The corporate and personal taxes have been reformed while the sin industries will be further taxed, Finance Minister Ravi Karunanayake said.
“I propose to restructure the present corporate income tax rate structure to a two-rate band system with a higher rate of 30 percent and a standard rate of 15 percent,” he said. He noted that the 30 percent rate will be applicable to the profit and income of betting and gaming, liquor, tobacco and banking and financial services which include the insurance and leasing industry and the trading activities. “In line with the government policy of creating a society free of tobacco, liquor and betting and gaming, I propose to impose surtax at the rate of 25 percent of income tax liability,” he added.
All other sectors will fall under the 15 percent rate band. He said that the past system of companies requesting different rates and exemptions had caused issues for the government in transfer pricing, tax planning and policy interpretation.
“The identified long term concessions such as institutional, miscellaneous and other exemptions granted without having any policy rationale will be revisited,” he added Meanwhile, he said that the individual Pay As You Earn (PAYE) tax, under which in the past a person earning more than Rs. 750,000 annually was liable to progressive taxation rate of up to 24 percent,
will be reformed.
“I propose to increase the tax free annual threshold to Rs.2.4 million. The PAYE tax over and above this limit to be charged at a uniform 15 percent and the taxable income will be inclusive of all the earnings by the employee with no
exemptions,” he said.