VAT HIKE to 18% from 2024 APPROVED in PARLIAMENT in SRI LANKA
Sri Lanka’s parliament approved a hike in value-added tax (VAT) to 18 percent from 15 per cent on Monday of the International Monetary Fund (IMF) preparing to approve the second tranche of a $2.9 billion bailout for crisis-hit country.
The county’s Parliament approved the VAT increase with 100 parliamentarians of the 225- member house voting in favour of the legislation, Speaker Mahinda Yapa Abeywardena said. A total of 55 parliamentarians voted against the legislation.
Sri Lanka plans to implement the VAT hike with effect from January 1st , 2024 and also include fresh items such as fuel fertiliser and cooking gas to increase government revenue by about 378 billion rupees ($1.1 billion), which is essential to meet targets set out under a four-year IMF programme.The VAT increase will boost the government’s tax revenue to 12.5 per cent of GDP next year from 9.1 per cent, State Minister Ranjith Siyambalapitiya told Parliament.“This is part of multiple economic reforms being implemented by the government to ensure that we increase revenue to 15 per cent of GDP by 2025,” he said.
“ Implementing this revenue measure is essential to Sri Lanka emerges from its current economic challenges.”Inflation could spike by 2 per cent after the tax increase, according to Finance Ministry estimates. Sri Lanka’s inflation doubled to 3.4 per cent in November from 1.5 per cent the previous month.
