‘Local tax system overlooks ability of public to pay taxes and poses questions of legitimacy’

By Hiran H.Senewiratne

‘The local tax system has become unbearable for the taxpayers of the country. It has completely overlooked their ability to pay taxes to the government. Consequently, the legitimacy of the tax system could be legally challenged by the people, a top tax expert said.

‘The tax structure of any country should take into account the principle of the ability of the public to pay taxes. This has been completely overlooked by the government. Taxes have now become unbearable for taxpayers, Senior Partner Gajma and Company, N. R. Gajendran, told a Rotary Club Colombo South forum held at the Hotel Galadari recently.

Gajendran added: ‘High taxes being unbearable for taxpayers could sometimes pose challenges for the government when it comes to collecting taxable income. The current tax system is neither fair nor reasonable, because it has to be based on the principle of the capacity of the public to pay. An unfair tax system could impact the people very seriously, so much so, some people could go to the extent of skipping meals and looking for alternatives in terms of consumption.

‘The concept behind taxing is not mere revenue generation for the government. The system has to encourage savings and investments as well and has to be a great encouragement for continued business activities in the country.

‘In other countries, people pay income taxes at 40 percent to 50 percent but don’t grumble much because they see value for the money they pay. But our people’s concept of value for money has depreciated many fold.

‘This country had an expenditure bill of around Rs. 2.9 -3 trillion just before the crisis. This year it is going to be Rs. 7 trillion. Therefore we are a bankrupt country and we are still borrowing.

‘Amid these developments the government has a challenge. There were a lot of expectations that the tax threshold would be increased in the 2024 budget. The people who do odd jobs can earn Rs 100,000 in certain months but a lot of these jobs have been lost because the SME sector has been wiped out due to current currency depreciation.

‘In the early 90s our tax to GDP was about 22 to 24 percent. Now it has come down to 11 percent. It is time to bring the people who are evading taxes, like doctors, lawyers and some teachers, into the tax net.’