’
He said that the regulator came in when deposit funds are re-lent as a finance business. Asked whether the CB went into the affairs of Sakvithi, Danduwan Mudalali etc., he said this was done only to the extent to establish whether they were operating as finance companies. There was no investigation on the quantum of deposits held, to whom they belonged etc.
Finance companies normally deduct a 10% withholding tax on interest paid on deposits unless the depositor signs a declaration saying that his/her income was below a floor that entailed no tax liability.
No withholding taxes are deducted on such declarations held by the companies concerned.
The new board of directors of the Seylan Bank, now being run by the Bank of Ceylon, is headed by Mr. Eastman Narangoda, a former GM/CEO of the National Savings Bank. Other directors include Messrs. Nihal Jayamanne, P.C., Mr. Lalith Withana, a chartered accountant who had previously served on the board of the Bank of Ceylon, and Mr. Neomal Gunawardene, a partner of Nithya Partners, a well known law firm.
