Sri Lanka's Comprehensive Revenue Measures to Boost Fiscal Health

COLOMBO (News 1st); President Anura Kumara Dissanayake said that no new taxes are proposed in the 2025 Budget and the tax revisions announced in January will be implemented.

He said that Sri Lanka's economic reform programme is firmly rooted in revenue-based fiscal consolidation, addressing the country's historically low government tax revenue levels, which stood at just 7.3 percent of GDP in 2022. 

For 2025, significant revenue gains are anticipated from the liberalisation of motor vehicle imports, effective from February 1, 2025. 

The President said that this process is being closely monitored to prevent any adverse impacts on external sector stability. 

Other key revenue measures, previously announced in Parliament in December 2024, include increasing the tax-free threshold for personal income tax, adjusting the second income tax slab, and removing VAT on fresh milk and yoghurt.

Additionally, the Government has decided not to pursue the Imputed Rental Income Tax agreed upon by the previous administration.

To offset potential revenue losses, the Government has introduced several measures, including VAT on digital services, corporate income tax on the export of services, and increased corporate taxes on cigarettes, liquor, and gaming. These tax policy measures are expected to help Sri Lanka achieve its revenue target of 15.1 percent of GDP in 2025.

Simultaneously, the Government is making concerted efforts to improve tax administration and compliance. 

The revenue strategy for the upcoming budget aims to enhance fiscal sustainability by strengthening tax administration, improving compliance, and bolstering institutional strength through enhanced digitalization and rigorous monitoring mechanisms.

These efforts will also provide relief to the most vulnerable groups in society. The focus will be on digitalizing tax systems to reduce leakages, enhance transparency, and minimize human interactions in tax administration.