Just less than three weeks to a much-expected budget, Finance Minister Ravi Karunanayake yesterday said the country’s fiscal front is at a crucial point and hinted a massive increase in tax revenue to the government in the forthcoming budget.
“We do have a serious situation,” admitted Karunanayake.
According to Karunanayake, his ministry officials along with the Inland Revenue Department staff are working tirelessly to prepare the forthcoming budget.
Karunanayake stressed the need to increase the tax revenues by as much as 60 percent from the current levels. Hence, tax revenue, which has come down to mere 10.85 percent of gross domestic product (GDP), is expected to go up to 15-16 percent of the GDP from the 2016 budget.
“I want to ensure, we will collect a minimum of 14-15 percent (tax revenue of GDP),” Karunanayake confided delivering the keynote address at a seminar on taxation conducted by the Sri Lanka Branch of International Fiscal Association. Sri Lanka’s curious case of an expanding economy with falling tax revenues as a percentage of GDP has been an economic paradox. Sri Lanka has the lowest tax revenue as a percentage of GDP in the South Asian region and this has been a top fiscal reform continuously called for by the International Monetary Fund. According to the Finance Minister, Sri Lanka’s tax revenue as a percentage of GDP was 17.6 percent. However, Karunanayake said the burden will not be passed on to the public; instead they will go hard on the tax defaulters. “Today the problem is not that the people are not paying. People who can afford to pay are the ones who are not paying. And I give a wake-up call for them,” the irate Finance Minister told the packed house.
Sri Lanka now operates with over 30 taxes making the tax structure, administration and compliance extremely difficult but a much simplified tax framework is expected to be introduced in the budget 2016.