Government servants cry foul over taxing allowances
Sri Lanka’s top bureaucrats have blasted the government’s imposition of Pay- as- You- Earn Tax (PAYE) on their all inclusive salary including allowances granted to them for expenses as part of performing their job.
According to the new Inland Revenue Act (IRA), employees will have to pay a higher level of taxes on employment income with the maximum rate increasing to 24 per cent from 16 per cent with effect from April 1.
Taxing of allowances specially granted to meet expenses exclusively incurred in the performance of official duties of public servants was highly unjustifiable, several senior Sri Lanka Administrative ( SLAS) officials told the Business Times.
This tax is imposed on telephone bill payments, and allowances granted for official housing facilities, fuel for official traveling, transport, entertainment, as well as payment for the driver.
“Taxing housing facilities given specially for divisional secretaries was unbecoming as the relevant officials are compelled to rent or lease a house in the respective authoritative area under the regulations,” one official pointed out.
Several state institutions such as the Central Bank, state banks, Ceylon Electricity Board, Ceylon Petroleum Corporation were violating the Inland Revenue Act and the principle of equal treatment by paying the PAYE tax of employees.
PAYE is meant to be paid by the employee and not by the employer, he said adding that all these issues had been brought to the notice of the President, the Prime Minister and the Finance Minister.
If the government fails to remedy this situation, senior public sector officials will have no other option other than resorting to work stoppage collectively paralysing the government service, he warned.
Amid pressure from top government servants, the government is mulling a revision to the advance income tax deduction from salaries of officials, after the new IRA increased PAYE tax by including allowances, presidential secretariat sources said.
The Finance Ministry will issue new circular granting some tax relief for the affected senior