The state minister claims that an extremely small portion of the labour force is eligible to be subject to Pay-As-You-Earn (PAYE) income tax. Since he made this claim in parliament, the statement has been cited and reported widely by high-level decision-makers and the media.
To check this claim, FactCheck.lk consulted the Inland Revenue Department (IRD) Annual Performance Report 2019 and the Department of Census and Statistics (DCS) Labour Force Survey (LFS) Annual Report 2019.
2019 was considered the year of reference since the PAYE tax collection scheme was abolished in January 2020. The minimum threshold for individual income tax eligibility in 2019 was the same as at present: being a salaried employee and having a monthly income of Rs. 100,000 (see Exhibits 1 and 2).
The IRD reports the number of “employees paying income tax under the PAYE scheme” in 2019 as 1,149,883 (Exhibit 1).
Figures presented in Exhibits 1 and 2 show that labour force demographics have remained relatively similar in 2022 compared to the end of 2019, while nominal GDP has increased by over 50% since then by the end of 2022. This suggests that the number and share of “employees [that would be] paying income tax under the PAYE scheme” would not be any lower in 2023 than it was in 2019.
The 2019 IRD number is almost 10 times the number cited by the state minister for 2023. Also, as a proportion of the labour force, the IRD number is 13.4% and not 2.6% as suggested by the state minister.
Therefore, we classify his statement as FALSE.
*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.
Exhibit 1: Sri Lanka employment statistics in 2019 and 2022 (Q3)
Source: Labour force survey annual report, 2019, Labour survey quarterly report 2022 Q3, Inland revenue department performance report 2019.
Exhibit 2: The number of employees paying income tax under the PAYE scheme as a proportion of Sri Lanka’s labour force and other employment indicators in 2019 and 2022
Source: Calculations based on data from the Labour force survey annual report, 2019, Labour survey quarterly report 2022 Q3, Inland revenue department performance report 2019.
Department of Census and Statistics. Labour Force Survey – Quarterly Report, Q3 2022. Available at; http://www.statistics.gov.lk/LabourForce/StaticalInformation/QuarterlyReports/3rdQuarter2022. [ Last accessed: 16 March 2023]
Department of Census and Statistics. Labour Force Survey – Annual Report, 2019. Available at; http://www.statistics.gov.lk/LabourForce/StaticalInformation/AnnualReports/2019. [ Last accessed: 16 March 2023]
Inland Revenue Department. Annual Performance Report, 2019. Available at; http://www.ird.gov.lk/en/publications/Annual%20Performance%20Report_Documents/IR_PR_2009_E.pdf. [ Last accessed: 16 March 2023]
“Government says only 2.6% of Sri Lanka’s total workforce subject to PAYE tax”, February 11, 2023, Daily Mirror Online. Accessed via https://www.dailymirror.lk/breaking_news/Government-says-only-2-6-of-Sri-Lankas-total-workforce-subject-to-PAYE-tax/108-253960. [ Last accessed: 15 March 2023]
LinkedIn post by the Managing Partner of PwC Sri Lanka. Accessed via https://www.linkedin.com/feed/update/urn:li:activity:7030034175638335488/. [ Last accessed: 15 March 2023]
LinkedIn post by Member of Parliament, Dr. Harsha De Silva. Accessed via https://www.linkedin.com/posts/harshadesilvamp_there-is-no-doubt-that-we-must-work-with-activity-7031923491394240512-5VeD?utm_source=share&utm_medium=member_desktop. [ Last accessed: 15 March 2023]
“PAYE Tax imposed on only 2.6% of workforce – Minister”, February 11, 2023, Newswire. Accessed via https://www.newswire.lk/2023/02/11/paye-tax-imposed-on-only-2-6-of-workforce-minister/. [ Last accessed: 15 March 2023]
“Only 2.6% of workforce subjected to PAYE”, February 11, 2023, TheMorning.lk. Accessed via https://www.themorning.lk/articles/b7n84DfK9BpWMhY6IhNk. [ Last accessed: 15 March 2023]