The Hon. Anura Karunathilaka - Minister of Urban Development, Construction and Housing

¶ 01 Hon. Deputy Speaker, generally, when changes are made to State fiscal policy, the enabling legal framework must be amended. That is why we are considering amendments to the Inland Revenue Act, No. 24 of 2017, today. There are several widely accepted principles of taxation: reducing income and wealth inequality, efficient resource management, simplicity, ease of compliance, fairness, flexibility, and transparency. These are basic concepts we all know.

¶ 02 Among the proposed amendments, I wish to focus on changes to personal income tax. A key consideration in pay-as-you-earn (PAYE) taxation is fairness: ensuring affordability for the taxpayer; avoiding serious harm to their standard of living or to their family life; and maintaining equity.

¶ 03 We recall that under the 2023 IMF programme, steps were taken to increase Government revenue, and PAYE was revised in a manner many considered unfair. Some say the Budget proposals we bring are dictated by the IMF. However, even within an IMF programme, the Government must minimize adverse impacts on ordinary people. In 2023, doctors, engineers, accountants and many other professionals mounted strong protests against those unfair changes. None of them said they would refuse to pay taxes; they asked for fair taxation, transparency, efficient spending, and zero tolerance for corruption and waste. They organized as the Professionals’ Trade Union Alliance and engaged the Government. The response then was to tell them to speak to the IMF if they wanted changes. In some places, tear gas was used and protests were stifled. University academics also faced such measures. The relief now proposed for PAYE aims to restore fairness to those professionals who raised their voices. Within that context, we must evaluate the relief.

¶ 04 I will not dwell on every rate change. But let me present a few data points to show impacts on certain professions, beginning with my own field—university academics.

¶ 05 As at March, the starting gross salary of a Senior Professor is Rs. 529,397. Under the existing PAYE scheme, he pays Rs. 117,082.92. From April, his gross increases to Rs. 560,038. If the current regime continued unchanged, he would have to pay about Rs. 128,113 in PAYE. With the proposed relief, his PAYE will be about Rs. 118,383. Thus, when gross rises from Rs. 529,397 to Rs. 560,038, the PAYE increases only by around Rs. 1,000. By end-2027, his gross salary reaches Rs. 619,869. Without the current PAYE reform, his monthly PAYE would be about Rs. 149,653. With the reform, it will be about Rs. 129,153. So across a gross rise from Rs. 529,397 to Rs. 619,869, PAYE moves from about Rs. 118,383 to around Rs. 129,153—an increase of roughly Rs. 12,000.

¶ 06 Today, a Professor’s starting gross salary is Rs. 422,913 and he pays Rs. 85,948 as PAYE. By April, his gross rises to Rs. 468,292. Under the existing schedule, his PAYE would be Rs. 95,085. With the proposed relief, it will be Rs. 74,585. So while gross rises from Rs. 422,913 to Rs. 468,292, his PAYE falls from Rs. 85,948 to Rs. 74,585. By 2027, his gross climbs to Rs. 515,844. Under the existing regime, he would have paid about Rs. 112,204. With the proposed relief, he pays about Rs. 91,703—an increase of only around Rs. 6,000 versus today, while gross rises by roughly Rs. 73,000.

¶ 07 For a Senior Lecturer Grade II, the current starting gross is Rs. 295,798 and monthly PAYE is Rs. 33,739. By April, gross rises to Rs. 314,123. Under the existing schedule, PAYE would be Rs. 39,584. With the new relief, it will be about Rs. 21,889—so PAYE drops from Rs. 33,739 to Rs. 21,889. By 2027, when his gross reaches Rs. 345,216, his PAYE will decrease from Rs. 33,739 to around Rs. 31,065. So, in real terms, he pays less income tax.

¶ 08 This relief is not limited to university academics. It applies across professions paying personal income tax. To all taxpayers, especially professionals, we say: these changes reflect the current economic realities and risks. As the economy strengthens and can sustain further relief, a government of the National People's Power will continue to provide further easing.

¶ 09 People demand fair taxes and effective, corruption-free use of public funds. Let me highlight proposed allocations in the Budget funded by your taxes: Rs. 483 billion for roads, bridges and rail; Rs. 604 billion for health; Rs. 619 billion for education, including Rs. 135 billion for higher education; and Rs. 108 billion for drinking water and sanitation. These directly uplift people’s lives.

¶ 10 We are also changing the political culture: Ministers and MPs living more modestly, curbing waste of public money, and establishing a culture of proper use of public funds.

¶ 11 Regarding salary revisions, while no system can solve 100 per cent of issues, everyone’s take-home pay has increased. As the economy improves, we can revisit remaining concerns and implement solutions. Let us focus on the strengthening of the economy, the increase in salaries, and the relief provided by lowering PAYE rates. Let us all, across political and religious differences, come together to build a better country and better lives for our people. Thank you for the time.