President Anura Kumara Dissanayake informed Parliament yesterday that the Government has successfully reached an agreement with the IMF to raise the Pay As You Earn (PAYE) tax exemption threshold from Rs. 100,000 to Rs 150,000.
The President stated that at the outset of the discussions on the IMF third review, the Government resolved to raise the PAYE tax-free threshold due to considerable discontent among professionals, including university academics, medical practitioners and banking officials, regarding this tax.
“Additionally, the first band of the Personal Income Tax (PIT), taxed at 6 percent, was extended from LKR 600,000 to LKR 1 million. “Accordingly, a person earning a salary of Rs. 150,000 per month is 100 percent tax exempt.
He added that an individual earning Rs. 200,000 is exempted from 71 percent of the tax they would have otherwise paid.
“An individual earning Rs. 250,000 monthly is exempted from 61 percent of the tax, while an individual earning Rs. 300,000 is exempted from 47 percent of the tax. An individual earning LKR 350,000 is exempted from 25.5 percent of the tax,” the President added.
The President announced that the vehicle market in the country will be reopened gradually, as it encompasses various industries and entrepreneurs.
He further stated that the import of passenger transport buses and vehicles designated for special purposes resumed on December 14, while the import of private vehicles will commence in February next year.
The President added that extensive discussions have been held with the Central Bank, and estimates have been prepared regarding the amount of dollars expected to be allocated for these imports.
“These calculations ensure that the economy can sustain the impact. To rejuvenate our economy, reopening the vehicle market is an essential step,” he said.
“This market includes a range of industries and entrepreneurs dependent on its operations, making it unsustainable to keep it closed indefinitely. Concerns about triggering a dollar crisis are unwarranted,” he added.
The President said that he will ensure that the 2022-23 crisis never recurs in the country. “Under our leadership, we will never allow a situation like 2022-23 to happen in our country. In 2028, this Government will still be in power, and we will have achieved stability and resilience,” he added.
He also said that the Government will reach its goal of increasing country’s foreign reserves to US$ 15.1 billion by 2028. “This is not just an aspiration; it is a commitment that we are diligently working to fulfil,” he added.
“As of today, we have restructured US$ 12.55 billion in debt, including US$ 1.7 billion of defaulted debt. Of this, US$ 12.55 billion, US$ 11.5 billion was borrowed during the 2015–2019 administration.
The President also informed Parliament that the Government has exempted yogurt and other dairy products from Value Added Tax (VAT) with the objective of improving the nutritional standards of children.
“Export service tax rate, previously set by the previous government at 30 percent, has been reduced to 15 percent. An agreement was reached to increase the withholding tax from 5 percent to 10 percent. Many ordinary elderly citizens and retirees rely on interest income from their deposits for their livelihood.”
He also added that the deadline for the Parate law which was set to end on December 15, is expected to be extended up to March 31, 2025.
“Since the public’s money is in the banking system, we must ensure the security of the banking system. The collapse of large financial institutions has caused immense hardship for the people,” he added.
“We are working to extend the Parate law until March 31, 2025. During discussions with bank loan holders, a deadline of December 31 has been given to restructure their loans. Those with loans between LKR 25 million and LKR 50 million, excluding interest, can also negotiate loan restructuring with banks.
The President added that a monthly allowance of Rs. 6,000 will be given to schoolchildren whose families are facing financial difficulties.
“Due to financial hardship, some children are not attending school, and funds have been allocated in this Budget to provide the necessary support to those children”. “We hope to provide a monthly allowance of Rs. 6,000 to these children. Additionally, we hope to include children who were previously excluded from the benefits in this scheme,” the President said.