Harsha proposes new PAYE tax scheme focused on professionals’ interests

Monday, 9 October 2023 00:36 –      – 634

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SJB MP Dr. Harsha de Silva 

  • Claims new PAYE tax scheme will address mass brain drain faced by country 
  • Stresses Govt. has underestimated PAYE tax revenue leaving room for introducing much favourable PAYE tax rates 
  • Says tax reforms proposed by SJB will not cause loss to Treasury, but ensure collection of Rs. 91 b annually
  • Assures a future Government led by SJB will implement proposed PAYE tax reforms

Main Opposition Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva yesterday proposed an alternative Pay As You Earn (PAYE) taxation system aimed at addressing the significant outflow of professionals from the country.

Addressing a press conference in Colombo, the MP said the SJB had engaged in discussions with the Professionals Trade Union Alliance, which comprises more than 40 trade unions representing diverse sectors. The MP noted that during these discussions, the issue of the substantial PAYE taxes paid by professionals was a central topic of concern.

“We conducted a thorough and comprehensive analysis of their proposals. However, as a responsible Opposition, we are unable to advocate for a reduction in taxes. Our stance has consistently emphasised that the decline in tax revenue is primarily attributable to the tax incentives granted by Gotabaya Rajapaksa’s Government,” he explained.

“The debate is not if taxes should be paid. Instead, the call is to stop unfair taxation and to collect taxes from evaders,” he added.

The MP said the SJB is therefore introducing a fresh PAYE tax scheme designed to be more advantageous for professionals, potentially encouraging them to remain in the country.

According to him, the new scheme will not cause any loss to the treasury and still ensure the Government meets its tax revenue targets.

He said the SJB scrutinised tax-related statistics for the preceding nine months and discovered that the Government had generated Rs. 107 billion in PAYE tax revenue during this period, surpassing its initial projection of collecting Rs. 100 billion for the entire year.

“It is consequently probable that the Government will collect Rs. 125 billion in tax revenue for this year. The current revenue is based on a tax compliance rate of 70%. If PAYE tax compliance were at 100%, then the Government would have generated Rs. 175 billion this year,” he observed.

The MP said therefore it is clear the Government had underestimated the PAYE tax revenue. “It is evident the call by PAYE taxpayers to revise the scheme is fair,” de Silva noted.

Accordingly, the SJB has now proposed to levy 6% for incomes over Rs. 100 000 with progressive increments of 4% for each 50 000 slab up to Rs. 250 000. It has also proposed a maximum tax rate of 24% for those earning Rs. 500 000 or more along with a 15% surcharge on monthly salaries exceeding Rs. 750 000.

The MP said this reform is expected to raise Rs. 83 billion, and with the surcharge tax on monthly salaries exceeding Rs. 750 000, the total expected revenue will rise to Rs. 91 billion. “This move not only maintains Government revenue targets but also significantly eases the tax burden on our middle-class professionals, potentially curbing the brain drain phenomenon that affects our nation’s progress,” he said.

He pointed out that although emigration has its attractive factors, there are also other compounding factors that drive professionals to depart the country, including the burden of high taxes during times of crisis.

“No one else has put forth an alternative plan. It’s easy to call for tax reductions, but the public is well-informed. They are aware of the challenges we are confronting. We extend an invitation to all professionals to engage in discussions with the SJB. We will introduce these proposals for PAYE tax reduction. We believe that those who voluntarily contribute will also be encouraged, recognising it as their civic responsibility in the event of a reduction,” he said.

The MP also assured the public that the SJB will implement this tax scheme under a Government led by the party in the near future.

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