Tax experts yesterday urged the government to provide further clarification regarding raising the Withholding Tax (WHT) from 5 percent to 10 percent.
As the measure includes a provision for the Inland Revenue Department (IRD) to issue non-deduction directions on a case-by-case basis, the expert argued that clearer communication is essential to ensure fairness and reduce confusion about how exemptions would be handled.
“Income tax policies should be given clear solutions and announcements. Even if a self-declaration system is introduced, imagine the time wasted and the anxiety it creates for the taxpayers,” Gajma & Co. Senior Partner N.R. Gajendran said addressing a virtual CMA Sri Lanka tax forum yesterday.
With the high cost of living, he stressed that people find it difficult to invest or save to pay these taxes.
According to Gajendran, a marginally skilled worker in Sri Lanka now has to earn at least Rs.100,000 to Rs.150,000 monthly, just to cover the basic living expenses.
This situation is also applicable to the high-income taxpayers, who now have to allocate a large portion of their incomes, which has led to an overall erosion of savings and investments in the country.
Therefore, the government should actually introduce incentives such as tax credits for long-term savings or tax exemptions that will encourage savings, according to Gajendran.
“We need structural reforms to provide tax reliefs for those who save or invest. Investment is crucial for GDP growth,” Gajendran said.
Reiterating his stance, Ranaweera Associates Managing Partner Athula Ranweera stated that the government should simplify how this is implemented to avoid various manipulations.
“I think the best thing is to go for a self-declaration system for the depositors by the institutions. We should encourage the IRD to introduce a simplified system and tax deduction system,” Ranweera said.