SJB up in arms against proposed higher tax on EPF/ETF as part of DDR

The main opposition party - Samagi Jana Balawegaya (SJB)  declared today that it is against the proposed government policy of imposing a 30 per cent tax on the Employee Pensions Fund (EPF) and Employees' Trust Fund (ETF) alleging labour funds have been unfairly targeted in the process of domestic debt restructuring.

This government is now amending the income tax laws to impose a 30% income tax on EPF/ETF. This tax will apply to all EPF/ETF income without any tax relief. Therefore, even an employee earning a monthly salary of Rs. 30,000 will be liable to bear the tax of 30% on their savings on EPF/ETF. ‘Is this justified against low-income workers?’ asked SJB, Parliamentarian Mr. Eran Wickramaratne issuing a special statement today (30)

The MP also stressed that the present government’s income tax policy to attract an effective tax rate of 30% would require a salary above Rs. 500,000 per month. Probably 90% of the working population draws less than 500,000 per month

Stressing that the government declared economic bankruptcy and entered into an agreement with the International Monetary Fund to obtain a loan of US $ 3 billion, the MP said the restructuring of the country’s debt is a condition involved as well. 

“Foreigners invest in bonds of small countries looking for more income, absorbing the risk factor. Having already profited from the high interest/income, restructuring of said loans does not bear significant consequences to the investors. The government has already declared bankruptcy and has stopped repaying foreign debt, including bonds. Although it was initially announced that the foreign bond would be restructured, the government recently postponed the discussion with foreign investors for the second time. However, it is foreign debt that is best restructured,” the MP said. 

Instead, the government has prioritised domestic debt restructuring. This is an injustice to the people of the country. The value of their investments has already taken a hit from inflation and the devaluation of the currency, he added. 

If the government does not act wisely in relation to the restructuring of bonds, Mr. Wickramaratne, a former banker and economist says that the government will not be able to successfully resolve the financial crisis.

All MPs of the present government supported this motion for domestic debt restructuring. But, the opposition vehemently opposed local debt restructuring as it is not a good strategic move. The debt restructuring is not equitable in terms of local and foreign bondholders. It is also not equitable between EPF holders as opposed to private individuals, businesses, banks and primary dealers who have been unfairly favoured.  It is to be noted that the EPF/ETF has been unfairly targeted in the process of domestic debt restructuring.

“At the end of 25 – 30 years of employment, the EPF holder bears an accumulated reserve with low interest. It is estimated that the monthly return will cover between 20% – 35% of an individual’s cost of living in retirement.  The proposed 30% tax on EPF will further reduce income.”