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EPF asked to pay 30% tax unless it participates in domestic debt restructuring process

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(L-R) CBSL Governor Dr. Nandalal Weerasinghe, Secretary to the Ministry of Finance Mahinda Siriwardena, Senior Advisor to the President on Economic Affairs Dr. R.H.S. Samaratunga and Deputy Treasury Secretary A.K. Seneviratne addressing the media on domestic debt restructuring in Colombo yesterday.

Banks, which pay taxes over 50%, least affected

By Sanath Nanayakkare

If the Employees’ Provident Fund (EPF) and other pension funds did not wish to participate in the proposed domestic debt restructuring process, there will be an application of higher annual income tax of 30%, Central Bank Governor Dr. Nandalal Weerasinghe said yesterday. The EPF is currently taxed at the rate of 14%.

Dr. Weerasinghe said so, addressing the media in Colombo.Finance Ministry Secretary Dr. R. Samaratunga, Treasury Secretary Mahinda Siriwardena were also present. Dr. Weerasinghe said, “Banking sector has already borne a significant burden of the fiscal adjustment and the economic crisis in several ways. The banking sector has been paying higher tax rates than other corporations.

The total tax burden on the banking sector, which is serving 57 million customer deposits, is more than 50%. Through high tax payment, the banking sector is helping the government’s fiscal consolidation efforts. Further, banks gave moratoriums and faced the brunt of non-performing loans during the Covid-19 pandemic. So, any disturbance to financial system stability could be costly. And disruptions to the banking system will adversely impact the effective transmission of monetary policy. So, the main effort is preserving the 57 million customer deposits in the banks and letting no room for a bank run.

“In contrast, superannuation funds are subject to a tax of 14%. It has been proposed for superannuation bonds to be exchanged for longer term maturity T-Bonds at a coupon rate of 12% until 2025m which will be 9% minimum beyond 2025. So, there is at least 9% return on EPF funds ensured on a long-term basis while there will be no reduction on the current balance of any individual’s EPF. In the event it has to be lowered below 9%, the Treasury has agreed to fill the balance.

“If superannuation funds don’t want to take part in this process, they will be liable to be taxed at 30% instead of the current 14%.”

The minimum participation requirement for EPF is set at 50% for outstanding bonds maturing in 2023 and 100% of bonds maturing between 2024 and 2032, according to CBSL.

 Speaking further the CBSL Governor said:

 “What we expect from this is to bring the government debt stock to a sustainable level within 10 years as per the agreement with the IMF. The number one benchmark in this context is reducing the public debt to GDP to 95 % from 128%. Secondly, the Gross Financing Needs (GFN) of the government needs to be reduced to below 13% of GDP from 34.6 % of GDP between now and 2032. Thirdly, Foreign Debt Servicing needs to be reduced to below 4.5 % of GDP from the current 9.4 % of GDP within the same period. If these targets are achieved, it should help close external financing gaps of USD 16.9 billion. For this, we need to restructure loans obtained from official bilateral creditors such as Japan and China.

Then there is the need for restructuring international sovereign bonds (ISBs) and negotiations are underway for these two elements. Our foreign exchange debt service target is set at 4.5% max. of GDP in 2027-2032. Thirdly, it is important to restructure domestic debt in some form and that is why we are presenting a plan to execute it. One available option in optimizing government debt is to increase taxes and improve the Primary Account Balance. These measures have already been taken. So, the remaining option is restructuring government debt stock through optimization of Treasury Bills and Treasury Bonds. At present Treasury Bill stock is worth LKR 4.1 trillion. 62.4 % of it is owned by the Central Bank of Sri Lanka (CBSL). CBSL has already agreed that its holdings of Treasury Bills would be converted to Treasury Bonds because this will help reduce gross financing needs of the government. And there are

Treasury Bonds worth of Rs. 8.7 trillion of which 20.5% is from superannuation funds including the Employee Provident fund (EPF); 36% from the banks and the balance from insurance funds and other private funds. So, we are looking at the best solution which can protect the banks, depositors and the EPF. That’s why CBSL has agreed to take part in these domestic debt optimization negotiations,” Dr. Weerasinghe said.



