Sri Lanka seeks to raise US$685mil in revenue from taxes

COLOMBO: Sri Lanka is seeking to raise 100 billion rupees (US$685.6mil) in revenue in 2016 by increasing the value added tax (VAT) and new taxes effective from Monday, Finance Minister Ravi Karunanayake (pic) said late on Sunday.

The VAT will rise to 15% from 11% and will be imposed on private sector health services as the government struggles to reduce a ballooning budget deficit amid a debt crisis.

The move is part of the government’s plan to meet a repeated request to raise revenue from the International Monetary Fund (IMF), which on Friday reached an agreement with Sri Lanka for a US$1.5bil bailout to help the island nation avert a balance of payments crisis.

“It will be 100 billion rupees, or 0.75% of the GDP (gross domestic product),” Karunanayake told reporters in Colombo.

“We consider this as a corruption tax due to the mismanagement by the previous regime.”

He said the IMF loan was a step of “abundant caution”, adding Sri Lanka was not facing a balance of payments crisis.

The island nation’s budget deficit almost doubled to 7.4% of GDP from an original forecast of 4.4% due to heavy debts incurred by the previous government headed by Mahinda Rajapaksa.

Revenue increased by 13.1% of GDP last year, compared with 11.5% in the previous year, mainly due to increased revenue from vehicle taxes.

The government is aiming for a 12.7% rise in tax revenue this year. — Reuters