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)