Tax System in Sri Lanka

By Engr. Kanthar Balanathan

DipEE (UK), GradCert (RelEng-Monash), DipBus&Adm (Finance-Massey), C.Eng., MIEE, 

Former Director of Power Engineering Solutions Pty Ltd, Consulting Electrical Engineers

 

1.     Illiteracy in Sri Lanka

 

Quote from Google Ref:

 

According to our estimates, 15,085,783 persons or 92.64% of the adult population (aged 15 years and above) in Sri Lanka can read and write. Accordingly, about 1,198,962 adults are illiterate. The literacy rate for the adult male population is 93.63% (7,360,933 persons). 500,960 are illiterate.

 

Conflict of interest in interpreting literacy rates. Reading and writing do not mean that people can understand what they are reading.

 

Perceptive Cognitive Skills: Quote Ref:

 

Traditionally, perceptual-cognitive skills have been defined as the ability to identify and process environmental information, and integrate them with pre-existing knowledge and motor capabilities, to select and execute adequate actions (e.g., Marteniuk, 1976).

 

Now, how many people have perceptive cognitive skills in SL?

 

Most unskilled workers may have zero ability to understand special and mathematical skills.

 

2.     Taxation

 

Currently, every Tom, Dick and Harry in SL is on the road protesting against the tax system. Even the Sri Lankan diaspora (most of them) is opposed to the tax system.

Let us discuss the population in SL:

 

The total population in SL is 22.16 million.

 

The parliament consists of the following: Quote: Of the 225 members, 196 are elected from 22 electoral districts, which are multi-member. The remaining 29 MPs are elected from National Lists allocated to the parties (and independent groups) in proportion to their share of the national vote.

 

Most of the Sri Lankan diaspora is questioning whether the MPs are paying taxes. The important thing to understand is that most MPs have not even paid their electricity, and water bills and maybe rates for their own houses. The importance here is the total number in parliament is only 225 No against the 22.16 million people. Even if half of the number works and must pay tax, it’s their obligation to satisfy the rules of the tax system.

 

Protesting taxation may be a criminal act. Government cannot give everything free to the people. SL government provides free health, education subsidised transport and other essential goods. Further, the corrupt system of parliament drives the country to poverty. The people shall understand how many unskilled workers get more than Rs 100,000 / month.

 

 

Quote Ref: https://www.icalculator.info/sri-lanka/salary-example/120000.html

 

A person receiving Rs 120,000 per year must pay only Rs. 7,200.00 per year. The person receives Rs 9,400 per month. Is this amount adequate for a family to survive as per the commodity price schedule prepared by the Central Bank?

 

Tax Rate Taxable Income Threshold

6% Income from Rs 0.00 to Rs 500,000.00

12% Income from Rs 500,000.01 to Rs 1,000,000.00

18% Income from Rs 1,000,000.01 to Rs 1,500,000.00

24% Income from Rs 1,500,000.01 to Rs 2,000,000.00

30% Income from Rs 2,000,000.01 to Rs 2,500,000.00

36%IncomefromRs2,500,000.01andabove

Read more at: https://www.icalculator.info/sri-lanka/income-tax-rates/2023.html

 

The minimum wage for an unskilled worker is Rs 12,500.00 per month. Quote Ref; https://salary.lk/salary/minimum-wage

 

The government states a minimum wage of Rs 400.00 per day. Can we get the labour for Rs 400.00 per day in the rural areas? No.

 

In 2014, the writer understood that unskilled workers were demanding Rs 1000.00 per day for unskilled work in the North. How about now? Government specifications and laws are different from the actual status of wages in the private industry.

 

https://numbers.lk/analysis/ceb-engineers-salary-scales-and-allowances-leak.

With highly paid engineers at the CEB, how come the electricity supply is in trouble?

It is assumed that Central Bank carries out extensive statistical studies on commodity prices and the near estimate of Rupees per month required by a family per month. Based on this the tax department is expected to prepare the tax schedule in consultation with the finance ministry and the Central Bank.

Commodity prices are evaluated and judged whether families can survive, which is the reason Central Bank carries out the statistical analysis. There shall be a balanced income with the commodity prices. Either the commodity prices shall drop down, or the salaries be increased for families to survive.

What can be found now in SL is that there is a large difference in income between professionals and unskilled workers. The unskilled workers are expected to survive on what they receive, which is impossible at the current time with quite high commodity prices.

The important thoughts are that everyone shall pay their taxes. All the micro-enterprises shall be expected to register with the tax department and every breadwinner shall receive a tax file number. With the current computerised system in SL, every person shall have a tax file number which could be linked with the NIC. Citizens shall be honest to pay all their dues in time to the government to receive their free health, education, subsidised transport etc. This may help the government to bring down commodity prices. The tax schedule shall not be prepared arbitrarily.

To be a more effective and efficient system the three sections are expected to coordinate, cooperate, and communicate with each other to prepare a sound tax system.

 

Government cannot expect a family to survive on Rs 400.00 per day with the current commodity prices.