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Monday April 15th, 2024

Sri Lanka income taxes up 291-pct to Sept 2023, PAYE up 497-pct

ECONOMYNEXT – Sri Lanka has collected 134.4 billion rupees in personal income tax with the major portion coming from advance taxes on wage earners, data from the Finance Ministry showed.

Pay-As-You-Earn/Advanced Personal Income Tax was up 497.8 percent to 107 billion rupees, higher than the full year target of 100 billion rupees.

Sri Lanka reduced the tax-free allowance to only 100,000 rupees (about 300 US dollars) and started to tax everyone earning above 10 US dollars a day after the country defaulted on its foreign debt after the most aggressive deployment of ‘macro-economic policy’ in the history of the island’s central bank.

The rate cuts which were backed up by tax cuts to close what state economic bureaucrats said was to close a ‘persistent output gap’ after the International Monetary Fund gave technical advice to calculate ‘potential output’.

The severe employment of Cambridge/Saltwater economics was employed by an administration said to have been run by ‘professionals’ somewhat similar to an ideology generally known as technocracy that developed in the West, students of history say.

PAYE thresholds were raised amid protests from some wage earners who wanted to pay tax through wages which was hassle free. After the default thresholds were brought down steeply.

There have been suggestions to give dependent allowances and widen the slab to reduce brain drain, however relief is not possible this year, as the country tries to re-structure debt, according to the budget.

Revenues from withholding tax (including on interest) went up 672.7 percent to 110.4 billion rupees.

Taxes from non PAYE income tax was only 30 billion rupees.

The Inland Revenue Department is now operating a policy of opening tax file for all individuals above 18 years, focusing initially on professionals, the report said.

“Enforcement will be further enhanced through the strengthening of the Large Taxpayers’ Unit (LTU) and the newly established High Net Worth Individuals’ (HNWI) Unit,” the Finance Ministry said.

“Going forward, all tax collections will be processed only through RAMIS (an electronic tax filing system).

“Further, the online portal for Individual Tax Identification Number (TIN) registration and Personal Income Tax (PIT) filing will be simplified.

“Moreover, Key Performance Indicators (KPIs) will be introduced to IRD on enhancing audit-effectiveness, improving tax return filing, recovering collectible revenue and increasing registration.”

Corporate income tax 8.7 percent to Rs. 415.6 billion in the first nine months of 2023 from 382.2 billion rupees last year. In an economic downturn corporate profits fall.

Unlike VAT both corporate income taxes and personal income taxes come at the cost of growth generating economic activities.

VAT is collected after a gainful economic decision is made by ordinary citizens contributing to an economic recovery as well as taxes, while income tax halts activity and transfers money to the state to be spent by planners and rulers. (Colombo/Nov14/2023)

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Sri Lanka to discuss two contentious points with bondholders: report

ECONOMYNEXT – Sri Lanka and sovereign bondholders are to discuss two matters in the near future which the two sides failed to reach agreement at March talks in London, a media report quoting a top aide to President Wickremesinghe as saying.

Sri Lanka and bondholders had discussed four matters on restructuring international sovereign bonds in late March and agreement had been reached on two, President’s Chief of Staff Sagala Ratnayake was quoted as saying on state-run ITN television.

A restructuring proposal by bondholders was not in line with IMF requirements, and Sri Lanka had sent a counter proposal, he said.

The matters will be discussed at round of talks in the near future.

Sri Lanka was optimistic of reaching an agreement with the bondholders before June, officials have said.

According to matters already in the public domain, sovereign bond holders are keen to get a bond tied to dollar gross domestic product, as they feel IMF growth projections are too low.

In past re-structuring so-called value recovery instruments, a type of warrant, gave their owners extra payments if a country did better than expected and were tied to items like oil prices.

Bondholders had initially proposed bond which would have a lower hair cut initially, and it will have additional hair cuts if growth is low (about 3.1 percent) as projected in an IMF debt sustainability analysis. (Colombo/Apr15/2024)

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BIMSTEC Secretary General visits Sri Lanka, discusses regional cooperation

ECONOMYNEXT – The Secretary General of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), discussed measures to enhance regional cooperation, during his visit to the island last week.

Ambassador Indra Mani Pandey, Secretary General of BIMSTEC visited Sri Lanka from 07 – 12 April 2024, following his assumption of office as Secretary General of BIMSTEC in January this year.

The Secretary General “met with senior officials of relevant Ministries/Agencies to discuss measures to enhance regional cooperation under various BIMSTEC initiatives,” the Foreign Ministry said in a statement.

Several BIMSTEC countries have bilateral trade agreements, such as Sri Lanka and India, Thailand and Myanmar, Sri Lanka and Thailand, but no collective regional agreement to enable intra-regional leverage.

During the visit, Secretary General Pandey held discussions with Ministry of Foreign Affairs officials and paid courtesy calls on the President and the Minister of Foreign Affairs.

Secretary General Pandey participated at an event on “Regional Cooperation through BIMSTEC” organized by the Lakshman Kadirgamar Institute (LKI) on 9 April. (Colombo/April15/2024)

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Sri Lanka rupee closes weaker at 299.00/10 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 299.00/10 to the US dollar in the spot forex market on Monday, from 298.50/55 on Wednesday, dealers said, while bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed stable at 11.90/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent up from 12.10/15 percent.

A bond maturing on 15.09.2029 closed stable at 12.20/40 percent. (Colombo/Apr15/2024)

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