Opinion

Should only private sector employees pay income tax?

Published

3 years ago

2023/01/31

Sahan Weerasooriya

File photo of a recent protest against tax hikes

By Sanjeewa Jayaweera

Who currently amongst those who receive a salaried income is not on the streets protesting against the need to pay income tax? The obvious answer is only those working in the private sector. The private sector is often slammed for its reluctance to criticise the government for everything wrong with our country. So their reticence may once again result in only private sector employees paying income tax if the government caves into the demands of the public sector employees and trade unionists.

Based on media reports and television visuals, most state sector employees and those working in state-owned enterprises are on the streets demanding that they not be subject to income tax. Yes, a few say they don’t mind paying income tax but at a lower rate and whilst some demand greater transparency regarding how taxpayer money is spent. However, the overall impression created is that state sector employees don’t want to pay income tax.

As someone who worked in the private sector for nearly three decades and paid significant amounts as income tax, I, too, despised the lack of transparency and equity. However, I did not have the luxury of coming to the streets, refusing to pay the tax, or seeking judicial intervention. I had no choice. My employer deducted the tax and remitted the balance to my bank account.

Shockingly, those protesting against paying income tax are not on the breadline. I see there are two segments. The first lot is mostly public sector employees who are at least in middle management. The second is those in state-owned enterprises earning significantly high salaries and overtime despite being overstaffed.

Those working in the public sector who are out on the street are mostly university graduates who benefited from free education, demanded and received a government job, and earned a pension they never contributed to post-retirement. So their reluctance to pay income tax is perplexing, although many would put it down to the entrenched entitlement mindset.

GMOA IS ONCE AGAIN AT THE FOREFRONT

As usual, the Government Medical Officers Association (GMOA) has been the most vociferous of those objecting to increased income tax rates. That is not surprising because even in 2015, they went to the supreme court seeking relief from paying income tax at the highest rate then of 24%. When they failed, they approached the government requesting that doctors be categorised as part of the small and medium enterprises (SMEs) subjected to only 14%!

So it is unsurprising that they do not want to pay income tax at 36%. It amazes me that doctors, despite benefiting from free university education, the right to engage in private practice, and regular car permits have a great reluctance to pay income tax at the same rates as others. Many stories are circulating about how doctors ask patients to settle their fees in cash, particularly post-surgery, to avoid income tax on their fees.

The good doctors have been joined by judges, university professors, university teachers, engineers and bankers. The only lot that has not joined the protests are those working in the department of Inland Revenue! It would be ironic but not surprising if they do.

It is a shocking indictment of our country’s social fabric that the most supposedly educated citizens feel that they should not be paying income tax and that only those employed in the private sector should bear the income tax burden.

THE GOVERNMENT AND PARLIAMENT ARE NOT WALKING THE TALK

Having said that, I certainly endorse those who protest, saying there is a lack of will on the part of the government to reduce state expenditure and, of course, a lack of transparency as to how our taxes are spent and that rampant corruption is going unchecked.

The appointment of cabinet ministers and state ministers well above what is required solely for political expediency is a case in point. That those appointed are inefficient and some stand accused of corruption makes it even harder to digest.

The much-debated expenditure allocation of Rs 200 million for the independence day celebration whilst asking ordinary citizens to tighten their belts is proof of utter insensitivity and an entrenched mindset of political entitlement. Moreover, the explanation given by the President that the world might think that the country lacks the financial resources to celebrate independence day has left me and many other millions totally incredulous.

Several international aid agencies have assessed that over five million of the population cannot adequately feed themselves, and malnutrition among children is at an all-time high. In addition, foreign and local correspondents have filed media reports of the dire situation in our country. As such, the world is aware of our predicament, and this fact should not escape the President and his cabinet. So who are they trying to deceive?

A principle of good leadership is being able to “walk the talk.” In that respect, the President and his cabinet have been woefully lacking. My criticism is not just limited to the current President and cabinet. The parliament, which includes those in the opposition, can easily demonstrate their commitment to austerity measures that they demand from us by voting to curtail their benefits, such as closing down the parliamentary restaurant where it is claimed that sumptuous meals are served. In the overall context of government expenditure, it might be a meagre amount. However, they need to be seen “walking the talk”.

A media report reported that Rs 800 million had been spent on refurbishing a residence occupied by former President Mahinda Rajapaksa. If this report is indeed correct, then it is an abominable act by someone who keeps repeating that he is with the common person.

