Sri Lanka income tax responds strongly to rate reduction

Nov 26, 2013 (LBO) - Sri Lanka's income tax volumes showed the strongest gain following a cut in the rates, in the middle of an economic downturn the reduced most other collections, a finance ministry report showed. Sri Lanka's income tax collections rose 14.

4 percent to 154.7 billion rupees in the first nine months of the year, the highest rate increase among all tax types, while overall revenue growth was only 2.



7 percent.

The finance ministry said the higher collections were a "favourable consolidation of the impact of 2011 tax reforms which is aimed at lower rates and broader base.

"

In the 2011 budget the finance ministry cut rates in both corporate income tax and personal income taxes including pay-as-you-earn (PAYE) collected at source from employment income.

PAYE tax collections had surged 25.9 percent to 14.4 billion rupees, after a cut in the rate and an increase in the threshold with better compliance and higher salaries declared..

The income tax increase came as a general economic downturn reduced most other taxes.

Import based taxes were down 1.3 percent 332.1 billion rupees, with customs duty down 1.

7 percent to 58.5 billion rupees and excise taxes were down 3.





3 percent to 74.3