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Imputed rent tax will not be imposed on those who cannot afford: Siyambalapitiya

24 Jun 2024 - {{hitsCtrl.values.hits}}      

The proposed imputed rent tax that will come into effect after 1Q25 will not apply to the primary assets of the wealthiest 10 percent but for a small percentage of their secondary assets, State Minister Finance Ranjith Siyambalapitiya said.

“We will not propose a tax which the people cannot afford. This will benefit those who have to pay in the long run. This is not an indirect tax. No one can change this. The payer is the one who will bear the burden. 

“Therefore, it is wrong to say that the end result will adversely affect the common man,” Siyambalapitiya stated. 

He noted that the government hopes to implement the tax after the completion of the first quarter of next year. The richest people in our society, accounting for almost 10 percent of the population, will be the ones facing this tax,” Siyambalapitiya said. 

He went on to assure that both the tax-paying 10 percent and the remaining 90 percent of the population will benefit from the implementation as it paves the way gradual reduction of indirect taxes .  

A recently published report by the International Monetary Fund (IMF) made reference to a proposed property tax to be implemented as an imputed rental income tax.

The IMF asserted that the introduction of an imputed rental income tax is critical to sustain revenue mobilisation efforts. This tax will be introduced by April 1, 2025, with an exemption threshold and a graduated tax rate schedule to ensure that the GDP would only fully materialise by 2026.

Imputed rental income is the deemed income that homeowners could earn if they rented out their homes. The tax is imposed on the income of individuals, rather than real property itself, and thus raises central government revenue in accordance with the constitution.