Sri Lanka mulls change to PAYE tax charging formula

ECONOMYNEXT – Sri Lanka is discussing a change to the advance income tax deduction from salaries, after a new tax law increased Pay As You Earn (PAYE) tax by including allowances, a minister has said.

"We got complaints on new #SriLanka PAYE tax that some employees will see pay cut due to bringing in allowances in to tax calculation," State Minister Harsha de Silva said in a message.

"We listened and revised the calculation to a most equitable manner. FinMin will release new circular."

Under the old system a car allowance of up to 50,000 was exempt as well as salaries up to 62,500 rupees.

But under the new law, incomes was taxed from 100,000 rupees including allowances.

Under the old system car allowances of up to 50,000 rupees were exempt for everyone, regardless of their salary.

Some relief on allowances are expected under the revised PAYE schedule.

In Sri Lanka state workers get tax slashed cars, while private sector citizens are taxed up to 200 percent for their car and motorcycles making them second class citizens, critics have said.

From 2015 to 2016 the central bank also printed money depreciating the currency, further reducing the purchasing power of wage earners. The so-called bracket creep that comes from inflation-currency depreciation increases the real tax share of the government. (Colombo/May22/2018)





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