The cash strapped Government has begun levying an indirect tax of Rs.1105 from a four member family per day with effect from yesterday January 01 2023, in accordance with budget 2023 tax proposals.
It has planned to recover an indirect tax revenue of Rs. 2218 billion per year from 2.2 million rich and the poor of this country increasing the per capita tax burden to Rs. 176 per day.
Therefore, the burden on indirect tax of Rs. 100,818 falls on a person per annum disproportionately on the low and high income earners.
However, the Central Bank has claimed that the growth isn’t much of an impediment when raising revenues through indirect taxes, although it may not be the best way to go about raising taxes.
This was in addition to the income tax hike to the maximum of 36 percent while removing concessions and exemptions, with a view to raise government revenues to fix the budget under an International Monetary Fund (IMF)-backed economic rescue programme.
Accordingly, the tax-free threshold applicable on an individual income has been brought down to Rs. 100,000 a month or Rs. 1.2 million a year, from an earlier Rs. 3.0 million, making every resident or non-resident Sri Lankan liable for personal income on taxable income in excess of Rs. 100,000 a month, effective from January 01, 2023.
The budget 2023 aims to raise Rs. 1763 billion in taxes on goods and services which is nearly double the amount the government is expecting to raise in 2022.
The indirect taxes account for 56 percent of total tax revenue and the share increases to 71 percent of total tax revenue when the taxes on external trade is also considered.
Meanwhile, a senior tax expert reiterated the need to remove the Value Added Tax (VAT) exemptions on over 100 items except for health and education, bringing down the VAT free threshold to further lower levels and imposition of withholding tax on deposit interest at 10 percent.
According to him, each of these proposals could rake in an additional Rs. 100 to Rs. 200 billion in revenues relatively easily.
Sri Lanka will phase out CESS, a para tariff in three years starting from January 2023. Ports and Airports Levy, another border tax will be phased out in five years.
Instead standard import duty will be raised from 0, 10 and 15 percent to 0, 15 and 20 percent.
Customs Import Duty on a total of 378 selected HS Codes will be revised under the Export Development Board Act, No.40 of 1979, effective from November 15, 2022.
A Surcharge Tax will be charged at the point of importation, on diesel, petrol and crude oil.
