Sri Lanka is targeting a 40 percent tax collection directly through income, wealth, and property taxes by 2025 from the current 30 percent with expanding tax nets and legal actions against tax dodgers, State Finance Minister Ranjith Siyambalapitiya said.
Direct taxes are collected through individual can afford to pay taxes due to their higher income along with asset and property ownership.
Since Sri Lanka faced an unprecedented economic crisis with sovereign debt default, both direct and indirect taxes have been increased while President Ranil Wickremesinghe’s administration is contemplating new wealth, property and inheritance taxes from next year in line with the commitments it agreed with the IMF.
Siyambalapitiya said the island nation’s state revenue has increased to “almost 13 percent” of the gross domestic product (GDP) now from 8.3 percent in 2022.
He said the the country had 80 percent of the indirect taxes and 20 percent of the direct taxes when the government started the recovery process from the bottom of the economic crisis.
“This means 80 percent of the state revenue was paid by all the people. The same amount was paid by both the rich and poor. Now this has changed to 70:30,” Siyambalapitiya told reporters at a media briefing in Colombo on Thursday (18) referring to 30 percent of direct taxes.
“The 20 percent direct tax has risen to 30 percent now. Our aim in 2025 is to change this to 40:60, which means 40 percent from the people who can afford to pay taxes and 60 percent from indirect taxes. Then we believe that we can implement a fair tax system.”
