Sri Lanka ends tax discrimination

Nov 22, 2010 (LBO) – Sri Lanka’s government will raise an employee income tax threshold and end discrimination that exempted state workers from paying tax, President Mahinda Rajapaksa told parliament. The PAYE (pay as your earn) tax threshold is to be raised to 600,000 rupees a year or 50,000 rupees a month, Rajapaksa said in a speech presenting the government budget for 2011.

Applicable tax rates for employees earning over 600,000 rupees a year will be reduced subject to a maximum rate of 24 percent, he said.

Employees will also not be required to file tax returns unless they have other sources of income.

Those earning above 50,000, including state workers, will have to pay tax, ending a discriminatory system under which private sector workers paid taxes while those employed by the bloated state sector, seen as inefficient, were exempt.

“I also propose to apply the new PAYE system to the public sector as well,” Rajapaksa said.

“This will correct the long-standing discrimination between public and private sectors.”

State sector workers an rulers were originally exempt from income tax in the later on the pretext that their salaries were much lower than private sector wor