Sri Lanka is expecting 1,400 billion rupees from Value Added Tax in 2024, after broadening the base and raising the rate, Director of the state revenue unit of the President’s Office K K I Eranda has said.
Though 600 billion rupees was expected from VAT in 2023 only about 450 billion had been collected so far, Eranda told reporters at the President’s media office.
Due to exemptions given in the past, there is leakage of taxes and the government was forced to broaden the base, he said.
Sri Lanka’s economic bureaucrats in December 2019 cut rates and taxes to target a potential output, triggering worst external crisis than in 2015 and 2018.
The VAT threshold which was at 15 million rupees a year was raised to 300 resulting in large numbers of payers dropping.
It was reduced to 80 million as part of efforts to raise taxes after the default and will be reduced to 60 million from January.
The Deputy Director of Economic Research at the central bank, Janaka Edirisinghe said in many countries VAT revenues were 6 to 8 percent of GDP.
In 2024 VAT revenues are targeted to increase to 4 percent of GDP. However, it was also below the optimal level, he said.
This year VAT was estimated to be only 2.2 percent of GDP.
Source: Economy Next
