VAT 18% from next year

By Rathindra Kuruwita

The Cabinet of Ministers had approved an increase in the value added tax (VAT) from 15% to 18% with effect from 01 January 2024, Cabinet spokesman Bandula Gunawardena told reporters on Tuesday.

Addressing the media in Colombo, Gunawardena said the increased VAT will also be imposed on certain goods and services that are currently not taxed.

Last year the government had taken significant steps to increase tax revenue, the Minister said.

The tax revenue during the first nine months of 2023 had been 51 percent higher compared to 2022, he said.

However, the government had failed to reach the tax collection targets recommended by the IMF, he said, adding that was why the IMF had delayed the release of the second tranche of its loan.

Former President Gotabaya Rajapaksa reduced the VAT from 15% to 8% in 2019. It was increased to 15% on 01 September 2022.

Sri Lanka had collected about Rs 1,751 billion as taxes in 2022, Minister Gunawardena said. The total tax and non tax revenue was 1,979 billion. Rs 956 billion was spent on salaries for 2022. Rs 309 billion was spent on paying pensions. Rs. 506 billion was spent on Samurdhi and other social welfare programmes.

“We can increase salaries. But the money will come from the people,” the Minister said, commenting on the state employees’ demand for a pay hike.