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‘Decision to tax above Rs. 100,000 earners must be reconsidered’

18 Oct 2022

 
  • Prof. Priyanga Dunusinghe says lower threshold must be revisited due to inflation
  • Suggests proper mechanism to be put in place to determine people’s income
The decision by the Government to tax anyone with a monthly income of about Rs. 100,000 should be revisited and the lower tax threshold should be increased as inflation has reduced the value of money, says University of Colombo Economic Prof. Priyanga Dunusinghe.  He also questioned the mechanism that has been or will be put in place to identify individuals with a monthly income of Rs. 100,000 or more.  “State sector and private sector officials who earn over Rs. 100,000 a month can be recognised easily, as the entities they work for can reduce the tax from their salaries monthly. But what is the mechanism the Government has in place to determine the monthly income of those who are not working in either of the sectors and are self-employed? How strong is this mechanism?” Dunusinghe questioned.  He suggested a proper mechanism to be implemented at the Grama Sevaka level to determine people’s income if the Government intends to ensure the efficiency of these new income tax reforms. “Some people buy vehicles in somebody else’s name and ownership. Some transactions do not provide a receipt or bill; an example of this is legal fees. Some doctors, too, do not provide receipts. These are ways to hide a person’s income. A mechanism that will capture all these things is required. If not, we will once again end up taxing the same people who always comply with taxes and leave the violators behind,” he warned.  Meanwhile, MP Prof. Gunapala Rathnasekara said that the new tax proposals will destroy the business environment and added that if a listed company pays a dividend, it will do so after settling 30% corporate tax and again the investors have to pay a tax for their dividend earnings, which according to him is unfair.  “The personal income tax threshold was previously Rs. 3 million. The tax slab was set at that rate, considering that for a person to have their basic needs fulfilled, they require Rs. 250,000 in income per month. But now, the taxable threshold has been brought down to Rs. 100,000,” he added.  Further, he noted that the exporters are also taxed and this would discourage investments into Sri Lanka while export companies would be discouraged to continue their business in Sri Lanka. 


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