A recent report that the Kurunegala Municipal Council has spent Rs. 60 million to remove a stone at a construction site where a building was being constructed for a Maternity and Child Clinic, whereas the approved cost was Rs. 9.3 million reflects the corruption that permeates all state institutions. That none will be charged and jailed for this offence is guaranteed.

I have highlighted a few minor examples of taxpayer money being robbed and wasted. It is, therefore, not surprising that some feel that being subjected to income tax is unfair.

WIDEN THE TAX NET AND IMPOSE A 10% WITHHOLDING TAX ON INTEREST INCOME

There is no doubt that the tax net should be widened. Many liable to tax are not doing so as they are wilfully avoiding tax payment, with many not having a file at the IRD. It was recently reported that as many as 113 members of parliament do not have tax files. In many conversations, a question is raised whether all traders in Pettah have a tax file. From my experience in the private sector, I know that most wholesalers and distributors are either not paying taxes or what they pay is significantly understated. It is generally believed that most of the 500,000 grocery stores are not within the tax net. The IRD is at fault for not forcing these miscreants to register.

An eminently sensible proposal by Dr Nishan De Mel, head of the research agency Verite is to increase the withholding tax (WHT) on interest income to 10 per cent. He has argued that the additional tax collected would enable the government to give a tax reduction to those earning salaries above Rs 100,000 to maybe Rs. 500,000 per month. His suggestion is based on the assumption that most of our country’s “super rich” are underpaying taxes. Taxes collected as the source is guaranteed income for the state. An argument that may be put forward against this is that it will penalise pensioners who may not be liable for tax. The IRD issuing a tax direction can resolve this by confirming that the recipient is not liable for tax. The reluctance of the government to adopt the suggestion is perplexing, if not surprising.

THE NEED TO INCULCATE PAYING OF INCOME TAX AT A YOUNG AGE

Returning to why most state sector employees are reluctant to pay income tax, I believe that the reluctance has been ingrained in their DNA by successive governments by exempting them from income tax. This is because so many good social attributes are taught, and people are exposed to them at a young age.

In my case, my parents inculcated in me that I have a social responsibility to those underprivileged and, of course, the need to adhere to the law of any country I live. At 18, when I worked part-time as a petrol station attendant in the UK whilst studying, my salary was subject to income tax. Despite my nominal wage, I was conditioned to the need to pay income tax. It is the same discipline I adhered to during my working career, and even after my retirement pay my taxes every quarter without any underpayment or delay. It is the same for all private sector employees in our country, where the employer deducts income tax from the salary. So they are conditioned at an early age to the proverb, “Nothing is certain in life other than death and taxes.”

Those employed in state-owned enterprises have gotten used to the employer bearing the tax on their behalf. So the new rule that the employer will no longer be allowed to absorb the tax is causing them much distress. Yet, shockingly, such a scheme has been in existence. The mindset of state employees was illustrated when recently, an employee of the Ministry of Finance justified this practice by saying, “What does it matter whether the employer bears the tax? After all, the IRD receives the tax” It is a shocking reflection of the prevailing attitude.

It is a universally accepted social principle that those better off must contribute a fair share towards maintaining those less well off and other services that the state provides, either free or at subsidised price levels. The responsibility of paying income tax is even more critical in a society that has accepted free education and free health care should be a right of every citizen. It is, therefore, difficult to comprehend why our supposedly educated citizens who have immensely benefited from free education are now unappreciative of the need to repay the state and the citizens a fair share of their income. I am shocked that university professors and teachers, who are assumed to be a fountain of knowledge and appreciate social responsibilities, are also out on the street protesting against the increase in income tax rates. The same applies to those at the Central Bank, who should understand our economy’s perilous state more than others.

All News Advertisement

Up Next

The real Ranil report and Aragalaya 3.0

Don't Miss

The inverted October coup in May 2022

Click to comment

Opinion

U.S. foreign policy double standards and Iran’s Iron theocracy

Published

20 hours ago

2026/03/11

Sahan Weerasooriya

The world’s most theatrical stage

Welcome to the Grand Circus

If global geopolitics were a TV show, it would be cancelled after the first season for being too unbelievable. Consider the plot: the world’s largest arms exporter lectures others about peace; a government that executed over 500 people in a single year tells its citizens it governs by divine law; and international bodies created to enforce rules seem to apply those rules with remarkable … flexibility. Welcome to the real world of international relations, where the rules are made up and the principles don’t matter.

