Government unveils tax reforms amid IMF scrutiny for public relief
- 5opn1
- December 30, 2024
- Political
- Government unveils tax reforms amid IMF scrutiny for public relief
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The new government has announced some tax reforms as an immediate relief to the people and the micro, small, and medium-scale businesses hit by high inflation and cost of living during the previous regime.These have come into the scrutiny of the International Monetary Fund (IMF).
The IMF staff will include a comprehensive report on those tax measures that will be presented to the executive board for their approval to release the next tranche of US$ 333 million under Extended Fund Facility program to Sri Lanka, Julie Kozack, Director, Communications Department, IMF said.
Key changes include an imputed rental income tax on residential properties, which generates 0.15 percent of GDP in 2025, and a raise of the VAT on digital services to 18 percent, contributing an additional 0.08 percent of GDP, the IMF technical report showed.
Corporate income tax will rise for industries like tobacco and betting, while stamp duties on leases will double. Simplified VAT (SVAT) will be abolished, increasing administrative demands on businesses.
Import restrictions on vehicles and goods will be lifted, adding 0.8 percent of GDP but increasing competition for local industries.The reforms target revenue growth and economic equity but may lead to higher costs for consumers, businesses, and property owners.
Short-term inflationary pressures are expected, although greater tax compliance and reduced evasion could bolster fiscal health. While the measures pose immediate challenges, they are essential for Sri Lanka’s long-term economic stability and debt sustainability, IMF claimed.
