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IMF defends tax hike in Sri Lanka

2 March 2023 08:41 pm - 14     - {{hitsCtrl.values.hits}}


The International Monetary Fund (IMF) has defended the tax reforms which has drawn strong public opposition in Sri Lanka.

The IMF said the current economic crisis has a number of origins, including the government’s inability to meet government spending needs through its revenue collections.

Sri Lanka is among the countries to collect the least amount of fiscal revenue in the world, with tax revenue to GDP ratio at only 7.3 percent in 2021.

According to the IMF, external creditors are not willing to provide financing to fill this gap.

Peter Breuer, Senior Mission Chief for Sri Lanka, and Masahiro Nozaki, Mission Chief for Sri Lanka, IMF said that tax reforms are needed to correct the imbalance.

"Only with appropriate tax receipts will the Government will be able to fund essential expenditures, and avoid further slashing of critically important outlays. These reforms will also help regain confidence of creditors," the IMF said.

The two officials said that efforts to increase tax revenues should be pursued in a growth-friendly manner while protecting the poor and most vulnerable.

"It is however also important that those who can most afford it, make commensurate contributions to the financing of the necessary government expenditures," the IMF said.

The IMF said that the tax package the authorities have introduced, including the new tax rate schedule for the personal income tax, helps to meet these objectives.

"The tax rates proposed under the authorities’ program are also in line with international comparison," the IMF added.

The IMF also said that it understands the hardship people of Sri Lanka are experiencing at this time.

"Increases in the cost of living, loss of employment and livelihood, and falling real incomes have hit large parts of the population, and particularly the poor and vulnerable who have no buffers to withstand these hardships," the IMF said. (Easwaran Rutnam)

  Comments - 14

  • Roger Halliday Friday, 03 March 2023 05:34 AM

    Why is the IMF silent about the waste corruption and the benefits given to ministers. No matter the increase but how the monies are spent needs to be investigated.

    Demuni de Silva Friday, 03 March 2023 07:37 AM

    IMF- did you scrutinize the living standard of the people, before introducing a tax hike ?

    Athk69 Friday, 03 March 2023 08:33 AM

    The government of SL must first tighten its expenditure. Does it need to increase the number of cabinet ministers now to function? The entire country is being ruled by one man. I.e. the president. Why do we need a set of good for nothing ministers and a jumbo cabinet? Is this the case in other countries as well? Come on IMF, don't just issue statements without reviewing the ground reality.

    Rathinam Navaratnam Friday, 03 March 2023 08:55 AM

    For me, taxation is fine; but government must realize the tax money is from people and be diligent in spending. Unfortunately not so now. An example - Appointment of so many ministers. Tax money should be spent only to bring benefits to the people.

    krish Friday, 03 March 2023 09:00 AM

    can IMF also monitor how our tax money is spent

    Jef Friday, 03 March 2023 11:03 AM

    Proper measures investigation must be done first for the mess that created the bankcruptsy by professional audits secondly what was called mismanagement if nothing been done just pumping up tax inflation cost of living gone through the roof for the past one year you think recovery is tax hike is a key factor putting more pressure on the middle-class and the poor day to day suffering continues to great extend surely there should be a better mechanism in place to help Rebuild the nation small businesses middle and the poor are effected hugely consumer confidence is so low no economy simulation in place tax is the only way out good luck....

    S.K.Seneviratne Friday, 03 March 2023 11:09 AM

    Imternational comparision ?? Please compare Sri Lanka's average monthly wage against international wages.

    Gavin C Anandappa Friday, 03 March 2023 11:52 AM

    Has the IMF not asked the government to stamp-down on corruption. Does the ordinary man have to bear the cost (through higher taxes) of corrupt politicians.

    Esak Raveendran Friday, 03 March 2023 12:26 PM

    Now that the IMF has discussed this subject publicly, can the IMF explain follows: 1. Has IMF identified how taxes are being spent? What monies are misused and others wantonly wasted on unproductive expenditures. What is IMF doing about it? Explain! 2. Educating the public areas of cost reduction as a means of reducing government expenditure, and what is being implemented, if not, the reasons why. Whilst, cIting indexes of other countries is a useful tool to escalating taxes, it is a one sided view. The IMF seems to have forgotten that rampant inflation due to mismanagement, is a tax burden by itself and any indiscriminate taxes makes the burden worse to an economically disadvantaged population. It would be more useful and encouraging if the IMF shared the cost reduction programmes publicly, the bottlenecks implementing same and ways and means to reduce the revenue/expenditure disparity in the budget, instead of merely continually increasing taxes to supplement revenues.

    Lasitha Friday, 03 March 2023 12:28 PM

    Can they please give more attention to wastage and robbery than just increase taxes and increase other related cost. It seems they are only strategy is by increasing not by increase efficiencies......

    Jayantha Friday, 03 March 2023 01:26 PM

    So it is clear that imf is also equally corrupted organization. It does not ask the government to cut down various benefits given to politicians like 500 odd litres of fuel per month, cut down salary paid to advisors, cut down unnecessary government expenses and automate where possible. No country was able to develop with imf loans as they sponsor and support corruption

    Sambo Friday, 03 March 2023 01:27 PM

    Who the hell is the IMF to defend tax increases in Sri Lanka. Try and go behind the politicians who stole billions and invested in other countries.

    GHT Friday, 03 March 2023 01:51 PM

    They (US

    Born again Friday, 03 March 2023 08:40 PM

    99% of employees earn less than one lakh and not taxed. Good to tax those earning more than one lakh, tax them some more.

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