This analysis examines two of the most consequential actors shaping global instability today: the United States of America, a democracy that can’t quite decide whether it believes in democracy, and the Islamic Republic of Iran, a theocracy that has perfected the art of punishing its own people for simply existing.

Episode I: The United States, ‘Do as I Say, Not as I Do’

The Democracy Export Business

The United States has, for decades, positioned itself as the global guardian of democracy, freedom, and human rights. It is a noble brand. The marketing budget alone, in the form of military expenditure at $886 billion in 2023, is staggering. And yet, the product being sold and the product being delivered have often been … different things.

The CIA-backed coup of 1953, codenamed Operation Ajax, removed Iran’s democratically elected Prime Minister Mohammad Mosaddegh and reinstated the autocratic Shah Mohammad Reza Pahlavi, primarily to protect Anglo-American oil interests.

Nuclear Exceptionalism: The World’s Worst-Kept Secret

The United States currently holds approximately 5,044–5,177 nuclear warheads (depending on the source and year), while Russia being the largest with a stockpile estimated at approximately 5,580 warheads. yet it leads international campaigns demanding that other nations not develop nuclear weapons. This is a bit like the world’s most heavily armed person standing at the door of a gun shop, telling customers they cannot purchase firearms.

Furthermore, Israel is widely believed to possess 80–90 nuclear warheads. The United States has never imposed sanctions on Israel for this. India and Pakistan, both outside the NPT, were rewarded with nuclear cooperation deals after the tested nuclear weapons.

The Saudi Arabia Paradox

Perhaps, no relationship illustrates U.S. foreign policy hypocrisy more vividly than Washington’s alliance with Saudi Arabia. The Kingdom is an absolute monarchy with no elections, no free press, where women were legally barred from driving until 2018, and where the murder of journalist Jamal Khashoggi, carried out, according to U.S. intelligence, on orders from Crown Prince Mohammed bin Salman, resulted in … arms sales continuing and diplomatic ties intact.

The United States sold Saudi Arabia over $37 billion in arms between 2015 and 2020, weapons used in a Yemen war that the United Nations described as one of the world’s worst humanitarian catastrophes. Yet the U.S. simultaneously held press conferences about human rights. The cognitive dissonance is not a bug. It is the feature.

Iraq: The Weapons of Mass Distraction

In 2003, the United States invaded Iraq on the basis of alleged weapons of mass destruction (WMD) that did not exist. The invasion resulted in an estimated 150,000–1,000,000 Iraqi civilian deaths depending on methodology, the displacement of millions, the destabilization of an entire region, and the rise of the Islamic State, none of which appeared in the original brochure. The officials responsible for this foreign policy catastrophe faced no international tribunal. No sanctions were imposed on the United States. Several architects of the war are today respected media commentators.

Meanwhile, the International Criminal Court (ICC), an institution the United States has never ratified, is expected to hold others to account for far lesser offenses. As of 2024, the U.S. has actively sanctioned ICC officials who attempted to investigate American personnel for potential war crimes in Afghanistan.

Episode II: Iran, The People’s Nightmare

Iran’s political system is built on the concept of Velayat-e Faqih, the Guardianship of the Islamic Jurist, a political-theological doctrine holding that a senior Islamic cleric should govern society. In practice, this means that Supreme Leader Ali Khamenei, unelected by the general public, holds veto power over all branches of government, controls the military, the judiciary, state media, and the powerful Islamic Revolutionary Guard Corps (IRGC).

The elected president, whether ‘moderate’ or ‘hardliner’, operates within a system where real power resides with the Supreme Leader and an unelected Guardian Council that vets all candidates and can disqualify anyone it deems insufficiently Islamic. In the 2021 presidential election, the Guardian Council disqualified over 590 candidates out of 592 who applied. The word ‘election’ is being used loosely here.

Women’s Rights: A Systematic Dismantling

Since the 1979 Islamic Revolution, Iranian women have endured one of the most comprehensive rollbacks of rights in modern history. Within weeks of the revolution, mandatory hijab laws were imposed, women were barred from serving as judges, and the minimum marriage age for girls was reduced to 9 years (later revised to 13 in 1982). This was not incidental policy; it was ideological architecture.

