Opinion
IMF folly – Imputed Rental Income Tax
By Dr Sirimewan Dharmaratne,
Former Senior Analyst, HM Revenue
and Customs, UK.
While one can only imagine the atmosphere at the discussions with the IMF, what transpires from these meetings, one can presume that there was no resistance or contention to whatever the IMF proposes. The IMF appears to be pretty much dictating the fiscal policies for Sri Lanka to follow. The proposed Imputed Rental Income Tax (IRIT) is a good example how helpless or defenceless Sri Lanka has become to get a bit of money that some oligarchs spend on their yachts. The gravity of this tax is only just gradually sinking in Sri Lanka. Even those in the government, or those wannabes, are clueless as to what this policy is. It is utter stupidity to make statements such as “90% of the property owners won’t be affected” when the policy is not yet even formulated. Without the Sale Price and Rent Register (SPRR), which will be the basis for valuation, it has not been even started, but is required to be completed within a few months. Tax rate has not been determined either. Therefore, it is disingenuous and misleading to say that only 10% of the households will be affected. Further because of the word ‘rental’, some politicians still believe this is a tax on rented properties or on those with ‘commercial value,” whatever that is. But potentially it could be far more sinister!
What is Imputed Rental Income Tax?
This is a highly controversial and nonsensical tax that is imposed in only five countries, namely Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland. None of these are developing countries and even in Switzerland, there is an ongoing debate on its abolition. The tax is imposed on the ‘imputed’ rental income of your own home after deducting mortgage or loan payments. The imputation is based on the rent that you would have to pay to rent a similar property in that location. Once this is determined, there may be some provision for the homeowner to negotiate the imputed value, based on several other factors. In countries where this is imposed, imputed value is negotiated down to be less than half of the potential rental value.
Proposed SPRR
The IMF has suggested implementing this tax by March 2025, once the SPRR is completed within a few months of this year. This will be a monumental task in the informal and disparate property market that exists in Lanka. Except for some properties in high-rise apartment complexes and a few other high-end properties, mainly in Colombo, most rentals and property transactions occur through personal advertisements on newspapers and online. Their rental rates and selling prices are personal information and are unlikely to be recorded anywhere. Further, each property is unique and no two properties, in the same neighbourhood, are the same. This adds to the complexity of determining overarching rental rates, or sale prices, even for a small confined neighbourhood. Also, rents are negotiated, based on personal acquaintances, actual or perceived ability to pay rent and several other factors that cannot be quantified. Often one finds palatial homes in not so desirable neighbourhoods surrounded by very basic abodes. This will make it extremely challenging for authorities to come up with any credible imputed rent register for a myriad of heterogeneous properties strewn all over the island.
This is very much different to developed countries, where there are whole neighbourhoods with pretty much identical properties. Variation is sale prices and rents are very minor within a neighbourhood. Transaction information on only a few properties is enough to impute the sale or rental value of similar properties. In the UK, for example, there are several online property sites that individuals use as guides to advertise properties for sale and rent. Also, since most homes are mortgaged owned, banks have a record of sale prices and mortgages extended to each property. The government and tax authorities have access to all this information almost in real time.
Is this tax realistic in Sri Lanka?
Despite the ill-conceived optimism of the IMF, this tax is highly impractical in Sri Lanka due to aforementioned reasons and certainly not within the suggested time frame. This is an excellent manifestation of what happens when international organisations run out of ideas and are devoid of any sense of reality of the environment that they are working on. In a highly fractured and heterogenous property market, each property will have to be considered individually to calculate the imputed rent as each property is a unique entity. Further, the rental demand for high-end properties in Colombo and its purlieu are by embassies, international organisations and other foreign establishments that can pay high rents, which are out of reach of many ordinary Sri Lankans. While those who are lucky enough to get such clients may demand high rents, to use them to impute rental value of the adjoining property is not possible. For properties of this nature there is an esoteric and limited client base. For the rest of the country, there is a ‘rent ceiling’ that any property could demand, regardless of how grand it is.
Therefore, any kind of rent register has to be either very individualised or fairly prosaic, mostly based on highly conservative estimates in a very parsimonious information environment. Either way, putting together a useful and credible SPRR would be highly contentious and those with means and connections could influence how much their imputed rent would be. This opens up another avenue for widespread corruption, where valuation offices could easily be the new elite surpassing custom offices.
Is this tax fair?
