Sweeping tax cuts announced; VAT down to 8%; PAYE, NBT slashed
Introducing sweeping tax relief measures today following its first-ever Cabinet meeting, President Gotabaya Rajapaksa’s caretaker government announced that Value Added Tax (VAT) will be reduced from 15 to 8 per cent, along with several other tax cuts.
At the new administration’s inaugural Cabinet briefing this afternoon, Co-Cabinet Spokesman Minister Bandula Gunawardena said the government will do away with Pay As You Earn (PAYE) tax, withholding tax on interest, debit tax on banks and financial institutes and Nation Building Tax (NBT) on household goods with immediate effect.
The Colombo Tax Exchange (CSE) Capital Gains Tax has also been removed.
The concessions, the Minister said, are part of a special relief package promised by President Rajapaksa on the campaign trail.
The ceiling for VAT has been raised to Rs. 25 million turnovers per month from the existing Rs. 1 million, Gunawardena further said, adding that income tax on the construction industry has also been reduced from 28% to 14%.
Taxes imposed on religious institutes will also be removed, while foreign currency earnings will be exempted from income tax.
The telecommunication levy will also be reduced by 25 per cent, said Gunawardena.
The Minister said by giving these reliefs to the people, the government expects to earn more tax income by targetting a larger group of people with low taxes than by just targetting a smaller group with higher taxes.
Through these concessions, he said, all sectors in Sri Lanka will rise again, increasing their productions. By expanding the tax base, the government expects to increase its tax income in the next year.
Gunawardena further said that the government hopes to make plans to increase the non-tax income which is currently at 15 per cent of the total government income in the future while not oppressing the general public.