CHATURANGA PRADEEP SAMARAWICKRAMA Reply To:
Name - Reply Comment
Taxes incl. VAT to be increased
The government today decided to revise taxes given the current economic crisis and thereby decided to increase Value added Tax from 8% to 12% and Telecommunication Levy from 11.25 percent to 15 percent.
“In addition the levy of gross collection from gaming was increased from 10% to 15%, corporate income tax was increased from 24% to 30%, the ten-year tax holidays from constructions using recyclable materials, boat manufacturing and bonded warehouses were also revised.
Sri Lanka introduced a low tax regime in late 2019. The reforms included the reduction of tax rates of Value Added Tax (VAT), Personal Income Tax (PIT) and Corporate Income Tax (CIT), and narrowing tax bases of VAT and PIT, while introducing a plethora of tax incentives, such as tax exemptions for agriculture and Information Technology (IT) and enabled services, tax deductions and tax holidays. This caused an annual loss of around Rs. 600 billion – 800 billion in tax revenue to state coffers.
Therefore, these reforms are now being looked as policies that led to a significant loss of government revenue, partly due to the spread of COVID-19 pandemic in 2020/2021 and related developments, which affected the revenue generation process, ultimately resulting in the lowest revenue to GDP ratio in the region. The revenue to GDP ratio has declined to 9.1% in 2020 from 12.7% in 2019 and further deterioration of 8.7% in 2021. This is significantly lower than the average revenue ratio of around 25% of GDP in emerging market and developing economies. (Yohan Perera)
Comments - 6
Recommended
You May Also Like
Trending
