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Lanka’s tax hike could force professionals to migrate – analysts
By SHIHAR ANEEZ
ECONOMYNEXT – Sri Lanka’s proposed tax hikes could force professionals out of the country as they discourage people who want to earn more and expand businesses, analysts say.President Ranil Wickremesinghe, who is also the island nation’s finance minister, through a gazette has proposed new tax rates, which if passed would bring Sri Lanka’s tax structure almost in line with 2019 before former president Gotabaya Rajapaksa removed many taxes in December that year.
The increase of tax revenue has become a must after the island nation declared sovereign debt default in April and as it is seeking a backing from an International Monetary Fund (IMF) for a loan and reforms.Anybody who earns more than 100,000 rupees monthly will have to pay tax in the proposed new tax amendment. That amount is 40 percent of the earlier threshold. The tax slabs of 500,000 rupee is taxed at an incremental 6 percent up to 36 percent.In addition to this, the corporate tax has been increased to 30 percent from a maximum of 24 percent.
However, analysts say the proposed tax hike will be seen as a disincentive because President Wickremesinghe is bringing the 2019 tax rates after an economic crisis and when the inflation is running at 70 percent.
“The sharp increase in personal income tax rates would discourage employment, negatively affect lives of the middle-class families and specially in an environment of high inflation could increase brain drain,” Danushka Samarasinghe, Chief Executive Officer/Director at Nation Lanka Equities (Pvt) Ltd told EconomyNext.
“Employees remain disproportionately affected since taxed at source with a sharp drop in disposable incomes which could also create a problem in personal debt servicing. This will be medium-long term negative for the country. A flat personal tax rate could have been more equitable and not discourage growth in incomes.”
He said the tax proposals “seem to be more of a knee-jerk measure in boosting government revenues” in the short term though it could have negative medium-long term impact.
“The 30% tax rate could be a disincentive for investment and job-creation. Sectors which enjoyed preferential tax treatment would be disproportionately affected though it could be argued as creating a level playing field, which is a positive. Question remains whether this would discourage export-oriented industries and trigger a shift.”
Sri Lanka’s tax to GDP ratio was 12.7 percent in 2019 when Wickremesinghe was ousted as the prime minister after his party lost the elections to former president Gotabaya Rajapaksa.The revenue, however, dropped to 8.7 percent of the GDP in last year after Rajapaksa slashed taxes despite warnings of consequences including a possible debt crisis.President Wickremesinghe has said the tax rates should be raised to 2019 level to increase the revenue.
“The 2019 tax system is not going to be the same now. Those higher tax rates were affordable at that time because the cost of living was lower and the inflation was 6-7 percent,” a financial analysts said asking not to be named.
“The new tax rates will force to reduce people’s disposable income and this will be a huge burden on the people who have been paying tax genuinely. Many professionals who want to stay in Sri Lanka and contribute to the economy will leave the country.”
Already Sri Lanka has seen many professionals leaving the country due to the unprecedented economic crisis and a prolonged political crisis with many uneducated lawmakers have been dictating what educated professionals must do with less participatory decision making, analysts say.They also said with prices of fuel, cooking gas, electricity, and water have been raised along with over 50 percent of depreciation in the rupee, many professionals have adjusted their consumption to suit the shrunk disposable income.
“These new tax hikes without considering the current inflation and cost of living will be the final nail in the coffin of the careers of professionals locally. They will look into migrate at any cost,” another analyst said.
The U.S. Embassy in Colombo welcomed the U.S. Sports Envoys to Sri Lanka, former National Basketball Association (NBA) and Women’s National Basketball Association (WNBA) players Stephen Howard and Astou Ndiaye, from June 8 through 14.
The Public Diplomacy section of the U.S. Embassy said that it would launch a weeklong basketball program intended to harness the unifying power of sports, made possible through collaboration with Foundation of Goodness and IImpact Hoop Lab.
