Govt. revises down revenue target after tax amendments

REUTERS: Sri Lanka has reduced its government revenue target for 2016 due to tax amendments in this year’s budget, Finance Minister Ravi Karunanayake said Tuesday. Karunanayake told parliament that this year’s total revenue is now expected to come to Rs.1.87 trillion (US $ 12.8 billion), 8.2 percent less than the originally forecast Rs.2.03 trillion. Last year, the government’s revenue came to Rs.1.41 trillion.

“We have revised down many taxes including Nation Building Tax (NBT), so revenue will be less than what we had originally estimated,” the Finance Minister told Reuters. Karunanayake did not say whether the government could still reach its 2016 budget deficit target, which it has said is 5.4 percent of the gross domestic product.

The International Monetary Fund (IMF), which on Saturday approved a US $1.5 billion loan to back the island nation’s economic reforms, had repeatedly requested Sri Lanka to increase the government revenue without cutting down public investments.

The island-nation’s finances are in a precarious state as it finds itself in a debt trap, partly due to heavy borrowing by the previous government during its nine-year tenure that ended in January 2015, while facing a balance of payments crisis with around US $ 2 billion foreign outflows from government securities.

Karunanayake said the government expects to simplify the tax system, expand the tax net and introduce new taxes, and introduce modern technology in tax collecting institutions to boost revenue. Government revenue rose 16.1 percent on year to Rs.346 billion (US $ 2.38 billion) in the March quarter. President Maithripala Sirisena’s coalition government has announced ambitious plans to boost revenue, but many have met with strong resistance from the public, denting the popularity of the government that took office in August.