The Supreme Court has informed Speaker Mahinda Yapa Abeywardena that the Surcharge Tax Bill can be passed with a simple majority in parliament as it is in accordance with the Constitution.

This was conveyed by Deputy Speaker Ranjith Siyambalapitiya during today’s parliamentary session.

“I wish to announce to Parliament that I have received the determination of the Supreme Court in respect of the Bill entitled ‘Surcharge Tax’ which was challenged in the Supreme Court in terms of Article 121(1) of the Constitution. On an overall consideration of the provisions of the Bill, the Supreme Court had arrived at the conclusion that neither the Bill nor any of its provision is inconsistent with Article 12 or Article 13 of the Constitution. The Supreme Court further states that in the circumstances the Bill entitled ‘Surcharge Tax’ can be validly passed by a simple majority of the Legislature. I order that the determination of the Supreme Court be printed in the Official Report of today’s proceedings of the House.”

The said Bill was challenged in the Supreme Court by 10 parties including main opposition Samagi Jana Balawegaya, who filed petitions claiming that the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF) would also be subjected to this 25% surcharge tax as any fund that exceeds Rs. 2 billion taxable income.

In 2022 Budget, it was mooted that a 25% surcharge tax be imposed on individuals or companies earning an annual taxable income of Rs. 2,000 million or more.

However, in the case of a partnership, the income of a partner derived from a partnership shall not be taken into account when calculating the taxable income of such partner as an individual, if the tax has been paid by the partnership on such taxable income.

Further, on each company of a group of companies of which the aggregate of the taxable income of all subsidiaries and the holding company in that group of companies having an income over Rs. 2 billion, a 25% surcharge tax will be charged on the taxable income.

It is to be a one-time tax payable by high-value taxpayers in 2022 for their income in the tax year of 2020/21 while the objective of this special tax was to raise the necessary revenue to finance the Government expenditure programs for the year undisturbed.

Earlier this month, the Attorney General informed the Supreme Court that one-time surcharge tax of 25% does not include 13 retirement funds including EPF and the ETF.