New personal taxes trigger skilled worker migration

Millions of rupees went into the government coffers last month by companies in several industries after deducting the new income taxes from their staff salaries.

The top three apparel manufacturers have given close to Rs.1 billion in personal income tax by the employees last month, industry sources said. A renewable energy subsidiary of a large conglomerate that houses 150 staff had paid Rs. 10 million last month as personal taxes to the government. The CEO of that company said that the conglomerate has over 4000 staff and about 3000 of them would be earning more than Rs. 100,000 which is liable for tax.

The skilled worker exodus which started before the implementation of this particular tax was renewed with new vigour after the tax, economists said.

Dr. Saman Weerasinghe, former Ambassador to the Russian Federation and a top businessman, said that taxes are needed, but right now the implementation of such taxes is questionable. With the current economic crisis and high inflation, these taxes have completely broken the family system in middle-class families, he added. “Most families have housing loans, car loans, and things like that. A considerable amount from their salary was portioned out for these, but now it is much more. This is the main reason that we have a brain drain today.”

Rohan Seneviratne - General Manager of the Ceylon Electricity Board (CEB), told a panel discussion organised by the Sunday Times Business Club on Tuesday that the CEB has lost 80 engineers who found jobs abroad owing to the economic crisis.

CEOs and other top management in several firms that the Business Times spoke were not convinced that these taxes are put to proper use.

Janaka Boteju, Chairman Bernard Boteju Industries Pvt Ltd, said that there should be transparency in the cash that is collected by the government. He added that there is a certain lifestyle that individuals are used to and that has come down after the taxes.

Senaka Kekiriwaragodage, CEO NDB Capital Holdings said the bigger issue is that in most other nations, such as the UK, and Australia, most taxes have a deductible component. For example, the tax for housing loans is computed after deducting the mortgage cost.

Analysts say that in addition to income tax at 36 per cent being a direct tax, there are many other indirect taxes that consumers pay on top of this. They pointed out that for certain goods and services, consumers pay direct taxes. Notable examples are food and beverage, and telco. “There is a 300 per cent tax on vehicles. In fact, most vehicle loans comprise taxes. When building a house, there are high taxes on bathware and steel. So, for a middle-class employee, the new taxes will be eating into his monthly expenses added to the housing and vehicle loan,” an analyst said.

Most families have housing loans, car loans, and things like that. A considerable amount from their salary was portioned out for these, but now it is much more. This is the main reason that we have a brain drain today.”