A strike has started against the income taxes imposed by the government. There are two types of taxes in a country.
1. Indirect taxes – taxes paid by all citizens of the country regardless of monthly or daily earnings. Goods and Services Tax (GST) is an example of this.
2. Direct Taxes – Taxes paid only by high income earners. Income tax is an example of this
Every family in Sri Lanka pays nearly Rs 28,000 taxes to the government every month. Due to the irregular tax system, people have to pay taxes regardless of whether they are rich or poor.
In this system,by one hand a poor person has given a Rs 4,500 as Samurdi subsidy and other hand government collects Rs 6,675 tax from them. Further government collects Rs 350 per day as tax from plantation workers who earn Rs 1150 per day. This is a tragedy.
70% of the total tax revenue in this country is collected from the Goods and Services Tax (GST). Same is imposed on all people. Accordingly, the extremely poor and the millionaire pay the ‘same’ amount of tax.
The number of companies and individuals paying a substantial income tax in Sri Lanka is 665. Number of Companies and individuals who pay more than 5 million tax per year is 132. Oops ! As per the existing system, Even the very poorer in the country pays Rs 300,000 taxes to the government.
Because of that mistake, not only poor people are suffering but also Sri Lanka has became a country with the lowest tax revenue. The happiest countries in the world have the highest taxes. And taxes in those countries are systematic. That is, the poor pay less tax. The tax paid by the rich is very high.
There are 2 solutions to fix situation in Srilanka
1. Reduction of indirect taxes that pays by all people. (Goods and Services Tax)
2. Increase in direct taxes that pays only by the rich (income tax)
Income tax in Sri Lanka was imposed accordingly. That is to collect more tax from high income earners.In developed countries of the world, 50% of tax revenue is income tax. Even Under the new system, it is 36% in Sri Lanka.
imposing of in income tax based with the earnings is correct decision. Whether the money collected as taxes is used efficiently by the government or not is another problem. But today’s strikes are not about that, but to turn the right decision upside down.
And it is a tragedy as well farce that the JVP, who talks about a socialist system and is ready to expropriate private property, goes on strike against newly imposed taxes on the rich.