Today, Iranian women face legal discrimination across virtually every domain. Under the Iranian Civil Code, a woman’s testimony in court counts as half that of a man’s. Women cannot travel abroad without the written permission of their husband or male guardian. Married women cannot work without spousal consent in many circumstances. The diyeh (blood money) for a woman’s life is legally valued at half that of a man.

In September 2022, 22-year-old Mahsa (Zhina) Amini died in the custody of Iran’s Morality Police, after being arrested for allegedly wearing her hijab improperly. Her death triggered the Woman, Life, Freedom uprising, one of the largest protest movements in Iranian history. The government’s response was to kill over 500 protesters, arrest more than 19,000, and execute at least four people in connection with the protests by early 2023.

The IRGC and State-Sponsored Repression

The Islamic Revolutionary Guard Corps is a military-economic-political entity unlike any other in the region. It controls an estimated 20–40% of Iran’s economy through businesses, construction contracts, and import monopolies. It commands proxy militias across Iraq, Syria, Lebanon, and Yemen. And it suppresses domestic dissent with a ruthlessness that has drawn consistent condemnation from United Nations human rights bodies.

Amnesty International’s 2022-2023 annual report documented the IRGC and security forces using live ammunition, birdshot, and metal pellets against protesters, deliberately targeting eyes, resulting in hundreds being blinded. The UN Special Rapporteur on Iran documented ‘serious, widespread and systematic human rights violations’ constituting potential crimes against humanity.

Episode III: Where the Two Hypocrisies Meet

The relationship between the United States and Iran is, in many ways, a story of two entities who deserve each other in the sense that the behavUior of each government has fed the domestic narrative of the other for decades.

Washington uses Iran as justification for its military presence in the Gulf, its arms sales to autocratic Gulf states, and its general posture as indispensable regional hegemon. Tehran uses American hostility and sanctions as justification for economic failure, political repression, and nuclear advancement. Both governments’ hard-liners need each other to remain in power.

The Iranian people, 85 million of them, majority under 35, highly educated, and overwhelmingly wanting engagement with the world, are trapped between a government that treats them as subjects and an international sanctions regime that punishes them for their government’s choices. The American people, meanwhile, continue paying for a foreign policy architecture that serves arms manufacturers, defense contractors, and geopolitical abstractions more than it serves democratic values or human security.

Some Uncomfortable Truths

The United States is not the villain of every story, nor is Iran irredeemably authoritarian in the hearts of its people. What is consistent, and what this analysis has documented, is that both governments operate by standards they refuse to apply to themselves.

Tehran’s theocratic governance has failed its population economically, politically, and most visibly in its treatment of women and dissidents. The Woman, Life, Freedom movement showed the world what Iranian society wants. The government’s violent response showed the world what the Islamic Republic fears.

The lesson, uncomfortable as it is, is that powerful states, whether wielding aircraft carriers or theology, tend to exempt themselves from the rules they want others to follow. The only antidote is an informed public that refuses to accept these double standards as the natural order of things. Read critically. Follow the money. And remember: when a government tells you it acts in the name of God or democracy.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal.)

Opinion

SLC Grants to clubs and associations under scrutiny

Published

20 hours ago

2026/03/11

Sahan Weerasooriya

The scale and manner of grant distributions underscore the urgent need to rectify the weaknesses identified by the Auditor General. Remarkably, the accounts for the years 2024 and 2025 are still not published and only the 2023 accounts are available for public scrutiny.

Grants to clubs and associations increased from LKR 1.30 billion in the prior year to LKR 2.46 billion in 2023, representing an escalation of over LKR 1.15 billion year-on-year. These grants were distributed among 36 recipient clubs and associations, with individual allocations ranging from approximately LKR 1.5 million to almost LKR 300 million. Such wide variation and substantial growth warrant clear public disclosure of the allocation framework, the approval processes, and the beneficiary criteria.

While it is understandable that higher profitability enables greater financial support to clubs, the absence of a transparent, rule-based grant policy gives rise to governance concerns, and unless properly explained, leaves room for malicious or unfounded allegations that grant allocations may be used to influence voting behaviour or entrench existing officials. Robust disclosure and effective oversight are therefore essential to safeguard institutional credibility. The precise immediate need for high funding and their monitoring processes need to be divulged.

A case in point is Colombo Cricket Club (CCC), which received LKR 279,531,827 in 2023, making it the highest individual club recipient. As disclosed under the related-party notes to the financial statements, the President of Sri Lanka Cricket is also the President of Colombo Cricket Club, resulting in this transaction being classified as a related-party transaction.

