Govt. could renegotiate with IMF on personal income tax, says Cabinet Spokesperson

The government could renegotiate with the International Monetary Fund (IMF) on the possibility of exempting allowances other than salary payments of state employees from personal income taxes, according to Cabinet Spokesperson and Minister Bandula Gunawardana.

While stressing that the staff agreement reached for an IMF programme is not the final agreement, Gunawardana indicated that there’s some limited scope to renegotiate some of the terms in the agreement before securing IMF Executive Board’s approval for the proposed programme.

Accordingly, he shared that the government is preparing to renegotiate the possibility of exempting allowances other than salary payments of state employees from income taxes.

However, he reiterated that the newly imposed taxes and tax rates cannot be brought down as demanded by trade unions.

“If there’s an alternative way without IMF, we are open to listen,” he added.

Gunawardana noted that the government plans to provide relief to state employees and to the public by end of this year after reaching an agreement on debt restructuring with the country’s creditors.

According to Dr. Kapila Senanayake, Director General of the Department of Financial Policy, the tax on personal income was imposed as a short-term strategy to resurrect the country from the existing economic situation, and this new tax system in Sri Lanka is of a meagre percentage compared to other Asian countries.

Senanayake also stated that there is an opportunity to discuss short-term strategies to provide some relief by considering trade union leaders’ and civil organisation representatives’ views and suggestions on the new tax system.