Sri Lankan President presents IMF-program based revenue generation plan

COLOMBO (News 1st); Sri Lanka's President Ranil Wickremesinghe told Parliament that the government will be introducing a serious of reforms after the IMF Executive Board granted approval for a bailout package of the country.

Increasing Public Revenue:

- Reduce the primary deficit to 2.3% of the GDP by 2025.

- Increase the government’s revenue up to 15% of the GDP by 2026 through our measures.

- Raised the standard corporate income tax rate to 30% without sectoral tax holidays.

- PAYE tax rate was increased from 8% to 15%.

- The measures required to reduce the existing tax exemptions on Value Added Tax (VAT) will come into effect by 2025. Further, necessary measures will be taken to remove the simplified VAT system and expedite its reimbursement.

-  Steps have also been taken to introduce tax on awards / substitutes and to introduce Estate Duty as a property tax by 2025, while providing an appropriate tax exemption allowance at a minimum.

-  Revamping the property tax system and introducing a wealth transfer tax 

- Introduce a gift and inheritance tax

Managing Expenditure:

- Increase the allocations provided to cover the expenses through proper management of expenditure.

- Adjustments in certain salary scales and pension schemes as part of the impact of inflation within the primary deficit targets.

State Enterprises and Energy Cost: 

- Fuel prices will be determined based on the 2018 Price Formula. The adjustment will take place once a month to cover the cost. Therefore, determination of fuel prices will be bereft of politicization.

- Adjust the tariff on electricity every six months to cover the cost after considering the estimated future cost.

-  Depoliticize energy pricing.

- Key loss making state ventures of the balance sheet namely the Road Development Authority, Sri Lankan Airlines, Ceylon Petroleum Corporation and Ceylon Electricity Board will be restructured. 

- Exchange the foreign loans obtained on overdue sovereign guarantees mentioned in the balance sheets of the state-owned enterprises, as payable debt of the Government of Sri Lanka.

Good Governance:

 Laws will be drafted against corruption in line with UN conventions.

• It is also expected to include the provisions with regard to the acquisition of assets to the legislative framework by March 2024.

• A new Public Finance Management bill that includes strong fiscal policies, laws, thresholds with regard to obtaining foreign loans and government securities will also be drafted.

• The individuals who had obtained permits to import vehicles on concessionary tax basis along with the institutions that enjoy tax concessions / tax holidays of the Board of Investment will be made public. Further, large scale government procurement contracts will also be made public.

Sources: President's Speech in Parliament / PMD Statement / IMF