Taxes and MPs have been in the spotlight in Sri Lanka after it was revealed that MPs in the country reduced their tax liability from Rs. 76,000 to Rs. 17,000 through an amendment made by the Inland Revenue Department (IRD).

According to a study done by NumbersLK, the amendment made MPs the largest beneficiaries as it significantly reduced the amount of tax they had to pay on non-cash benefits.

The new instructions state that if government employees, including MPs, receive a vehicle provided by the government, only 25% of the vehicle and fuel allowances are considered taxable income. Similarly, only 25% of the communication allowance is considered taxable income. This effectively created a two-tier tax system, with one set of rules for the entitled and another for the regular law-abiding citizens.

It is important to note that this amendment does not apply to private-sector employees who are still required to pay taxes on 100% of their fuel/transport/vehicle/communication allowances. The introduction of this amendment did not benefit regular government employees either, as they are still required to pay taxes on 100% of their employment income, including their salary, overtime pay, allowances, bonuses, and rewards, much like those in the private sector.

According to some media reports, Members of Parliament (MPs) received a tax reimbursement of around Rs. 55,000 in March for the taxes they paid in January. If true, this must be the quickest reimbursement in the history of IRD, especially considering the fact that MPs would eventually need to pay more than the reimbursed amount within the next few months.

Critics have called the preferential treatment of MPs and some entitled government employees "appalling," and are urging parliamentarians to address the issue. The revelation has sparked a debate about the fairness of the tax system in Sri Lanka and whether it is serving all citizens equally.