In contrast to several grant recipient entities reporting profits, Sri Lanka Cricket recorded a deficit of approximately Rs. 2 billion in its Statement of Financial Performance for 2023.

It is also noteworthy from the cash flow statement that cash and fund balances declined sharply, from approximately LKR 10.8 billion in the previous year to around LKR 5.6 billion in 2023, representing a significant depletion of liquid resources within a single financial year.

A more meaningful and complete evaluation of these developments—particularly the position of funds available as at 31 December 2024 and 31 December 2025—will only be possible once the financial statements for 2024 and 2025 are released and subjected to public scrutiny.

A cricket enthusiast – Moratuwa

Opinion

Microfinance and Credit Regulatory Authority Act 2026 fails all affacted communities

Published

2 days ago

2026/03/10

Sahan Weerasooriya

A protest against exploitation by microfinance companies

The Microfinance and Credit Regulatory Authority Bill was passed into law by the Parliament of Sri Lanka on 4 March. According to Deputy Minister of Finance and Planning Dr. Anil Jayantha, the main object of the Act is to establish an Authority to “license and supervise the under-regulated microfinance and moneylending sector, aiming to protect borrowers from exploitation and ensure financial stability”.

However, the Yukthi Collective is saddened and disappointed that a government which pledged to take “measures to alleviate the burden of predatory microfinance loans with high interest rates on women” (NPP Manifesto, 2024: Page no. 44), will now add to their unbearable weight.

The new Act, as virtually all legislation enacted by Anura Kumara Dissanayake’s government, is a legacy of the anti-working class Ranil Wickremesinghe regime. It evades the root causes of the microfinance trap, and ignores debt justice for women borrowers.

It fails in understanding the connections between household debt and public debt. The vicious cycle of national debt is sustained by lack of growth in economic activity because of poor access to affordable credit.

It fails to make equal representation of women mandatory in the new Authority. If representatives of women borrowers and their self-run organisations are not present in the regulatory body, how will its members know of their lived experiences and make decisions that value women’s unpaid and paid contributions to sustaining life?

System Change

Millions of indebted households voted for the NPP with hope and expectation of ‘system change’. But instead of honouring its manifesto promise to them, the government has let them down in the law-making process; as well as the focus and substance of the new Act.

It is appalling that NPP parliamentarians, including some of its women members, appear not to have read and understood the bill they enacted into law, nor spoke to the rural credit community providers in their electorates for their views.

Predatory lending exists in the formal and informal sectors. Within this ecosystem, the Act fails to understand, identify, and prohibit predatory lending and recovery practices. It is a cover for the Central Bank’s failure to properly regulate ‘Licensed Finance Companies’ in the interests of citizens.

The biggest offenders are the big finance companies, in which some parliamentarians are deposit-holders. Therefore, some lawmakers benefit from excess profitmaking through exploitative practices, at the expense of poor mostly rural women.

Where law reform should discipline the bullies and thugs in credit delivery, it will instead wipe out, through over-regulation, community-based and managed lenders such as death donation societies, farmer associations, and urban and rural women’s collectives, which have been a lifeline for vulnerable working-class women and a defence from harmful recovery practices.

Structural Adjustment Programmes

The motivation for this new law are the market- and capital- friendly structural reforms insisted by International Financial Institutions; not the concerns and needs of those at the mercy of predatory lenders.

From the Microfinance Act 2016, to the 2023 version of the Ranil Wickremesinghe regime, the Asian Development Bank (ADB) through its loans has been a promoter of these regressive reforms.

The 2026 Act, with some changes suggested by the Supreme Court in 2024 and hardly any of the changes demanded by affected communities, has been moved forward by the NPP government in line with ADB loan conditionalities.

The path of de-regulation for banking, finance, trade, and investment; and over-regulation of poor people’s savings and credit institutions, smacks of the bias to big capital, which the NPP in opposition once criticised.

Reforms needed

The financial and banking reforms we want to see are to make credit from state banks and public funds accessible and affordable to women producers in agriculture and micro and small business operators; with decent wages and social protection for workers; that improve household opportunity for a dignified livelihood and decent lives.

Yukthi is a forum supporting working people’s movements and people’s struggles for democracy and justice in Sri Lanka.

by Yukthi Collective