Sri Lanka’s proposed property tax targets only rich, claims minister

Colombo, Jun 23 (PTI) The proposed imputed rental property tax would target only the 10 per cent rich population leaving out a larger section untouched, Sri Lanka’s State Minister for Finance Ranjith Siyambalapitiya said on Sunday.

This proposed tax would not even be implemented this year but would come into force in the first quarter of 2025, the minister said in a statement issued to the media.

Siyambalapitiya’s statement came after the opposition parties questioned claims made by the government that the proposed tax on housing, as part of an International Monetary Fund (IMF) bailout deal, is only limited to rich people.

The IMF’s staff report issued two weeks ago on the second review of the USD 2.9 billon programme said, “The introduction of an imputed rental income tax is critical to state revenue mobilisation efforts… an imputed rental income tax from owner occupied and vacant residential property would be an appropriate substitute.” Opposition leader Harsha de Silva earlier pointed out that the IMF programme documents clearly say taxes will be levied on owner-occupied houses on ‘imputed taxes’, not second houses, Economy Next reported.

De Silva, however, welcomed the exemption when President Ranil Wickremesinghe on June 18 made a promise in Parliament that the first house of a citizen will be excluded from the property tax.

With the issue still simmering on, Siyambalapitiya reiterated on Sunday: “Only 10 per cent of the population would be taxed, the rest of the 90 per cent would benefit from collecting this tax by the state.” The opposition slamming the proposal couldn’t have come at a worse time for President Wickremesinghe, who is also serving as the Finance Minister, as he is widely believed to be re-running for the presidential election scheduled to be held before mid-November.

The government has introduced tough reforms such as a rise in utility rates and direct taxes, Siyambalapitiya said and added that the government aims to reduce indirect taxes.

Earlier this month, the IMF disbursed the third tranche of USD 336 million from its USD 2.9 billion bailout package to Sri Lanka, even as it cautioned that the economy of the cash-strapped nation remains vulnerable and the path to debt sustainability is “knife-edged.” The third tranche under the Extended Fund Facility (EFF) arrangement was released during an executive board meeting of the IMF, the Washington-based global lender said in a statement.

With the release of the third tranche amounting to USD 336 million, the total IMF financial support disbursed so far to Sri Lanka under the bailout package is about USD 1 billion, the statement said.

In April 2022, Sri Lanka declared its first-ever sovereign default since gaining independence from Britain in 1948 and the unprecedented financial crisis led the then-president Gotabaya Rajapaksa to quit office. PTI CORR/GSP NPK GSP