Economy Decoded! Let’s talk about tax!

By Yasu-e Karunaratne

The year 2022, has thrown a lot of curve balls at us:  the Economic crisis, increased inflation and cost of living, increased loan interest rates and now increased tax. Or rather, Sri Lanka actually needs this proposed tax policy for the economy to recover. 

Amendments to the Inland Revenue Bill was gazetted on October 11 2022. However, the bill was challenged in the Supreme Court of Sri Lanka before a three-member Supreme Court Bench. The three-member Supreme Court Bench comprised of Justice Buwaneka Aluwihare PC, Justice MaduN.B. Fernando PC and Justice Janak De Silva. The petitioners contended that the proposed bill was too taxing on the public and thus it was inconsistent with the constitutional rights of the people. 
 

However, the three judge bench ruled on the November 16, 2022 that the Inland Revenue (Amendment) Bill was not inconsistent with the constitution. The petitioners argued that it was prejudicial to charge a high increase in taxes, within an economic crisis and to an unscrupulous government. 
 

According to the bill Income tax rates have increased drastically, where on average it has increased by almost 78% (average considering varying income tax brackets ranging from Rs 200000 taxable income to Rs. 1.5 million taxable income). Another noticeable feature in the bill is that the tax relief threshold has reduced from Rs. 3 million to Rs. 1.2 million.

The Income tax rates have increased drastically, where on average it has increased by almost 78%. What does this all mean? Watch our explainer here

https://youtu.be/nowy80yDpD0