Effective tax rate on banks and finance firms down by 9%

The overall effective tax rate on banking and finance companies will be reduced by 9 percent to 43 percent from 52 percent with the removal of Debt Repayment Levy and Nation Building Tax (NBT), according to Colombo-based equities broker, SC Securities.

The Cabinet of Ministers this week approved a special Cabinet paper presented by President Gotabaya Rajapaksa to implement the economic revival programme mentioned in his election manifesto, which included the removal of Debt Repayment Levy (DRL) and Nation Building Tax (NBT) on banking and 
financial institutions. 

The move is expected to significantly improve profit after tax (PAT) of banks and finance firms. 

Further, 0.05 percent debit tax on transaction slapped on banks and financial institutions was also abolished. 

The previous government increased the taxation on the banking and financial sector while introducing new taxes such as DRL.  

The banking sector was critical of the increased tax burden and cautioned that would have a knock down effect on other sectors of the economy as high taxes constraint the banking sector’s ability to support other industries to spur economic growth.