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Govt. proposes slashing of personal income tax
View(s):IMF response in two weeks; major salary increases also planned for public servants from next year
By Damith Wickremasekara
A proposed personal income tax reduction plan, costing the government more than Rs 25 billion a year, has been taken up with the International Monetary Fund (IMF), a senior Treasury official said.
The proposed tax reduction has been taken up with the IMF on the grounds that the revenue targets are being met.
Under the proposal, the tax bands are to be increased from Rs 500,000 to Rs 720,000. While the marginal tax rate at each band remains at six percent, with the top tax rate remaining at 36 percent.
The Treasury has submitted the proposed reduction in tax burden for different income levels. Accordingly, the reduction for a monthly income of Rs 150,000 will be 14 percent. The other reductions are: 20 percent for Rs 200,000, 25 percent for Rs 300,000, 23 percent for Rs 400,000, 15 percent for Rs 500,000, 8 percent for Rs 750,000, and 6 percent for Rs one million.
The tax-free threshold will remain at the existing figure of Rs 1.2 million a year.
The official said they were expecting a response from the IMF within the next two weeks, and thereafter the proposal would be submitted to the Cabinet for approval before the figures would be made public.
Following Cabinet approval, the proposal would be included in the proposed budget for next year, he said.
Meanwhile, the proposed salary revisions for the public sector employees due to come into effect from January next year had been finalised and would be included in the budget proposals, the official said.
According to the figures finalised for Grade III staff, the salary of an office assistant will be increased by Rs 5,450, a driver by Rs 6,900, a Samurdhi Development Officer by Rs 8,430, a nurse by Rs 13,725, a principal by Rs 23,425, a College of Education qualified teacher by Rs 17,480, a graduate teacher by Rs 19,055, and a police constable by Rs 10,740.
The salary increases will apply to the armed forces, statutory boards, and corporations.
The proposed salary increase will cost the government Rs 160 billion.
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