One of the main arguments against IRIT is that it goes against the very principle of taxation. A tax is imposed on a transaction or when an income is generated. This tax is imposed on a non-income generating asset. As such, it is biased against those individuals who are asset rich but cash poor. Sri Lankan house ownership is unique. Most people strive throughout their working years to build a house that eventually becomes their family home. When they retire and income is drastically reduced, it not only becomes their permanent refuge, but also serves as a launching pad for grown up children until they become independent. Few lucky ones acquire homes through bequeath or marriage. For these individuals’ this tax may not be as unfair as for those who have spent their hard-earned money building or acquiring a property. However, the morality of the tax is still questionable. This tax is penalising people for their enterprise. It is in effect disincentivizing people from investing in their future and the welfare of their children. While tax implications can be taken into account in making a decision about going for a higher paying job, or purchasing an item, no one would know what the future tax is when they start to build their own home. It is completely at the mercy of an imperfect and capricious valuation process. Therefore, if applied regressively, this tax would be unfair on the owners of the existing stock of property and could peril the livelihood of those who are living at the margins, but fortunate enough to have their own comfortable home in a desirable location. Those who are planning to get on the property ladder would be no better off either as they would have to consider some random tax that will be imposed once the property is built or acquired.
Why in this predicament?
The reason that Sri Lanka is in this quandary and has to propitiate IMF is due to years of neglect to implement sensible tax policies. Ridiculously low historic personal income taxes and their ad hoc implementation has given a false sense of prosperity that accustomed the populace to a lifestyle that otherwise would not have been possible. If the taxes have been allowed to increase marginally over the years to reflect the true cost of providing public services, the pain would have been much less. To cover the gap that could not be covered by taxes, all elected governments have been borrowing heavily, primarily to support consumption. Even when borrowed for income generation, gratuitous corruption and egregious decisions have rendered most investments liabilities. All the while the debt has been piling up unabated, and passed on from one administration to another. Economic mismanagement and the maintenance of a bloated, inefficient and corrupt public service have finally nailed the coffin in. While decreasing government expenditure through restructuring and privatisation is facing fierce opposition, agreeing to raise taxes and find new sources for taxation appears to be the only way to convince creditors to lend more. But is it?
Tax Gap – Finding tax leakages
One of the main accusations against pervasive taxation is the inability or unwillingness to clamp down on widespread tax evasion. Different groups point out sources where substantial haemorrhage of tax occurs. However, quantifying leakages of tax revenue has hampered putting forward a compelling case against imposing more debilitating taxes. To realise how extra tax can be collected without imposing new taxes, the government needs to know how much tax is lost and then formulate a comprehensive plan to collect. The method to estimate lost tax is by calculating the tax gap. Tax gap calculates the overall deficit in the tax that is due under full compliance and what is actually collected. It can be broken down by sector, such as tax lost through income tax, corporate tax, excise tax. The concept is fairly straightforward although computationally data driven. Rather than agreeing to every outlandish suggestion that the IMF makes, the government should be able to suggest alternative methods to raise taxes without further burdening the long-suffering public. The way to achieve this is by having people who could hold a conversation at their level. Obsequiousness is seen as a sign of weakness that organisations like the IMF have come to expect in developing countries. Unless the government gets its act together and shows that they could put forward fact-based strong arguments, it won’t be able to defend the public from the wrath of the IMF. Without the knowledge of how much tax is lost and a comprehensive plan to collect it, it is not surprising that only one party dominates these discussions.
Repercussions of Excessive Taxation
Studies done in the UK and other countries have shown that excessive tax burden promotes evasion and evasion is self-feeding. When people see others evade taxes, they are also compelled to do so, especially if they see no action is taken. Since taxes don’t give any direct benefits, individuals are more likely to comply if everyone else does. People neither feel good when they pay taxes or feel bad when they evade. Because they feel ‘everyone’ is doing it. All this means that there will be a huge cost making individuals comply with various taxes and associated regulations that are popping up like mushrooms. This will in turn increase government expenditure, negating most or some of the revenue from increased taxation. A complicated tax like IRIT will face significant difficulties and costs through its implementation. Identifying the ownership, imputed rent valuation, adjusting it for various mitigating factors, negotiations, endless legal challenges and distortions to the property market will render this tax unworkable in Sri Lanka. The IMF really should stay away from prescribing specific tax policies that are not suitable for Sri Lanka while the government should be much more erudite in holding their ground and fighting their corner.
