PAYE tax: Treasury won’t budge

A senior Treasury official yesterday declared that there would be “no exceptions” in the implementation of the Pay-As-You-Earn (PAYE) tax.

The official stressed that the tax was a precondition for obtaining a USD 2.9 billion bailout package from the International Monetary Fund (IMF).

Protests against the unprecedented increase in the PAYE tax are growing, with employees of more sectors demanding concessions.

While the increase in the PAYE tax was “a painful decision amidst the current economic crisis,” the official said the extent of the crisis had left the Treasury with no option.

Over the past few days, there have been increasing requests from various sectors for concessions with regard to the PAYE tax.

District and divisional secretaries, for example, have already written to the Finance Ministry claiming that the PAYE Tax was being deducted from their salaries in an unfair manner. They have asked that the tax be applied only for financial benefits and not for the entertainment allowance.

Employees of the Central Bank, other state and private banks, doctors and university lecturers are among others who protest the PAYE tax.

The Treasury official noted that all those who were protesting against the PAYE Tax were highincome earners and said the Finance Ministry was not prepared to grant concessions to different groups as it would be unfair.

He, however, said the government was not planning to continue with the current tax increase indefinitely. “We need to obtain the IMF package. Once that is approved and we receive at least the first tranche, then we can consider making some concessions.”

He noted that the government was only targeting to recover Rs. 100 billion through the PAYE Tax.

The government can only expect the situation to improve if it obtains the IMF package, known as an Extended Fund Facility (EFF), State Finance Minister Shehan Semasinghe said.

“We plan to stop money printing by April, and this means it will be more difficult to manage expenses. We are only a USD 800 million economy,” he added.

He claimed the government has received encouraging signals from India, China, Japan, the UK and creditor nations making up the Paris Club regarding Sri Lanka’s debt restructuring programme.

Meanwhile, the Attorney General is to file a motion before the Court of Appeal (CA) tomorrow (30) requesting permission to present facts before Court in relation to the interim order issued by the CA preventing the Justice Ministry and Inland Revenue Department from collecting PAYE taxes from judges. The order is valid until February 10.

A three-Judge bench comprising Judges Sobitha Rajakaruna, Dhammika Ganepola and Neil Iddawala issued the interim order on Wednesday after considering two petitions filed by the High Court Judges’ Association and the Judiciary Service Officers’ Association.