December, 3, 2018
Despite massive ‘Tax Cut’ that was announced on 1st November that came soon after the Prime Minister and Minister of Finance and Economic Affairs Mahinda Rajapaksa was appointed on a ‘Surpirsed Friday’ on October 26th 2018 by the President Maithripala Sirisena, general public have recently discovered that none of the banks in the country had removed the ‘Withholding Tax’ from Savings and Fixed Deposits.
“Even this month end any person in Sri Lanka could see that ‘Removal of Withholding Tax’ was not done by Banks and they have deducted 5% Withholding Tax from all Savings and Fixed Deposits too ” a concerned citizen Gamini Sarathchandra said.
“It is a question whether the Banks had not been informed by the Finance Ministry, or Central Bank to remove the Withholding Tax” Shehan Kularatne another young entrepreneur pointed out.
On 1st November it was announced to general public that the President, and the Prime Minister and Minister of Finance and Economic Affairs have raised concerns regarding the serious setback in the economy as reflected in the persistently low growth rates during the last 3 years along with the rising cost of living. Accordingly an official communique said that the Prime Minister is of the view that ill-conceived economic and financial policies of the previous Government have led to this situation by marginalizing local entrepreneurs, industries and domestic production.
Initially in the Budget 2015 proposals earlier under Mahinda Rajapaksa’s government of 2014 introduced a single withholding tax rate of 2.5% irrespective of the amount of interest to deposits and later it was increased to 5% and made applicable to all deposits and savings under the 2018 Budget proposals of Yahapalanaya Government. As a result the tax was increased from 2.5% to 5% from the interests earned from Fixed Deposits and Savings Accounts of Banks and Financial institutions according to the new income tax act which will came into effect from 1st of April 2018. However it was stated that the new tax revision will be applicable, if the income of a senior citizen is over Rs.1.5 million, according to new income tax act. That time in April 2018, arrangements were made to tax 5% from the interests of the deposits of immigrants workers and a 5% of tax was imposed according to new income tax for the deposits of emigrants workers despite the taxes in various forms that had been charged from 2% to 10% on their deposits.
“In the statement it was said that “Withholding tax will be exempted on Interest on any savings and fixed deposits maintained in any financial institution, however we see none of the banks had not removed the tax” Sashika Sewwandi who is another concerned citizen on the Tax cut said.