Opinion
Lakshman Balasuriya – Not just my boss but a father and a brother
It is with profound sadness that we received the shocking news of untimely passing of our dear leader Lakshman Balasuriya.
I first met Lakshman Balasuriya in 1988 while working at John Keells, which had been awarded an IT contract to computerise Senkadagala Finance. Thereafter, in 1992, I joined the E. W. Balasuriya Group of Companies and Senkadagala Finance when the organisation decided to bring its computerisation in-house.
Lakshman Balasuriya obtained his BSc from the University of London and his MSc from the University of Lancaster. He was not only intellectually brilliant, but also a highly practical and pragmatic individual, often sitting beside me to share instructions and ideas, which I would then translate directly into the software through code.
My first major assignment was to computerise the printing press. At the time, the systems in place were outdated, and modernisation was a challenging task. However, with the guidance, strong support, and decisive leadership of our boss, we were able to successfully transform the printing press into a modern, state-of-the-art operation.
He was a farsighted visionary who understood the value and impact of information technology well ahead of his time. He possessed a deep knowledge of the subject, which was rare during those early years. For instance, in the 1990s, Balasuriya engaged a Canadian consultant to conduct a cybersecurity audit—an extraordinary initiative at a time when cybersecurity was scarcely spoken of and far from mainstream.
During that period, Senkadagala Finance’s head office was based in Kandy, with no branch network. When the decision was made to open the first branch in Colombo, our IT team faced the challenge of adapting the software to support branch operations. It was him who proposed the innovative idea of creating logical branches—a concept well ahead of its time in IT thinking. This simple yet powerful idea enabled the company to expand rapidly, allowing branches to be added seamlessly to the system. Today, after many upgrades and continuous modernisation, Senkadagala Finance operates over 400 locations across the country with real-time online connectivity—a testament to his original vision.
In September 2013, we faced a critical challenge with a key system that required the development of an entirely new solution. A proof of concept was prepared and reviewed by Lakshman Balasuriya, who gave the green light to proceed. During the development phase, he remained deeply involved, offering ideas, insights, and constructive feedback. Within just four months, the system was successfully developed and went live—another example of his hands-on leadership and unwavering support for innovation.
These are only a few examples among many of the IT initiatives that were encouraged, supported, and championed by him. Information technology has played a pivotal role in the growth and success of the E. W. Balasuriya Group of Companies, including Senkadagala Finance PLC, and much of that credit goes to his foresight, trust, and leadership.
On a deeply personal note, I was not only a witness to, but also a recipient of, the kindness, humility, and humanity of Lakshman Balasuriya. There were occasions when I lost my temper and made unreasonable demands, yet he always responded with firmness tempered by gentleness. He never lost his own composure, nor did he ever harbour grudges. He had the rare ability to recognise people’s shortcomings and genuinely tried to guide them toward self-improvement.
He was not merely our boss. To many of us, he was like a father and a brother.
I will miss him immensely. His passing has left a void that can never be filled. Of all the people I have known in my life, Mr. Lakshman Balasuriya stands apart as one of the finest human beings.
He leaves behind his beloved wife, Janine, his children Amanthi and Keshav, and the four grandchildren.
May he rest in eternal peace!
Timothy De Silva
(Information Systems Officer at Senkadagala Finance.)
Opinion
The science of love
A remarkable increase in marriage proposals in newspapers and the thriving matchmaking outfits in major cities indicate the difficulty in finding the perfect partners. Academics have done much research in interpersonal attraction or love. There was an era when young people were heavily influenced by romantic fiction. They learned how opposites attract and absence makes the heart grow fonder. There was, of course, an old adage: Out of sight out of mind.
Some people find it difficult to fall in love or they simply do not believe in love. They usually go for arranged marriages. Some of them think that love begins after marriage. There is an on-going debate whether love marriages are better than arranged marriages or vice versa. However, modern psychologists have shed some light on the science of love. By understanding it you might be able to find the ideal life partner.
To start with, do not believe that opposites attract. It is purely a myth. If you wish to fall in love, look for someone like you. You may not find them 100 per cent similar to you, but chances are that you will meet someone who is somewhat similar to you. We usually prefer partners who have similar backgrounds, interests, values and beliefs because they validate our own.
Common trait
It is a common trait that we gravitate towards those who are like us physically. The resemblance of spouses has been studied by scientists more than 100 years ago. According to them, physical resemblance is a key factor in falling in love. For instance, if you are a tall person, you are unlikely to fall in love with a short person. Similarly, overweight young people are attracted to similar types. As in everything in life, there may be exceptions. You may have seen some tall men in love with short women.
