Lankans pay low taxes, want Scandinavian-style welfare - CBSL governor | Sunday Observer

Lankans pay low taxes, want Scandinavian-style welfare - CBSL governor

Dr. Indrajit Coomaraswamy
Dr. Indrajit Coomaraswamy

With the new tax structure raising many eyebrows amongst a section of the country’s taxpayers, the Governor of the Central Bank of Sri Lanka last week said it is interesting to learn that Sri Lankans want Scandinavian-type social welfare while paying Hong Kong rates of tax.

“Sadly that doesn’t add up. If we want to continue with our free education and free health, we have to pay taxes. We have one of the most regressive and unfair tax systems in the world,” said Dr. Indrajit Coomaraswamy.

Hong Kong is one of the most attractive places in the world for businesses, with a low-tax environment that goes back to the 1960s. However, the country’s Gini coefficient score - a system used to compare inequalities is one of the highest in the world with the richest 1% controlling the wealth equivalent to 80% of the country’s Gross Domestic Product.

Making his remarks at the Cambridge Knowledge lecture organized by the Cambridge Alumni Society of Sri Lanka, Central Bank governor, Dr. Coomaraswamy pointed out that Sri Lanka collects 83% of its tax revenue from indirect taxes, where the richest person and the poorest person are treated the same way.

“That cannot be right because the basic principle of any tax is fairness and the capacity to pay.

We have to move out from the indirect tax to direct tax ratio of 83:17 to about 60:40.

“That means people have to pay more direct taxes to have a fairer system and the new Inland Revenue Act tries to move in that direction,” explained Dr. Coomaraswamy.

Recently, Sri Lanka’s medical specialists threatened to withdraw from private practice if their requests for a revision to the tax structure were not heeded.

In response to their request, Sri Lanka’s Finance Minister Mangala Samaraweera said high-income professionals like doctors, lawyers, tuition masters and architects who are products of free education should pay their fair share of taxes.

“It is only fair that they step up and start paying their taxes in line with the new law – then as a government we can look at giving more subsidies for the people,” the Minister said in response.

According to the Inland Revenue Department (IRD), 69,000 new tax files have been opened in the past two months alone compared to the 400,000 total tax files that were opened in Sri Lanka to date.

Commissioner General of IRD, Ivan Dissanayake recently disclosed that total taxes collected by IRD from January 1 to June 13 this year amounted to Rs.276.7 billion compared to the Rs. 256 billion collected in the corresponding period last year.

“The government needs to be given a greater deal of credit for the tough reforms that it has undertaken in terms of revenue enhancement.

The increase in the VAT rate, removal of some exemptions, and introduction of the Inland Revenue Act that sought to simplify the tax structure and to widen the base were some of these measures,” Dr. Coomaraswamy highlighted. 

Comments

NO coomaraswamy lankans want to stop the crooked politicians and government officials like you siphoning the lankans money It is you and the crooked politicians and their families who get special treatment at government hospitals while the poor wait in line charge 20% university fees make doctors and lawyers pay back 50% of their education cost in the 10 years they start practising their proffession here or overseas

I am personally happy to pay taxes. In order to continue with Sri Lanka being a welfare state, high ranking Government officials should also be taxed, thereby increasing the tax base.

What the CBSL Governor says is correct, By living in a foreign country to my knowledge. People are leaving Sri Lanka and living in developed countries and say there wages are high comparing to Sri Lanka, but never mentioned about their higher Taxes and that's why they get many benefits like Welfare, Maternity, Child allowances, Medicare, Road accident insurance payments, Work accident payments, Elder care payments, Old age security payments, disabled payments and many, why they are heavily Taxed. People of the country should know. Our people wants to have higher wages and doesn't like pay Taxes. The government money means peoples money. Its like rolling business otherwise their is no money to full fill the state and the people. Over here poorest to richest are Taxed. That's why people say developed countries and the same way country has money. Main thing to do is wiped away corruption's, Bribery and other illegal activities. Then our country will be same as them and not a single Sri Lankan to leave the country by saying they are going for economical benefits or anything. That's the time our country Sri Lanka will fruitful and good future. Buddhusaranai,

Dear Governor, We are not opposed to taxes but is Govt spending our tax money responsibly ? Is this system equal ? If so why Duty Free grants are given to some ? Why only Private sector is taxed ? Why Special benefits are provided to Govt Workers like 1/3 Train seasons ? What have Govt done to punish those who did corruption and officers involved? Have they taken back their properties at least if not hailed ? In Sri Lanka we pay taxes for politicians to enjoy. Change it first.

Well said Mr Governor. In fact this country is in ruins because most of the public and so called leftists want as you say a scandinavian style welfare estate and pay nothing for it. We are a 'what is in it for me' society. Those who are powerful (including unions) get what they want. Thhose who gets a certain Z-score enters uni and want a Govt job with pension etc. But those who fail, the weak, gets nothing they even have to pay for their tution to be a welder or a mason. SAD!

It should be obvious that whatever we do, new IRD Act etc. Won't increase tax, with the tax administration we have. What we can do stop fee health, free education, free government jobs and all other frees. Then we can prosper. Else we fail. After all these frees are not free, only the corrupt individuals prosper.