State Minister Harsha de Silva said the calculation method of PAYE tax should be revised.
"There has been an outcry by private sector employees against the method of incorporating allowances in calculating taxable income for PAYE tax since last month based on the new Inland Revenue Act. I believe it is a fair request that the calculation method, not the law, should be reassessed," de Silva, an economist, said in a Facebook post yesterday.
He also added, "The direction by the Inland Revenue Department on calculating allowances for PAYE taxes should have been much smoother given that the highest tax bracket has also increased to 24 percent. The calculation change is too drastic and sudden. I believe this must be revised whilst sticking to the medium term objective of changing the composition of direct:indirect ratio (from current 20:80 to 40:60) so that taxes become more socially equitable.
Even though this is a matter of the IRD, and not under us, I brought it up with both the Minister and State Minister of Finance and we had a series of fruitful discussions with Eran and the senior officials.
I have suggested a revision in the calculation of taxable allowances also keeping in mind the increase in the final marginal rate. There is no need for any change in the law, but IRD directions on what are taxable allowances. I am certain that the ministers and senior officials will agree and we can arrive at a more equitable and smooth way to calculate PAYE from next month; something hopefully most would appreciate."
