ECONOMYNEXT — The leftist National People’s Power (NPP) has proposed that Sri Lanka’s income tax-free threshold be increased to 2.4 million rupees a year from the current 1.2 million and to “equitably” amend tax rates and tax brackets.
The NPP’s election manifesto released on Monday August 26 has also proposed that the tax base be widened according to taxation fundamentals.
Increasing the tax-free threshold to include people who earn up to 200,000 rupees a month will likely exclude many people from the tax base, however.
NPP leader and presidential candidate Anura Kumara Dissanayake first proposed this increase in January 2023. He also said at the time that an NPP government would cap progressive taxation at a maximum of 24 percent.
“We will definitely reduce this tax,” he said.
Treasury Secretary Mahinda Siriwardana said on August 18 2024 that Sri Lanka’s planned relief to personal income tax payers could cost 0.08 percent of gross domestic product in lost revenues and would be compensated by additional tax measures.
President Ranil Wickremesinghe also said in August that Sri Lanka and the International Monetary Fund (IMF) had discussed giving income tax relief by widening tax slabs.
“The Treasury began negotiating such an amendment with the IMF as far back as September 2023,” Siriwardana said, speaking at an event.
“It was not possible to implement such a proposal previously given the fact that revenue was falling short of targets.
“However, with the improvement in revenue performance this year, it has become possible to negotiate an adjustment to the PIT (Personal Income Tax) structure which provides some relief to the tax payers in the middle bands, whilst ensuring there isn’t an excessive gain for the highest income earners.
“The proposed adjustment to the PIT is estimated to cost around 0.08 percent of GDP and compensating revenue measures have already been discussed with the IMF, such that revenue targets are not compromised,” he said. (Colombo/Aug26/2024)