COLOMBO: Sri Lanka will lose 500,000 employed who were pay as you earn (PAYE) tax payers under a new law that came into effect in on April 01, the finance ministry said.
The current administration lifted a tax free slab to 1.2 million rupees a year but removed 50,000 allowance for transport and also telephone allowances.
The finance ministry said as a result 500,000 out of 1.2 million PAYE tax payers will be out of the tax system.
The balance will now have to pay a higher rate of tax.
The administration however came of the promise of broadening that tax base and charging lower rates.
The finance ministry said there was no truth in claims that everyone above 18 years will be made to have a tax file.
Meanwhile state worker show get tax slashed cars will not have to pay tax on the benefits. Private citizens on the other hand have to pay rates in excess of 200 percent to buy a car.
Critics say successive administrations have used hard working people outside the state as second class citizens and tax machines.