The charity establishments that work towards the wellbeing of children will soon be provided with tax relief with the Cabinet of Ministers having approved this week the amendment of the Inland Revenue Act to accommodate the changes.

Accordingly, the Legal Draftsman will be directed to draft a bill for amending Inland Revenue Act No. 24 of 2017, including legal provisions for the purpose.

A proposal in this regard was made previously to allow any charity establishment that provides health facilities to children with disabilities to request for tax relief. The establishments should be working in partnership with the government health services and/or education system.

The entities seeking tax relief must be established as legitimate institutions, prioritising the wellbeing of the differently-abled children in society, while being established as legitimate institutions or registered under any law enforced for registering social services organisations.

Following the myopic decision taken by the government in 2019 to significantly reduce taxes, Sri Lanka saw its tax revenue fall to an all-time low, which worsened the economic situation with the global pandemic struck the economy.

In an attempt to rectify the mistake, Sri Lanka took measures to increase tax revenue by imposing hikes in personal income tax and Value Added Tax (VAT), while a pay-as-you-earn (PAYE) was imposed on everyone earning over Rs.100,000 per month.

The tax hikes are also part of the measures stressed by the International Monetary Fund, as it justified the investors and creditors would not support the island nation, as heavy tax exemptions and concessions were given, which resulted in the tax-to-GDP contracting drastically.

DN