Colombo May 31, 2022: Sri Lanka’s government on Tuesday announced a taxation overhaul to maximize revenue amid the country’s crippling economic crisis, hiking value-added taxes and corporate income tax, and slashing the relief given to individual taxpayers.
Prime Minister Ranil Wickremesinghe, who took office this month and plans to present an interim budget within weeks, said that measures were necessary as the current state of government finances was unsustainable.
“…the implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalization measures in 2022,” Wickremesinghe’s office said in a statement.
An increase in Value Added Tax (VAT) from 8% to 12% with immediate effect is among the key tax increases announced on Tuesday, which is expected to boost government revenues by 65 billion Sri Lankan rupees ($180.56 million).
Other measures, including increasing corporate income tax from 24% to 30% from October, will earn an additional 52 billion rupees for the exchequer.
Withholding tax on employment income has been made mandatory and exemptions for individual taxpayers have been reduced, the statement said.
