The Frontline Socialist Party (FSP) has sent a letter to all MPs of the ruling National People’s Power (NPP) government, urging them to reject what it describes as a severely unfair tax policy outlined in the 2025 Budget. The party has warned that the proposed tax structure will place an unbearable burden on the public, while at the same time granting significant concessions to large corporations and wealthy individuals.

The 2025 Budget, which was presented to Parliament on 17 February, is scheduled for a final decision on 21 March. The FSP stated that tax policies were generally designed to reduce economic inequalities, prioritise economic development, and regulate market consumption patterns. It argued that the 2025 Budget approached taxation solely as a means of generating government revenue, disregarding the economic hardships faced by the majority of the population.

The FSP has raised concerns over the significant increase in Value Added Tax (VAT) on goods and services, which is set to rise by 25.94% in 2025. The government aims to increase tax revenue from Rs. 2,201 billion in 2024 to Rs. 2,772 billion in 2025, resulting in a notable rise in the financial burden on ordinary citizens. According to the FSP’s analysis, this means that in 2024, an average Sri Lankan household paid Rs. 31,623 per month in indirect taxes on goods and services. In 2025, this figure is expected to increase to Rs. 39,817 per month, placing an additional Rs. 4,200 in taxes on each household. The party argued that this increase is unbearable for families already struggling under the weight of the economic crisis.

Citing data from the Department of Census and Statistics, the FSP has highlighted that the average monthly household income in Sri Lanka is Rs. 76,414, while monthly expenses amount to Rs. 63,130. It has warned that nearly two-thirds of a family’s monthly spending would now be consumed by taxes, describing this as a severe economic blow to working-class and lower-income groups. The party accused the government of betraying the expectations of the people who placed their trust in the NPP administration.

While the government has defended its decision by claiming that the higher VAT collection is not the result of introducing new taxes, but rather improving tax enforcement, the FSP dismissed this argument as misleading. It pointed to the Ministry of Finance’s own report, which stated that between 2023 and 2024, businesses collected Rs. 333.1 billion in taxes from consumers but failed to remit them to the state. Despite this massive tax evasion by corporations, the 2025 Budget does not prioritise recovering these unpaid revenues or strengthening direct taxation on high-income earners. Instead, the government has doubled the withholding tax on savings from 5% to 10%, imposed a 15% tax on foreign income earned through online services, and extended import duties on 63 essential goods, including food items, from 1 January 2025.

The FSP also criticised the government’s handling of VAT rates, which have been rising continuously since 2022. The VAT rate, which was 8% in early 2022, was increased to 12% in August 2022, then raised to 15% in January 2023, and further increased to 18% in January 2024. The party warned that the government appears to be following a pattern of gradually increasing VAT, making it even more difficult for ordinary people to afford basic goods and services. Additionally, a Social Security Contribution Tax was introduced in 2023, further exacerbating financial pressures on the public.

Beyond the tax hikes on ordinary citizens, the FSP condemned the favourable treatment given to wealthy individuals and large corporations. It cited a Parliamentary Committee on Public Accounts (COPA) report from March 2024, which revealed that large corporations evaded Rs. 1,068 billion in taxes, while domestic and foreign corporate entities received tax concessions worth Rs. 978 billion. Despite these staggering figures, the government has only planned to increase direct tax revenue by Rs. 141 billion, indicating that it has no real intention of recovering unpaid taxes from the country’s largest businesses.

The FSP also highlighted a controversial clause in the 2025 Budget that offers a six-month amnesty period for overdue tax payments. This clause, buried in the technical section (Clause 1.9) of the budget document—which was only released in English—states that businesses that failed to pay taxes between 2022 and 2023 can settle their dues without facing penalties or interest charges. The party described this as a shameful giveaway to tax-evading corporations, arguing that it directly undermines the government’s claims of enforcing tax compliance.

In its letter to MPs, the FSP urged lawmakers to reject the tax policy and stand against what it called a blatant betrayal of the public interest. The party reminded Parliamentarians that Sri Lanka’s economic crisis, IMF-imposed financial restructuring, and rising inflation have already pushed millions into financial hardship, and that imposing additional tax burdens on struggling families would only deepen the crisis.

The FSP warned that if MPs vote to approve these unfair tax measures, they risk facing public outrage and a loss of trust. It called for an immediate revision of the 2025 Budget’s tax policy, urging the government to shift the tax burden away from ordinary citizens and onto the country’s wealthiest individuals and corporations.