By: Staff Writer
Colombo (LNW): The government has extended a date for pension funds and the Employees Provident Funds to exchange Treasury bonds to September 11 following a delay in enacting a penal interest rate for superannuation funds along with the pending Supreme Court case.
A legal amendment to change the Inland Revenue Act to charge 30 percent tax from superannuation funds instead of the current 14 percent, has been delayed amid the legal challenge.
Placing the entire burden of domestic debt restructuring on ‘captive’ institutions — the Central Bank and the EPF, which is managed by the monetary board— is an easy option for the government, eminent economic experts claimed.
But the favoured treatment of commercial banks and domestic government security holders compared to the EPF is an inequitable distribution of the burden of debt restructuring, they added.
Two bonds (9.00 percent 01 Sept 2023 and 11.20 percent 01 September 2023 bond) would be excluded from the list of eligible bonds as they will mature before the offer date. The bonds would also be excluded from the offers that had been accepted.
The participation threshold for 1 October 2023 (7.00-pct), 15 November 2023 (6.3 -pct) and 15 December 2023 (11.6-pct) would be changed to 50 percent.
The participation threshold for 1 October 2023 (7.00-pct), 15 November 2023 (6.3 -pct) and 15 December 2023 (11.6-pct) would be changed to 50 percent.
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, economic analysts said.
This government is now amending the income tax laws to impose a 30% income tax on EPF/ETF.
This tax will apply on all of 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.
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.
This government is now amending the income tax laws to impose a 30% income tax on EPF/ETF. This tax will apply on all of 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.
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. Proposed 30% tax on EPF will further reduce income.
‘Is this justified against low income workers?’ asked SJB, Parliamentarian Eran Wickramaratne issuing a special statement. 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, he added.
