Sri Lankan President announces new Wealth Tax on Rental Income

Sri Lanka President Ranil Wickremesinghe

Sri Lankan President Ranil Wickremesinghe addressed the Sri Lankan Parliament today, unveiling a new wealth tax initiative targeting rental income.

This measure aims to address fiscal challenges while ensuring that most homeowners remain unaffected.

The proposed Imputed Rental Income Tax is designed with a high threshold, ensuring that 90 percent of house and property owners will not be impacted. This reassurance came directly from President Wickremesinghe, who responded to concerns raised by Opposition Leader Sajith Premadasa.

Premadasa had questioned the new tax, emphasizing the necessity of broadening the tax base and enhancing the efficiency of tax administration.

“We agree with expanding the tax net and making tax administration efficient,” President Wickremesinghe stated, addressing Premadasa’s concerns. He further emphasized, “I just want to assure the House regarding rental income. We are going to have a wealth tax with a very high threshold. So don’t worry, your house is safe.”

The President explained that the decision to focus on rental income was a strategic response to potential constitutional issues involving provincial council revenues. By opting for a rental income-based approach, the government aims to avoid complications that could arise from provincial council jurisdiction over rates.

“This was based on rating. Then we encountered a problem. Rates belong to the provincial council. So if we proceed with the rating business, there is a possibility that the court could say this money belongs to the provincial council. So we want to keep it here. We have used a different formula called rental income. Your income tax belongs to the central government. It’s the same. We generally used ratings, but to avoid the constitutional issue, we have done this,” the President elaborated.