one of the lowest rates in recent years, the economy in 2019 is estimated to have grown by only 2.6%.
The target of the inland revenue department for economically challanging year was to collect Rs. 799 billion and the department has succeeded in collecting Rs. 785 billion in 2019.
The provisional collection figure was revealed to the media on Friday by the IRD Commissioner General Nadun Guruge. He said that the IRD’s performance was good considering the fact that in 2018, the revenue collection was Rs. 650 billion and reflects a 21% increase.
Last year the IRD had opened over 10,000 new tax files following engagement with tuition masters who are considered to be higher income earners. Tapping the other segment, doctors, had been via imposing a Withholding Tax in private hospitals. The IRD had also filed 434 cases against defaulters last year.
Guruge said the IRD hasn’t finalised a revenue target for 2020 as it is awaiting information from the Ministry of Finance.
However he suggested that following a series of tax relief granted by the new Government of President Gotabaya Rajapaksa, revenue in 2020 is likely to be lower but pick up in aggregate demand will enhance revenue collection in the medium term.
The reduction in VAT rate from 15% to 8% and increase in the VAT threshold to Rs. 75 million per quarter from Rs. 3 million previously, will see a revenue loss of Rs. 143 billion.
Apart from VAT relief, the new Government also abolished Nation Building Tax (NBT). The NBT of 2% imposed on liable turnover will be removed in respect of goods and services supplied, and 1% at wholesale point. The Economic Service Charge (ESC) of 0.5%, too, was abolished.
The Government also announced removal and/or cut in corporate taxes. For example, income from Agriculture, Fisheries and Livestock will be exempted from income tax, with effect from the year of Assessment 2019/2020.
The Income Tax Rate applicable to the construction industry will be reduced from 28% to 14%, with effect from the year of Assessment 2019/2020. Religious institutions are fully exempted from income tax, with effect from 1 December 2019.
Interest for income up to Rs. 250,000 per month is exempted from the Withholding Tax (WHT), with effect from 1 January. Income of an individual up to Rs. 3,000,000 per annum from any source of income will be exempted from income tax and the excess income to that amount shall be liable for income tax at the progressive rates of 6%, 12% on each tax slab of Rs. 250,000, and 18% on the excess, with effect from 1 January.
Tax-free threshold of the employment income of all public and private sector employees for the purpose of Pay-As-You-Earn (PAYE) will be increased from Rs. 100,000 to Rs. 250,000 per month and the excessive personal income will be liable for income tax at the progressive rate of 6%, 12% on each tax slab of Rs. 250,000, and 18% on the excess, with effect from 1 January.