If you are interested in someone, declare your love in words or gestures. Some people have strong feelings about others but they never make them known. If you fancy someone, make it known. If you remain silent you will miss a great opportunity forever. In fact if someone loves you, you will feel good about yourself. Such feelings will strengthen love. If someone flatters you, be nice to them. It may be the beginning of a great love affair.
Some people like Romeo and Juliet fall in love at first sight. It has been scientifically confirmed that the longer a pair of prospective partners lock eyes upon their first meeting they are very likely to remain lovers. They say eyes have it. If you cannot stay without seeing your partner, you are in love! Whenever you meet your lover, look at their eyes with dilated pupils. Enlarged pupils signal intense arousal.
Body language
If you wish to fall in love, learn something about body language. There are many books written on the subject. The knowledge of body language will help you to understand non-verbal communication easily. It is quite obvious that lovers do not express their love in so many words. Women usually will not say ‘I love you’ except in films. They express their love tacitly with a shy smile or preening their hair in the presence of their lovers.
Allan Pease, author of The Definitive Guide to Body Language says, “What really turn men on are female submission gestures which include exposing vulnerable areas such as the wrists or neck.” Leg twine was something Princess Diana was good at. It involves crossing the legs hooking the upper leg’s foot behind the lower leg’s ankle. She was an expert in the art of love. Men have their own ways. In order to look more dominant than their partners they engage in crotch display with their thumbs hooked in pockets. Michael Jackson always did it.
If you are looking for a partner, be a good-looking guy. Dress well and behave sensibly. If your dress is unclean or crumpled, nobody will take any notice of you. According to sociologists, men usually prefer women with long hair and proper hip measurements. Similarly, women prefer taller and older men because they look nice and can be trusted to raise a family.
Proximity rule
You do not have to travel long distances to find your ideal partner. He or she may be living in your neighbourhood or working at the same office. The proximity rule ensures repeated exposure. Lovers should meet regularly in order to enrich their love. On most occasions we marry a girl or boy living next door. Never compare your partner with your favourite film star. Beauty lies in the eyes of the beholder. Therefore be content with your partner’s physical appearance. Each individual is unique. Never look for another Cleopatra or Romeo. Sometimes you may find that your neighbour’s wife is more beautiful than yours. On such occasions turn to the Bible which says, “Thou shalt not covet thy neighbour’s wife.”
There are many plain Janes and penniless men in society. How are they going to find their partners? If they are warm people, sociable, wise and popular, they too can find partners easily. Partners in a marriage need not be highly educated, but they must be intelligent enough to face life’s problems. Osho compared love to a river always flowing. The very movement is the life of the river. Once it stops it becomes stagnant. Then it is no longer a river. The very word river shows a process, the very sound of it gives you the feeling of movement.
Although we view love as a science today, it has been treated as an art in the past. In fact Erich Fromm wrote The Art of Loving. Science or art, love is a terrific feeling.
karunaratners@gmail.com
By R.S. Karunaratne
Opinion
Are we reading the sky wrong?
Rethinking climate prediction, disasters, and plantation economics in Sri Lanka
For decades, Sri Lanka has interpreted climate through a narrow lens. Rainfall totals, sunshine hours, and surface temperatures dominate forecasts, policy briefings, and disaster warnings. These indicators once served an agrarian island reasonably well. But in an era of intensifying extremes—flash floods, sudden landslides, prolonged dry spells within “normal” monsoons—the question can no longer be avoided: are we measuring the climate correctly, or merely measuring what is easiest to observe?
Across the world, climate science has quietly moved beyond a purely local view of weather. Researchers increasingly recognise that Earth’s climate system is not sealed off from the rest of the universe. Solar activity, upper-atmospheric dynamics, ocean–atmosphere coupling, and geomagnetic disturbances all influence how energy moves through the climate system. These forces do not create rain or drought by themselves, but they shape how weather behaves—its timing, intensity, and spatial concentration.
Sri Lanka’s forecasting framework, however, remains largely grounded in twentieth-century assumptions. It asks how much rain will fall, where it will fall, and over how many days. What it rarely asks is whether the rainfall will arrive as steady saturation or violent cloudbursts; whether soils are already at failure thresholds; or whether larger atmospheric energy patterns are priming the region for extremes. As a result, disasters are repeatedly described as “unexpected,” even when the conditions that produced them were slowly assembling.
