In Sri Lanka, taxes and MPs have been in the spotlight after it was revealed that MPs in the country reduced their tax liability from Rs. 76,000 to Rs. 17,000 thanks to an amendment made by the Inland Revenue Department (IRD).
According to a NumbersLK study, the amendment benefited MPs the most because it significantly reduced the amount of tax they had to pay on non-cash benefits.
According to the new instructions, if government employees, including MPs, receive a government-provided vehicle, only 25% of the vehicle and fuel allowances are taxable income. Likewise, only 25% of the communication allowance is taxable income.
This effectively resulted in a two-tiered tax system, with one set of rules for the entitled and another for ordinary law-abiding citizens.
It should be noted that this amendment does not apply to private-sector employees, who must still pay taxes on 100% of their fuel/transport/vehicle/communication allowances. Regular government employees, like those in the private sector, are still required to pay taxes on 100% of their employment income, including salary, overtime pay, allowances, bonuses, and rewards, as a result of the passage of this amendment.
According to media reports, Members of Parliament (MPs) received a tax refund of approximately Rs. 55,000 in March for taxes paid in January. If true, this must be the quickest reimbursement in IRD history, especially given that MPs will be required to pay more than the reimbursed amount within the next few months.
Critics have called MPs’ and some entitled government employees’ preferential treatment “appalling,” and have urged parliamentarians to address the issue. The revelation has sparked a debate about the fairness of Sri Lanka’s tax system and whether it serves all citizens equally.
