VAT & Telecom Levy to be upped
The government has proposed to increase the Value Added Tax (VAT) and the Telecommunications Levy as an immediate measure, the Prime Minister’s Office announced today (31).
The low tax regime introduced in late 2019 had caused an annual loss of around LKR 600 billion – 800 billion in tax revenue to state coffers, a statement added.
“At present, the situation has aggravated to a very critical level where the General Treasury has to increasingly obtain Central Bank financing to make the government expenditures, including a substantial part of interest, salaries and wages, pensions and Samurdhi payments etc. This is clearly unsustainable and hence the implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalization measures in 2022 and beyond to ensure macroeconomic stability to support the medium to long-term economic growth objectives of the country,” the statement adds.
Accordingly, it has been proposed to increase the Value-Added Tax from 8% to 12% as well as to increase the Telecommunications Levy from 11.25% to 15%. It has been proposed to implement these reforms immediately.