Opposition MP Ajith P. Perera told Parliament on Wednesday that the government has introduced three new taxes and raised seven existing ones, disputing President Anura Kumara Dissanayake’s statement that no new tax has been imposed since he took office.
Perera listed the new measures as a 15 percent income tax on service export earnings, an 18 percent value added tax (VAT) on digital services and a 5 percent withholding tax on certain payments for professional services.
He also named increases in taxes on interest income, capital gains, financial services, alcohol, tobacco, and betting and gaming businesses.
Perera pointed out that President Dissanayake also holds the Finance portfolio, and questioned how closely the President follows the changes. He accused the President of misleading the public while households face financial pressure. He also said the government has raised the tax burden without making full use of the revenue it collects.
His remarks follow a recent statement by the President that his administration has not introduced a single new tax and has significantly reduced some existing ones. The President has also pledged further tax reductions in the coming Budget, which he is due to present on 12 November.
Background
The President’s statement and Perera’s reply turn on how a “new tax” is defined. The government’s position, as the President has put it, is that it has cut some existing taxes and added none. The Opposition’s position is that extending a tax to a new activity or raising a rate amounts to a new burden on the public.
VAT is a consumption tax added to the price of goods and services. A withholding tax is deducted from a payment at source, before the recipient receives the money, and is credited against the recipient’s final tax bill. Taxes on interest income, capital gains and financial services affect savers, investors and bank customers, while taxes on alcohol, tobacco, betting and gaming are paid mainly through retail prices and operator costs.
The Budget is the government’s annual statement of planned revenue and spending. The President, as Finance Minister, presents it to Parliament, and the tax changes it announces usually take effect through later legislation or gazette orders.
What it means
For salaried workers, savers and small businesses, the Budget on 12 November will show whether the President’s pledge of further tax reductions covers the taxes Perera named, or only other measures. The Budget speech and the accompanying documents will set out which rates change and when.
For freelancers, exporters of services and professionals who are paid by Sri Lankan clients, the rates Perera mentioned on service exports, digital services and professional payments decide how much they keep from each invoice. Anyone affected can check current rates on the Inland Revenue Department’s website.