This blind spot matters because Sri Lanka is unusually sensitive to climate volatility. The island sits at a crossroads of monsoon systems, bordered by the Indian Ocean and shaped by steep central highlands resting on deeply weathered soils. Its landscapes—especially in plantation regions—have been altered over centuries, reducing natural buffers against hydrological shock. In such a setting, small shifts in atmospheric behaviour can trigger outsized consequences. A few hours of intense rain can undo what months of average rainfall statistics suggest is “normal.”
Nowhere are these consequences more visible than in commercial perennial plantation agriculture. Tea, rubber, coconut, and spice crops are not annual ventures; they are long-term biological investments. A tea bush destroyed by a landslide cannot be replaced in a season. A rubber stand weakened by prolonged waterlogging or drought stress may take years to recover, if it recovers at all. Climate shocks therefore ripple through plantation economics long after floodwaters recede or drought declarations end.
From an investment perspective, this volatility directly undermines key financial metrics. Return on Investment (ROI) becomes unstable as yields fluctuate and recovery costs rise. Benefit–Cost Ratios (BCR) deteriorate when expenditures on drainage, replanting, disease control, and labour increase faster than output. Most critically, Internal Rates of Return (IRR) decline as cash flows become irregular and back-loaded, discouraging long-term capital and raising the cost of financing. Plantation agriculture begins to look less like a stable productive sector and more like a high-risk gamble.
The economic consequences do not stop at balance sheets. Plantation systems are labour-intensive by nature, and when financial margins tighten, wage pressure is the first stress point. Living wage commitments become framed as “unaffordable,” workdays are lost during climate disruptions, and productivity-linked wage models collapse under erratic output. In effect, climate misprediction translates into wage instability, quietly eroding livelihoods without ever appearing in meteorological reports.
This is not an argument for abandoning traditional climate indicators. Rainfall and sunshine still matter. But they are no longer sufficient on their own. Climate today is a system, not a statistic. It is shaped by interactions between the Sun, the atmosphere, the oceans, the land, and the ways humans have modified all three. Ignoring these interactions does not make them disappear; it simply shifts their costs onto farmers, workers, investors, and the public purse.
Sri Lanka’s repeated cycle of surprise disasters, post-event compensation, and stalled reform suggests a deeper problem than bad luck. It points to an outdated model of climate intelligence. Until forecasting frameworks expand beyond local rainfall totals to incorporate broader atmospheric and oceanic drivers—and until those insights are translated into agricultural and economic planning—plantation regions will remain exposed, and wage debates will remain disconnected from their true root causes.
The future of Sri Lanka’s plantations, and the dignity of the workforce that sustains them, depends on a simple shift in perspective: from measuring weather, to understanding systems. Climate is no longer just what falls from the sky. It is what moves through the universe, settles into soils, shapes returns on investment, and ultimately determines whether growth is shared or fragile.
The Way Forward
Sustaining plantation agriculture under today’s climate volatility demands an urgent policy reset. The government must mandate real-world investment appraisals—NPV, IRR, and BCR—through crop research institutes, replacing outdated historical assumptions with current climate, cost, and risk realities. Satellite-based, farm-specific real-time weather stations should be rapidly deployed across plantation regions and integrated with a central server at the Department of Meteorology, enabling precision forecasting, early warnings, and estate-level decision support. Globally proven-to-fail monocropping systems must be phased out through a time-bound transition, replacing them with diversified, mixed-root systems that combine deep-rooted and shallow-rooted species, improving soil structure, water buffering, slope stability, and resilience against prolonged droughts and extreme rainfall.
In parallel, a national plantation insurance framework, linked to green and climate-finance institutions and regulated by the Insurance Regulatory Commission, is essential to protect small and medium perennial growers from systemic climate risk. A Virtual Plantation Bank must be operationalized without delay to finance climate-resilient plantation designs, agroforestry transitions, and productivity gains aligned with national yield targets. The state should set minimum yield and profit benchmarks per hectare, formally recognize 10–50 acre growers as Proprietary Planters, and enable scale through long-term (up to 99-year) leases where state lands are sub-leased to proven operators. Finally, achieving a 4% GDP contribution from plantations requires making modern HRM practices mandatory across the sector, replacing outdated labour systems with people-centric, productivity-linked models that attract, retain, and fairly reward a skilled workforce—because sustainable competitive advantage begins with the right people.
by Dammike Kobbekaduwe
(www.vivonta.lk & www.planters.lk ✍️
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