‘Problem areas’ in new taxes acknowledged

COLOMBO: Sri Lanka’s president, cabinet of ministers and opposition groups will all be part of discussions the government expects to hold on the best possible taxation system going forward, Justice Minister Wijeyadasa Rajapakshe said.

Speaking at a press conference, Rajapakshe acknowledged that there are some problem areas in the recently gazetted revisions to personal income tax but said increasing tax revenue through direct taxation was necessary.

The state lost 600 billion rupees a year over the past three years since former President Gotabaya Rajapaksa slashed taxes upon his election in November 2019, the minister said.

“Taxes have to be raised to resolve the economic crisis that was caused by [this decision],” said Rajapakshe.

“We realise that a sudden high tax rate imposed to recoup the losses of three years can create problems. No government imposes taxes willingly, but taxes must be charged for the continued functioning of the state,” he said.

The minister said there are some “problem areas” in the new taxes.

“We expect to hold discussions with the president, the cabinet, the opposition and other groups in parliament and decide on the best system,” he said.

The minister also acknowledged that people are heavily burdened by Sri Lanka’s ongoing currency crisis, the worst in decades.

“The tax policy we had formulated sought to earn tax revenue from high income earners. That’s what the former president suddenly changed. Had that policy continued, such a huge economic crisis would not have occured,” said Rajapakshe.

“Three of my four personal tax files were closed as I didn’t qualify for taxation. But none of us had said we couldn’t pay taxes or asked for relief. That happened as a result of the then president being misled,” he said.

The minister said he hoped for the people’s support to build up a proper taxation system gradually.

“Let’s aim for a policy to tax high income earners more than low income earners. Also, if we don’t raise revenue through direct taxes, we have to go for indirect taxes, which would lead to increased prices of goods affecting everyone in society including the poor. That’s why we’re trying to increase some of the direct taxes.”