Are hardworking Sri Lankans who pay hefty taxes receiving the benefits they rightfully deserve? For thousands of professionals across the country, the answer is a resounding no.
Take Sanjeewa (name changed), a private sector employee who used to pay about Rs. 70,500 in monthly income tax. Following recent amendments, his tax has dropped slightly to Rs. 50,000, yet his overall deductions, including income tax, provident fund, and stamp duty still amount to 20.5% of his salary.
Despite contributing significantly to state revenue, Sanjeewa sees little to no return. His two children attend an international school, their education funded entirely out of pocket. “We even have to buy the government-issued English medium textbooks ourselves. Our kids don’t use a single public resource, not even water from a state school. But we still pay tax like everyone else. People like us deserve some relief,” he argues.
Then there’s Medha, a post-graduate professional from Kurunegala working in Colombo. She pays over Rs. 100,000 in income tax monthly, while juggling rent, housing loan repayments, and rising living costs. “I dream of building my own home someday. But with these expenses, that dream feels impossible. We’re not against paying taxes—we work hard and live here but there’s no support at all. No relief, not even on the debt burden.”
Medha doesn’t earn income outside of her job and says she has no time for part-time work. Her frustration deepens when she compares her plight with others who earn more yet allegedly evade tax. “There must be a system where people like us can live with dignity. Other countries provide that. Why can’t we?”
And Sanjeewa and Medha are not alone. Thousands of Sri Lankan professionals are voicing similar frustrations. Many trace their discontent back to the abolition of five major expenditure reliefs under the Inland Revenue Amendment Act No. 45 of 2022.
Until the end of 2022, taxpayers could deduct up to Rs. 1.2 million annually across these five categories:
- Health and medical insurance expenses
- Educational expenses for self and immediate family at local institutions
- Interest paid on housing loans
- Contributions to local retirement schemes
- Investment in stock market shares
But all these deductions were scrapped starting January 1, 2023, during the administration of then-President Ranil Wickremesinghe. The act was updated again in 2024, raising the tax-free income threshold to Rs. 1.8 million. However, no expenditure-based reliefs were restored.
The Only Relief Left: Solar Panels
The sole remaining relief available to income tax payers now is a refund for solar panel installation costs, capped at Rs. 2.4 million over four years (Rs. 600,000 annually). Eligible taxpayers can apply for reimbursement when filing annual returns, and the approved refund is deposited into their bank account.
“Taxpayers Deserve More Than Just Bills” – Academic Weighs In
Professor Aminda Methsila Perera from the Faculty of Management and Finance at Wayamba University argues that almost every country in the world rewards its taxpayers and Sri Lanka should too.
“Before the 2022 amendments, our system offered reasonable relief. For instance, parents sending children to international schools without costing the government a cent could deduct educational expenses. Now that relief is gone, and it feels like an injustice. Tax has become a burden instead of a contribution,” he said.
Will Relief Return?
Asked about possible reforms, Deputy Finance Minister Professor Anil Jayantha Fernando acknowledged the concerns and said the government is considering reviewing expense-based reliefs. “We need to study this area further before making any commitments,” he added.
The Bigger Issue: Is the System Even Fair?
Currently, income tax in Sri Lanka is directly deducted from monthly salaries of professionals, creating a perception that white-collar workers bear the lion’s share of the tax burden while many high-earning businesses and individuals evade taxation altogether.
Professor Perera emphasized the need for a digital overhaul: “To reduce tax evasion, Sri Lanka must promote online and card payments over cash. The government is moving toward this with proposed legislation and digital payment initiatives. If implemented effectively, it could formalize the economy and improve fairness in tax collection.”
Such reforms, he said, would not only broaden the tax base but also reduce the burden on the few who currently pay the most. “Instead of taxing a small group heavily, we could collect fairly from a larger population—making the system more sustainable.”
How India Gets It Right
A comparison with India reveals how Sri Lanka could improve. In India:
- Income between Rs. 400,000 and Rs. 2.4 million is taxed at 5% to 25%
- Income above Rs. 2.4 million is taxed at 30%
- But key expenses—rent, travel, education, insurance, housing loans, and investments—are all tax-deductible
What’s more, lower cost of living in India gives taxpayers better purchasing power, allowing them to live comfortably despite the taxes they pay.
Final Thoughts
In Sri Lanka, middle- and upper-middle-class professionals who form the backbone of the tax system—are increasingly feeling alienated and unrewarded.
They pay high taxes, educate their children without government help, and receive no relief on housing, medical care, or retirement planning. They ask: Where is the dignity for the honest taxpayer?
Until structural changes are made, either through restoring meaningful deductions or ensuring tax justice through a broader base, Sri Lanka’s tax system risks losing not just revenue, but also the trust of the very citizens it depends on.
