Sri Lanka’s proposed tax hikes could force professionals out of the country as they discourage people who want to earn more and expand businesses, analysts say.
It will also hit the country’s middle income earners and the Middle class struggling to survive in skyrocketing inflation.
Sri Lanka’s proposed tax hikes could hit investments into stock markets from small timers as the new levies could wipe out a significant portion of disposable income, analysts say.
“These new tax hikes without considering the current inflation and cost of living will be the final nail in the coffin of the careers of professionals locally. They will look into migrate at any cost,” another analyst said.
The recent tax increases introduced by the government will result in massive social unrest, MP Patali Champika Ranawaka said.
“The lower middle class would fall into lower strata, while the upper middle class would become lower middle class because of tax increases. There will also be massive migration and Sri Lanka will become a human desert.
There will be social unrest at the end of the day.therefore the Central Bank and the Ministry of Finance will have to create a scientific tax regime,” the MP said in a special statement.
“There are no funds to pay salaries for the public servant. October is a difficult month. The Government cannot even think of how to pay salaries in November.the situation will be the same in December.
Government anticipate that it will be able to generate some funds with tax increases. Government is also forced to issue treasury bonds at a high rate of 37 per cent.the incumbent Minister of Finance and Central Bank Governor is following a similar approach just like their predecessors.
Taxes have been increased to sectors which cannot bear it by any means. Therefore, it is wrong to impose taxes without considering the situation of society. One should understand that tax increase could cause destruction,” the MP added.
The MP said the decision to make everyone who earns a monthly salary more than Rs 100,000 pay income tax would adversely affect a majority of both public servants and private sector workers.“This is the real situation though Rs 100,000 seems to be a high figure,” he therefore said.
“The sharp increase in personal income tax rates would discourage employment, negatively affect lives of the middle-class families and specially in an environment of high inflation could increase brain drain,” Danushka Samarasinghe, Chief Executive Officer/Director at Nation Lanka Equities (Pvt) Ltd said.
He said the tax proposals “seem to be more of a knee-jerk measure in boosting government revenues” in the short term though it could have negative medium-long term impact.
“The 30% tax rate could be a disincentive for investment and job-creation. Sectors which enjoyed preferential tax treatment would be disproportionately affected though it could be argued as creating a level playing field.
