New tax hike hurts high income earners
Central Bank workers protest against tax hike. Pic By M.A. Pushpa Kumara
The Government’s desperate move of increasing income tax to a very high level under the new tax reforms fulfilling one of the commitments for the US$2.9 billion IMF extended fund facility has hit hard the high income earners and professionals below the belt.
Hundreds of professionals including doctors, university professors, lecturers, engineers, bankers and public and private sector top executives took to the streets protesting against the unbearable tax hike in a black week organised by their trade unions and associations since Monday.
The government is now in two minds after raising value added tax to 12 per cent, corporate tax to 30 per cent and the highest personal income tax rate to 36 per cent in a bid to raise Rs. 195 billion to steady the Treasury’s dwindling cash flow, several top state officials told the Business Times.
Spokesman of the Government Medical Officers Association Dr.Chamil Wijesinghe, one of the black ribbon-wearing protestors, said that they have no objection against any reasonable tax hike. But there was no sign of tax rupees working properly.
The absence of transparency, high government spending, wastage and corruption along with, reckless political decisions prompted them to protest against unfair taxation, he claimed.
“If the government wants to raise the revenue, it has several other options to do it including streamlining the administration of revenue collection authorities including the Inland Revenue Department,” he added. One of the immediate options is to recover the Rs. 16 billion from the sugar scam, Rs. 11 billion bond scam and over Rs. 200 billion tax evasion up to now, he said adding that the government could raise over Rs. 237 billion from it.
The tax increase has impacted most of these professionals who had to pay their children’s school and private tuition fares, housing loans, car lease, and other consumption spending etc.
According to a research and evaluation of a specialist team headed by Prof Wasantha Athukorala of the Peradeniya University economics faculty, a breadwinner of a 4-member middle class family will have to pay Rs. 13, 571 per month as taxes this year.
The Government has collected Rs. 25,056 from a person as direct taxes in 2022 and it will be increased to Rs. 40,714 in 2023 as a result of the new taxes, he predicted.
If the government wants to raise revenue from other taxation options rather than increasing income tax they could have done it via imposing a tax on each file of 1.4 million EPF tax files. Another option is to impose a flat rate tax each on 300,000 active tax files and reactivating 100,000 more inactive tax files
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