Govt. to boost tax revenue by removing VAT exemptions

7 June 2023 12:55 am - 15 - {{hitsCtrl.values.hits}}

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Expects to boost tax revenue by 1.2% of GDP by removing VAT exemptions and abolishing SVAT methodology
Current SVAT methodology to be replaced with a more formal methodology
VAT exemptions granted on health, education, agriculture as well as products and services impacting low-income families to remain intact

The government is planning to boost tax revenue by 1.2 percent of gross domestic product (GDP) by removing most of the Value-Added Tax (VAT) exemptions and abolishing the Simplified Value Added Tax (SVAT) methodology.

Bandula Gunawardana

President Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilisation and National Policies on Monday sought the approval of the Cabinet of Ministers to remove majority of the VAT exemptions granted and to replace the current SVAT methodology with a more formal methodology.
Accordingly, the Legal Draftsman has been instructed to prepare a draft bill to amend the provisions in Inland Revenue Department (IRD) Act for this purpose.

However, Cabinet Spokesperson Minister Bandula Gunawardana noted that VAT exemptions granted on health, education, agriculture as well as products and services impacting low-income families would remain intact.

The SVAT methodology is set to be terminated with effect from January 1, 2024, which would be replaced by a “more formal methodology” for the repayment of VAT, according to the Department of Government Information.

Gunawardana pointed out that SVAT methodology has created in loopholes in the system leading to tax evasion. He said the proposed new methodology would enable the IRD to roll out a more strict and
effective tax regime.

The two tax reforms are commitments listed under Sri Lanka’s US$ 3 billion International Monetary Fund
(IMF) programme.

The IMF Deputy Managing Director Kenji Okamura in a recent visit to Sri Lanka emphasised on boosting tax revenue in order for the country to return to macroeconomic stability.

Sri Lanka has granted VAT exemptions for a range of products and services, including locally produced dairy, electronic items, mobile phones, sea sand and unprocessed prawns.

According to World Bank (WB) estimates, there is a wide gap of around 6 percent of GDP between the VAT capacity and performance. The local tax experts believe that the country could easily boost the tax revenue by Rs.200 billion by removing these exemptions.

In the first quarter of the year, IRD collected Rs.113.5 billion from VAT, up from Rs.60.6 billion in the corresponding period of 2022, as the government increased the VAT rate to 15 percent from 12 percent.

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Comments - 15

BUSHEL Wednesday, 07 June 2023 08:29 AM

Similarly remove fringe benfits granted to parliamentarians if you really want to manage government income

joshua Wednesday, 07 June 2023 08:29 AM

These monkeys are playing to the tune of IMF without knowing the ground situ. To hell with these politicians

Sambo Wednesday, 07 June 2023 08:36 AM

Especially from friends @ love ones.

sas Wednesday, 07 June 2023 09:25 AM

svat is headache for Tax payers and tax collectors additional staff and monitoring cost lot . if IRD works effectively to process refunds a matter

Lion Wednesday, 07 June 2023 09:59 AM

Your taxing has made even senior citizens to go on fasting as you have started to charge 5% out of our interest income which no other government did. We are waiting to give you all a fitting reply once we are allowed to use our franchise ,with that the end comes to you all to be in the political waste paper basket.

Sambo Wednesday, 07 June 2023 09:59 AM

This government has only two solutions to think ,increase taxes and borrow. Very sad.

Jongi Nanda Wednesday, 07 June 2023 10:47 AM

All efforts to bring down $ to 1 LKR by 2048. There won't be $$$ then and have to pay thousand fold against some other if this bunch and their goons continue. No fuss cos majority of us and the master mind expire long before the deadline.

Jayantha Wednesday, 07 June 2023 11:17 AM

The government is trying to squeeze and take tax after they totally collpased the system with money wasting projects. No action taken against MR and family for corruption and useless projects. No action against politicians and officers who wasted public funds. So everything is against people.

Mahesh Wednesday, 07 June 2023 12:47 PM

How about removing the unproductive work force in every public sectors and retrain them to activities focusing on manufacturing, farming, IT, hospitality industries, etc

Ama Wednesday, 07 June 2023 01:11 PM

Why cannot you REMOVE subsidised priced meals, facility of impoting DUTY FREE VEHICLES to PARLIMENTARIANS ?

Kd Wednesday, 07 June 2023 01:13 PM

we also need to parliament reduced from 225 to 9 people. They want to increase revenue. ok. but we want them to reduce costs

VJ Wednesday, 07 June 2023 02:08 PM

Can we also do away with the subsidies given to parliamentarians in the parliament canteen? Substantial saving could be realized.

Laurie Julius Senanayaake Wednesday, 07 June 2023 03:54 PM

Fringe benefit tax for those enjoying such benefits. Diaspora tax to cover cost of free education.

Sam Silva Wednesday, 07 June 2023 07:27 PM

So you are calling the country as a Tax Regime.

Roshanaly Thursday, 08 June 2023 10:00 AM

Just make it simple like the previous Turnover Tax. All these corruption occurs when there is room for refunds.

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Govt. to boost tax revenue by removing VAT exemptions

Comments - 15

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