Super-rich escapes proposed wealth tax

Pressure by highly influential persons saw the Government withdrawing a proposal, planned in the budget, to impose a tax on the super-rich, authoritative sources said.

However, the tax is expected to be introduced later through a different process.

Instead, to raise revenue, a series of new taxes were introduced in addition to increasing import duties and cess, all aimed at lifting revenue by at least Rs. 41 billion. A more worrying tax for the working class is the new proposal to levy a tax on those who earn Rs. 50,000 from different sources of work.

According to official sources, the maximum wealth in the country is confined to a handful of people and yet, a super-rich tax from these people would yield considerable revenue for government coffers.

The super-rich tax proposal (wealth tax), which was exclusively reported in the Business Times and triggered ‘pain’ and ‘anxiety’ in the minds of the super-rich category, is now being considered for introduction as a new amendment in the Inland Revenue Act with the approval of the cabinet, the sources said.

A senior government official said there is a need to move away from the present structure of a high share of indirect taxes in the tax revenue to a high share of direct taxes.

The exact modality of taxing the super-rich has not been ascertained and the government is weighing its pros and cons before its introduction because of upcoming elections, he said adding that the finance ministry was very careful in introducing new taxes The income tax regime which was reformed recently has been left largely as it was, except some changes including the revision of tax rates for professionals and persons employed by more than one employer or serving in different places and receiving the benefit of using a private motor vehicle, he disclosed.

Professionals such as medical doctors, engineers, architects, lawyers , pilots , navigation officers software engineers, accountants, researchers or senior economics who earn an income of up to Rs 25 million will have to pay a maximum rate of 12 per- cent, and the maximum tax rate for professionals earning between Rs. 25 million and Rs. 35 million will be 14 per cent.

The maximum rate of income tax applicable on income of over Rs. 35 million will be 16 per cent he revealed.

The previous tax rate was 24 – 35 per cent. The 2014 budget has reduced the tax rate on professionals to widen the tax base and to make them tax complacent, he said.

But an economic expert noted that it should have been other way round as these professionals could be included in the super rich category.

On the other hand persons who earn over Rs 50,000 per month by serving in different places will be subject to 10 per cent income tax.