Sri Lanka’s new tax structure reduces burden.

In a recent address to Parliament, Sri Lanka’s President unveiled proposed reforms to the country’s Personal Income Tax (PIT) system. These changes include raising the tax-free monthly income threshold from LKR 100,000 to LKR 150,000, allowing lower-income earners to retain a larger portion of their income. Additionally, the reform aims to adjust the tax brackets, offering significant savings for taxpayers, further strengthening Sri Lanka’s position as one of the least taxed countries in the region for lower-income groups.

While the President did not provide the exact tax rates for each bracket, PublicFinance.lk has estimated the new rates and brackets based on the proposed adjustments, which could extend to LKR 300,000 per month. These changes are expected to make the PIT system more progressive, benefiting a wider range of citizens, particularly those in the middle-income group. The revisions aim to ease the financial burden on taxpayers while ensuring that the system remains equitable.

Exhibit 1 below outlines the revised tax brackets and corresponding rates, offering a clearer view of how the proposed reforms could impact taxpayers across different income levels. The adjustments are expected to provide tax relief for many while maintaining the overall structure of the system, ensuring it continues to generate necessary revenue for the government.