ECONOMYNEXT – Sri Lanka’s parliament has passed a bill to hike income tax to force superannuation funds to agree to a restructuring of bonds in the Employees’ Provident Fund (EPF) and other pension funds.
The tax hike was passed with 103 voting in favour and 58 voting against, Speaker Mahinda Abeywardana said.
State Minister for Finance Ranjith Siyambalapitiya said bonds had to be re-structured to take an International Monetary Fund programme. A 9 percent return would be given to EPF holders, the government said.
Foreign Minister Ali Sabry, citing a Central Bank assessment report, said the impact of the new law could reduce the annual EPF return to 9.72 percent from the current 10.99 percent which is given with a 14 percent corporate tax.
“But if the EPF is not going to be subject to domestic debt restructuring and going to be imposed a 30 percent (corporate) tax instead of the current 14 percent, like other private pension funds, then the annual return will be reduced to 8.62 percent,” Sabry told parliament just before the vote.
“So it is a choice between 9.72 percent and 8.62 percent. This law has to be passed for the central bank to decide to choose the option.”
Opposition legislator Harsha de Silva said the restructure was not voluntary and a future government will redress the injustice to EPF holders.
Though statements are made that 9.0 percent would be paid to EPF holders in the next few years, there was no guarantee, de Silva who heads the parliament’s Committee on Public Finance said.
Officials had told the COPF that they would ‘try’ to pay 9.0 percent. (Colombo/September07/2023)