While in Sri Lanka, Howard and Ndiaye, both retired professional basketball players, will conduct a weeklong program, Hoops for Hope: Bridging Borders through Basketball. The Sports Envoys will lead basketball clinics and exhibition matches and engage in leadership sessions in Colombo and Southern Province for youth aged 14-18 from Northern, Uva, Eastern and Western Provinces, offering skills and leadership training both on and off the court. The U.S. Envoys will also share their expertise with the Sri Lanka Basketball Federation, national coaches, and players, furthering the development of basketball in the country. Beyond the clinics, they will collaborate with Sri Lankan schoolchildren to take part in a community service project in the Colombo area.
“We are so proud to welcome Stephen and Astou as our Sports Envoys to Sri Lanka, to build on the strong people-to-people connections between the United States and Sri Lanka,” said U.S. Ambassador Julie Chung. “The lessons that will be shared by our Sports Envoys – communication, teamwork, resilience, inclusion, and conflict resolution – are essential for leadership development, community building, equality, and peace. The U.S. Sports Envoy program is a testament to our belief that sports can be a powerful tool in promoting peace and unity.”
SJB Colombo District MP Mujibur Rahuman in parliament demanded to know from the government the reasons for CEB suspending the leave of all its employees until further notice from Thursday.
MP Rahuman said that the CEB has got an acting General Manager anew and the latter yesterday morning issued a circular suspending leave of all CEB employees with immediate effect until further notice.
“We demand that Minister Kanchana Wijesekera should explain this to the House. This circular was issued while this debate on the new Electricity Amendment Bill was pending. There are many who oppose this Bill. The Minister must tell parliament the reason for the urge to cancel the leave of CEB employees,” the MP said.However, Speaker Mahinda Yapa Abeywardena prevented Minister Wijesekera responding to the query and said that the matter raised by MP Rahuman was not relevant.
The Chartered Institute of Personnel Management (CIPM) successfully concluded the 8th Annual CIPM Symposium, which took place on 31st May 2024. Themed “Nurturing the Human Element—Redefining HRM in a Rapidly Changing World,” the symposium underscored the pivotal role of human resource management (HRM) in today’s dynamic global landscape. Since its inception in 1959, CIPM has been dedicated to advancing the HR profession through education, professional development, and advocacy, solidifying its position as Sri Lanka’s leading professional body for HRM.
Ken Vijayakumar, the President of the CIPM, graced the occasion as the chief guest. The symposium commenced with the welcome address by the Chairperson, Prof. Arosha Adikaram, followed by the Web Launch of the Symposium Proceedings and Abstract Book by the CIPM President. The event featured distinguished addresses, including a speech by Chief Guest Ken Vijayakumar, President of CIPM, and an address by Guest of Honor Shakthi Ranatunga, Chief Operating Officer of MAS Holdings Pvt. Ltd., Sri Lanka.
The symposium also featured an inspiring keynote address by Prof. Mario Fernando, Professor of Management and Director of the Centre for Cross Cultural Management (CCCM) at the University of Wollongong, Australia.
Vote of Thanks of the inauguration session was delivered by Dr. Dillanjani Weeratunga, Symposium Co-chair.
The symposium served as a comprehensive platform for researchers to present their findings across a wide range of critical topics in HRM. These included Cultural Diversity and Inclusion, Talent Development and Retention, Ethical Leadership and Corporate Social Responsibility, Adapting to Technological Advancements, Mental Health and Well-being at Work, Global Workforce Challenges, Employee Empowerment, and Reskilling and Upskilling.
The plenary session was led by Prof. Wasantha Rajapakse. Certificates were awarded to the best paper presenters during the valedictory session, followed by a vote of thanks delivered by Kamani Perera, Manager of Research and Development.
The annual symposium of CIPM was a truly inclusive event, attracting a diverse audience that spanned undergraduates, graduates, working professionals, research scholars and lecturers. This widespread interest highlights the symposium’s significance in the field of HRM, offering a unique opportunity for everyone to network and learn from scholarly brains.The CIPM International Research Symposium was sponsored by Hambantota International Port, Sri Lanka Institute of Information Technology (SLIIT), E B Creasy & Co. PLC, and Print Xcel Company.
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