New taxes contributing to Sri Lanka’s brain drain
More and more information technology professionals are moving to Australia, the United States and the European Union following hikes in personal income tax last month. According to analysts, higher taxes are not bad per se, but this is not the right time. The Sri Lankan government also lacks transparency.
Colombo (AsiaNews) – New personal taxes are causing a brain drain in Sri Lanka, especially among information technology (IT) workers.
Higher taxation brought billions of rupees in taxes into the state coffers last month, but this is pushing more and more professionals to move to Australia, the United States and the European Union.
According to analyst Dhanushka Ramanayaka, the employees of three major garment companies paid nearly one billion rupees (US$ 2.75 million) in personal income taxes last month.
“Currently, we are experiencing a severe brain drain. At this rate, especially among IT professionals, engineers, university lecturers and medical professionals, in 10 years, the economy may come to a standstill,” said Maheshi Samaratunga, a software engineer employed in a Colombo-based US IT company, speaking to AsiaNews.
“Many software engineers working with me, especially married couples who are already burdened with housing loans and vehicle leasing, have submitted their resignations in order to leave the country.”
While “taxes are necessary, currently, their implementation is questionable,” said analyst Rohantha Semasinghe, Due to the current economic crisis and high inflation, they have completely wrecked some families, especially in the middle class. A big chunk of their salary goes to pay personal loans, but now the situation is worse.”
Some CEOs and top managers doubt that “taxes are put to proper use. There should be transparency in the way the government collects tax money.”
Many “individuals are used to a certain lifestyle and that has dropped after the taxes,” explained Sudarshini Lamabadusuriya, a senior lecturer.
“In most other countries, such as Australia and the UK, most taxes have a deductible component; for example, the tax for housing loans is computed after deducting the mortgage cost.”
Several experts note that “in addition to income tax at 36 per cent, which is a direct tax, there are many other indirect taxes for certain goods and services”, like “food, telecommunication and a 300 per cent tax on vehicles.”
“For a middle-class employee, the new taxes will be eating into his monthly expenses added to the housing and vehicle loan.”
Analyst Charitha Hewapathirana blames “Sri Lanka’s 2019tax cuts, which crippled its economy. The current economic crisis can be traced back to wrong political moves that snowballed into a massive crisis.”
While “new taxation rates can bring in necessary funds for the government, for the economy to recover, adequate expenditure rationalisation and macroeconomic restructuring are needed to keep inclusive progress”.
The analyst goes on to say that it will be “difficult to reach the desired goals without the tax system being 14.5 to 15 percent of GDP revenue by 2026.”
“It is necessary to monitor tax revenue collection and government waste, as well as cut down on unnecessary government expenditure, like tax money wasted on white elephant projects or for politicians’ benefits. [. . .] There should be a transparent mechanism.”
“The 2023 budget seeks to increase tax revenues by 69 per cent to RS 3.13 trillion, while reducing the budget deficit to 7.9 per cent, lower than last year's revised 9.8 per cent, in order to achieve high economic growth of 7-8 per cent through the social market economy.”