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25% surcharge on EPF and ETF: Gazette remains, pending Court verdict

19 Feb 2022

By Maheesha Mudugamuwa The Finance Ministry is yet to withdraw the controversial Gazette notification that imposes a 25% surcharge on the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF), among several other pension taxes, through a draft Bill. However, The Sunday Morning learns that the decision to impose a surcharge tax on the EPF and ETF had been reversed following a Cabinet decision. Speaking to The Sunday Morning, State Minister Shehan Semasinghe said the Gazette was being challenged in Court and until a verdict was given, it could not be debated in Parliament although it had been tabled in the House.  Therefore, he said that once the verdict was given, the Gazette would be debated in Parliament and amendments would be moved accordingly, reiterating that the surcharge would not be imposed and there was no gazette to be withdrawn as it had not been enforced yet.  Meanwhile, commenting on the proposed tax, Semasinghe accused the Opposition of hypocrisy, pointing out that when the Opposition was in government, it too had introduced a similar initiative in 2017. He further explained that the proposal was to increase the taxes on the EPF, ETF, and 11 funds from 10% to 14%. This 4% jump is an annual burden on the EPF and ETF. According to him, the 11 funds were not specifically put into this category, but under company laws and other laws, all individuals and organisations that earn profits exceeding Rs. 2 billion after taxes and dividends have been put into this category. It had been proposed in the 2022 Budget to impose a 25% Surcharge Tax on individuals or companies earning an annual taxable income of Rs. 2,000 million or more during the 2021 financial year. It is to be a one-time tax payable by high value taxpayers in 2022 for their income in the tax year of 2020/21, while the objective of this special tax was to raise the necessary revenue to finance Government expenditure programmes for the year. However, concerns have been raised by experts, Opposition politicians, and trade unions as well as members of the Government itself that the EPF and ETF would also be subjected to this 25% Surcharge Tax as any fund that exceeds Rs. 2 billion in taxable income would be subjected to this tax. When contacted by The Sunday Morning, Treasury Deputy Secretary R.M.P. Rathnayake confirmed that the Surcharge Tax would not be imposed on EPF and ETF.


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