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Harsha alleges Basil intentionally subjected EPF, ETF to surcharge tax

11 Feb 2022

  • Claims instructions given despite Legal Draftsman’s Dept. concerns
Samagi Jana Balawegaya (SJB) Member of Parliament (MP) Dr. Harsha de Silva, speaking in Parliament yesterday (10), stated that the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF) will be subjected to Budget 2022’s surcharge tax, not due to any fault on the part of the Legal Draftsman’s Department as claimed by the Government, but because the word “company” in the new Surcharge Tax Bill was interpreted in an extensive manner in order to cover the EPF and the ETF, on the instructions of Finance Minister Basil Rajapaksa. “We were informed that some of the officers in the Legal Draftsman’s Department had requested the Finance Minister not to include this in the Bill because it’s unfair. I heard Minister (Ramesh) Pathirana stating that no discussions regarding this issue were carried out at the cabinet level. Therefore, our allegation is that the term ‘company’ was interpreted to cover the EPF on the instructions of the Finance Minister,” claimed Dr. de Silva. Speaking further, he dismissed the claims made by government MPs that the imposition of the 25% retrospective surcharge tax on the EPF and the ETF was merely a drafting error and was not intended.  Instead, Dr. de Silva claimed that he had received information that the officers within the Legal Draftsman’s Department had informed the Minister of Finance of the applicability of the surcharge tax on the EPF and the ETF and had pointed out the unfairness of such a measure.  Dr. de Silva accused the Government of attempting to secretly steal from the EPF and the ETF on Monday (7), and claimed that this plan was foiled by the Opposition who informed the public of this issue. However, he claimed that several government MPs are attempting to mislead the country by painting this as merely a drafting error or by blaming the previous Government. Explaining the issue at hand, he said: “During the previous Budget, Minister of Finance Basil Rajapaksa imposed a 25% retrospective surcharge tax on all companies with a taxable income greater than Rs. 2 billion. At the time, there wasn’t much debate on the matter because imposing a tax on parties that have earned a large income isn’t opposed by the society. However, this tax imposed by the gazetted Bill shall apply from April 2020 to March 2021 in a retrospective manner. What shocked us was the manner in which they interpreted a ‘company’ in this gazetted Bill.” Accordingly, he pointed out that the Surcharge Tax Bill interpreted “company” according to the meaning given under the Inland Revenue Act No. 24 of 2017. He claimed that the term “company” is given a wide interpretation under the Inland Revenue Act to include a friendly society, building society, pension fund, provident fund, retirement fund, superannuation fund, or similar fund or society. Dr. de Silva claimed that the term company should have been interpreted in a restrictive manner similar to the interpretation provided under the Companies Act No. 7 of 2007 under which the EPF wouldn’t have been subjected to this surcharge tax.   He further alleged that the Government is syphoning money from the EPF to fund its “Gama Samaga Pilisandarak (A discussion with the village)” rural development programme which requires Rs. 100 billion. According to him, the Government doesn’t have the funds for this programme as they are unable to print more money due to food inflation having increased by over 25% as per government statistics. Therefore, Dr. de Silva opined that the only recourse available to the Government was to syphon money from the EPF.  “The EPF is the largest fund in the country containing over Rs. 3 trillion. We do not know the income and profit of this fund during fiscal year (FY) 2020/21. It is sad to say that annual financial data of this fund have not been published since 2019. However, based on what we have heard from their statements, the profit in FY 2020/21 was Rs. 250 billion,” stated Dr. de Silva. Accordingly, he claimed that by this tax, the Government is seeking to obtain Rs. 62.5 billion from the funds saved in the EPF by the working-class citizens for their future retirement period to fund the Government’s political activities. He further stated that the ETF had an income of Rs. 30 billion during FY 2020/21, from which Rs. 7.5 billion will be obtained under the surcharge tax .     


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