Sri Lanka income taxes collections up following lower rates

July 03, 2013 (LBO) - Sri Lanka's income tax collection have risen sharply in the first few months of the year, despite a slowing economy after rates were brought down as part of tax reforms in 2011, according to a finance ministry report.

The finance ministry said it reflected "a favourable consolidation of the impact of 2011 tax reforms which aims at lower rates and a broad base".

Income tax had risen 14.2 percent to 62.2 billion rupees in the first four months of the year, and tax revenues from wage income (pay-as-you-earn) had risen 43.

5 percent after rates were cut and threshold lifted.

The finance ministry said higher wage income and employment liable to such taxes, collection of tax at source as final tax and improved compliance from employers.

Corporate and non-corporate income and profit tax had gone up 7.9 percent due to ending tax holidays and good performance in banking, food and beverage and tourism, the finance ministry said.

Income taxes were devised by Western states as emergency war taxes at rates of around 1-3 percent as book-keeping systems became sophisticated enough for rulers to track income staring with Britain at 0.08 percent to fight Napoleon in 1798.

The rates then went up as much as 90 p