The average monthly tax burden of a Sri Lankan family is 28,000 rupees, Professor Wasantha Athukorala of Peradeniya University’s Department of Economics and Statistics said yesterday.
He said that a poor person in Sri Lanka will be given 4,500 rupees as Samurdi subsidy and 6,675 rupees will be collected from the government as tax. He said that those who earn Rs 1,150 per day, such as plantation workers, pay Rs 350 as tax daily.
70% of the total taxes in Sri Lanka are Goods and Services Tax (GST), as such even the poorest have to pay it. The rich and the poor pay the same tax. The reason for this situation is the informality of the tax system. Because of that mistake, Sri Lanka is the country with the lowest tax revenue in the world.
Sri Lanka’s tax revenue as a percentage of GDP is 12%. The happiest countries in the world have the highest tax revenues. 50% in Denmark, 43% in Finland, and 45% in Sweden. Because the taxes paid by the rich people in developed countries are very high. Less privileged people pay very little tax.
The situation in Sri Lanka is upside down, the poor and the rich in Sri Lanka pay the same tax. Otherwise, the government collects more taxes from poor people. Facts being so,
1. Indirect taxes i.e. taxes imposed on all people, like GST, should be reduced
2. Direct taxes, such as income taxes, which are payable only by the rich, should be increased
Recently Mahindananda said in a hair-straightening speech in the Parliament that only 665 companies and individuals pay taxes in Sri Lanka, further only 132 people pay more than 5,000,000 taxes per year. But even the extremely poor person also pays more than 350,000 tax to the government every year
This situation changed somewhat during 2015-2017. During that time, the tax collected from the rich citizens, i.e. direct tax revenue, increased from 8% to 15.2%. Due to this progressive policy, the finance minister then Ravi Karunanayaka was awarded as the best finance minister in the Asia Pacific region.