President raises expectations of new tax relief in Thursday's budget

President Anura Kumara Dissanayake has said the Pay As You Earn (PAYE) income tax threshold will be raised again. He said the change is expected in the 2027 budget to be presented in Parliament on Thursday. PAYE is the income tax deducted directly from salaries.

Addressing a national trade union conference held in Colombo on Saturday, he noted that the threshold has already been raised from Rs 100,000 to Rs 150,000. Following discussions with private-sector companies and business chambers, the basic salary has been increased, and because a basic salary rise alone was not enough, additional allowances were also considered, he said. He added that the government has a duty to protect the welfare and economic security of public, semi-government, plantation and private-sector employees.

Meanwhile, in recent months the President has introduced several relief measures: gradually reducing value-added tax (VAT) over the next two to three years, removing the tax on essential educational items including schoolbooks, and postponing by another year the home property tax proposed under the International Monetary Fund (IMF) programme. He has also said funds will be allocated in the budget for 750 telecommunication towers next year, Grade 6 education reforms and an electric railway project.

However, the public-sector basic salary increase is expected to cost an additional Rs 330 billion by 2027. Under debt restructuring, revenue must exceed 15.3 per cent and 15.4 per cent of GDP in 2026 and 2027, and the primary expenditure limit is set at 12.9 per cent of GDP. The IMF programme ends in March 2027, and debt repayments will increase in 2028. The government says the budget will remain within IMF parameters.