MONETABRIEF – A tax to have been hit on houses, which were built with the savings of the people who had already paid taxes on their earnings proposed in an International Monetary Program has been deferred for another year, President Anura Kumara Dissanayake said.
In the run up to the election, there was fear mongering that any National Poeples' Power government would take away a second house owned by people, he said.
"Even at that time there was an agreement that there would be a property tax," President Dissanayake told a rally in the Gampaha district.
"We are now presenting the third budget, and there is still no property tax.
"Our argument is that property is built by saving earnings that have already been taxed. So that person has paid taxes for the property.
"On that basis we have deferred the property tax.
Houses are one of the few assets that people are left when macro-economists cut rates and prints money to reach a controversial inflation target or busts the currency by dishonoring the central bank's note issue under 'flexible' exchange rate doctrine.
When inflation go up steeply with flexible exchange rate crises, both bank deposits and Employment Provident Fund balances are destroyed.
The capital decumulation tax would penalize people even as the nominal value goes up due to inflation or other factor and people would have to pay tax on an item that has not cashflow, critics have pointed out.
Unlike valued added tax, which allows people to make economic decision (and gives them choice) income tax also decumulates capital and gives economic decision making to buraucrats and the ruling class.
In Sri Lanka each time macro-economists cut rates, engages in inflationary open market operations new and ad hoc taxes imposed in the IMF programs that follow.
These include the 'financial VAT' which is not a VAT at all which was slammed in 2003 and the new Social Security Contribution Levy, a cascading tax was imposed on top of VAT.
There was series of ad hoc taxes involving import tax surcharges and income tax hikes when the central bank triggered the first currency crises in February 1952.
In the 2004 currency crises which ended with a tsunami driven credit contraction, a 25 page gazette was issued with hundreds of CESS taxes. They are only going away in 2028. (Colombo/Sept28/2026