ECONOMYNEXT – Sri Lanka President Anura Kumara Disanayake in his maiden full-year budget has not implemented the imputed rental income tax which the previous government agreed to implement from 2025, while expecting majority of the revenue from vehicle imports.
President Disanayake’s new expenditure proposals need an additional 225 billion rupees.
“For the year 2025, the bulk of revenue gains is expected to be delivered by the liberalisation of motor vehicle imports that took place on 1st February 2025,” the 2025 budget document said.
“This process is being carefully monitored to ensure that import of vehicles does not result in undue negative impacts on external sector stability.”
Former President Ranil Wickremesinghe’s government committed the International Monetary Fund (IMF) to implement asset tax including imputed rental income tax from 2025.
“The Government also decided to not pursue this year the Imputed Rental Income Tax that had been agreed by the previous administration,” the 2025 budget document said.
“To compensate for any revenue losses, the Government already presented in Parliament measures including the introduction of VAT on digital services, the imposition of corporate income tax on export of services, and an increase in the corporate tax on cigarettes/liquor, and gaming.”
The government expects its tax policy measures outlined in the budget are expected to deliver the required revenue to enable Sri Lanka to meet the revenue targets of 15.1 percent of GDP in 2025.
“Nonetheless, in parallel, the Government is taking concerted efforts to improve tax administration and compliance. In fact, Sri Lanka’s revenue strategy for the upcoming budget aims to enhance fiscal sustainability by strengthening tax administration, improving compliance, improve institutional strength through enhanced digitalization and rigorous monitoring mechanisms; while providing relief to the most vulnerable groups of the society.”
“Efforts will be directed toward digitalizing tax systems to reduce leakages and enhance transparency while minimizing human interactions in tax administration.” (Colombo/February 17/2025)
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