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PAFFREL raises concerns over Anti-Corruption (Amendment) Bill

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Anura and Rohana

Executive Director of People’s Action for Free and Fair Elections (PAFFREL) Rohana Hettiarachchi yesterday (28) said that there were three major concerns regarding the Anti-Corruption (Amendment) Bill 2026. Acknowledging the recent Supreme Court determination, in respect of the above-mentioned Bill, that three of the provisions were not consistent with the Constitution, requiring a special majority in Parliament, with one clause requiring approval by the people at a Referendum, Hettiarachchi said nonetheless PAFFREL had decided to bring their concerns to the notice of President Anura Kumara Dissanayake.

Responding to The Island queries, Hettiarachchci said that PAFFREL sent a letter, dated 24 Sept., to President Dissanayake, regarding the issue at hand.

Petitions against the Bill was heard before a three-judge Bench of the Supreme Court, comprising Justices Shiran Gooneratne, Mahinda Samayawardena and Sampath Wijeratne.

PAFFREL and Transparency International Sri Lanka (TISL) were among the petitioners who challenged the proposed amendments to the Anti-Corruption Act No. 9 of 2023. “We did so in public interest,” Hettiarachchchi said, adding that three major concerns were (i) the breadth of the proposed redaction power and the proposed criminalisation of certain uses of publicly accessible redacted asset declarations, particularly in relation to freedom of expression, and the public’s right to meaningfully receive and impart information (ii) raising of the State or public-corporation shareholding threshold for certain asset declaration obligations from 25% to 50%, as this could exclude officers of State-linked entities in which the State holds less than 50%, in spite of such entities exercising public functions and managing public resources and (iii)role of the Director General Ranga Dissanayake.

Hettiarachchchi emphasised that though the PARREL appreciated the way CIABOC DG handled his responsibilities, centreing of power on one person was not acceptable.

Hettiarachchi urged President Dissanayake and the 159-member government parliamentary group to pay attention to concerns raised by those who moved court against the controversial Bill and address their concerns though the Parliament received the SC determination.

An International Monetary Fund mission that visited Colombo recently warned that the proposed amendments could weaken the country’s anti-corruption framework.

The mission, led by Evan Papageorgiou, was in the country from 10 to 23 September for discussions on the seventh review of the Extended Fund Facility and the 2026 Article IV consultation. (SF)

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First cases taken up by SC after enactment of 22A dismissed

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The Supreme Court yesterday (28) dismissed two petitions filed by retired Flight Lieutenant Shantha Jayathilake against Deputy Inspector General of Police of the Criminal Investigation Department (CID) Shani Abeysekara and Secretary to the Ministry of Public Security Ravi Seneviratne, and Rev. Father Cyril Gamini, alleging them of committing contempt of court.

They were the first cases dealt by the Supreme Court after the enactment of the 22nd Amendment to the Constitution.

The recipient of gallantry medal alleged that contempt of court had been committed through an affidavit previously submitted to the Supreme Court by Shani Abeysekara and Ravi Seneviratne.

The other petition alleged that contempt of court had been committed through the contents of a complaint submitted to the Criminal Investigation Department by Rev. Father Cyril Gamini.

The Supreme Court ordered that both petitions be dismissed without being taken up for hearing.

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Now NR named 4th suspect in Krrish case

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Namal

The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) yesterday (28) named former Minister and leader of the SLPP parliamentary group Namal Rajapaksa as the fourth suspect in the Krrish case before the Colombo Chief Magistrate’s Court.

The MP was named as the fourth suspect in the wake of the arrest and remanding of former Executive Officer and Director of the Krrish Group, Janaki Siriwardena, regarding the payment of Rs. 70 mn to Namal Rajapaksa to facilitate the land transaction. Police arrested Ms. Siriwardena on 24 September and she was remanded till 6 Oct. pending investigations.

The investigation focuses on 4.3 acre land development in the Fort area that began in the 2013-2014 period. Investigations were launched in 2016 by the Yahapalana government, following a complaint lodged by Wasantha Samarasinghe, now a Minister in the current Cabinet.

The Indian company in this controversy is Krrish Transworks Colombo (Pvt.) Ltd .

The CIABOC named Namal Rajapaksa as a suspect in the Krrish case while he was remanded over two cases in respect of Airbus bribery probe. (SF)

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