What are the tax reforms Sri Lanka plans to introduce next month to boost government revenue, as per the IMF report?

According to the IMF report, Sri Lanka plans to introduce tax reforms next month that include increasing VAT rates, broadening the tax base by reducing exemptions, and enhancing tax administration efficiency to boost government revenue. These measures aim to stabilize the economy and ensure fiscal sustainability.

Sri Lanka to Implement Tax Reforms Next Month to Boost Revenue

Key Tax Reforms

One of the major changes includes the imposition of a value-added tax (VAT) on digital services, while existing income tax exemptions on service exports will be removed. Additionally, the social security levy currently charged on sales will be replaced by VAT.

Corporate income tax rates for alcohol, tobacco, and gaming companies are slated to rise from 40% to 45%. Most of these new taxes are expected to take effect in January 2025.

Furthermore, a tax on the imputed rents of owner-occupied and vacant houses is planned to commence in April 2025.

The IMF report also notes that the planned tax measures, alongside the resumption of vehicle imports, are projected to generate annual revenue equivalent to 1.5% of the country’s GDP.

Source: imf.org

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Sri Lanka to Implement Tax Reforms Next Month to Boost Revenue

Key Tax Reforms