By: Staff Writer
August 15, Colombo (LNW): The Sri Lankan government has suggested to the International Monetary Fund (IMF) that income tax relief be provided by adjusting tax brackets, according to President Ranil Wickremesinghe’s office.
This comes as tax burden discussions gain traction in the ongoing presidential election campaign.
President Wickremesinghe indicated plans to offer relief on personal income tax soon, with two proposals under consideration—one from the Treasury and a counterproposal from the IMF. These plans aim to benefit middle-income groups, including academics.
As part of economic reforms agreed upon with the IMF, Wickremesinghe’s administration increased the top personal income tax rate from 24% to 36% and lowered the tax brackets to 500,000 rupees after the country faced a severe economic crisis in 2022.
While this move boosted government tax revenue, it also drew criticism from millions of public and private sector workers due to the higher tax rates and reduced brackets.
In light of stronger tax revenue performance this year, the government has proposed to the IMF an adjustment in the Personal Income Tax brackets from 500,000 to 720,000 rupees, aiming to ease the burden on mid-level taxpayers impacted by recent tax changes.
The IMF has suggested modifications to this proposal, offering more relief to lower-income groups, similar relief for mid-level earners, and slightly less for higher-income earners, while keeping the core proposal intact.
Opponents in the presidential race have suggested renegotiating IMF agreements and lowering taxes, although they have yet to present a detailed economic plan. Additionally, the government has increased the value-added tax (VAT) from 8% to 18% over the past two years.
Wickremesinghe’s strict economic reforms have contributed to Sri Lanka’s economic recovery, though they have resulted in reduced disposable income for many citizens who now face direct tax deductions from their salaries.
The President outlined a series of economic targets, including achieving a primary budget surplus of 2.3% by 2025-2032, reducing the public debt-to-GDP ratio to 95% by 2032, and maintaining inflation below 5%. He emphasized that these terms are non-negotiable and necessary for the country’s continued economic recovery.
