Govt. to Raise VAT to 18% to meet IMF Revenue Targets

Cabinet approves President Ranil Wickremesinghe’s resolution for VAT rate increase
New 18% VAT rate set to take effect from January 1, 2024; to be applied to previously exempted goods and services
IMF has withheld the second tranche due to Sri Lanka’s failure to meet revenue targets
Tax revenue increased by 51% in the first nine months of 2023, yet falls short of IMF targets
Sri Lanka has one of the lowest tax-to-GDP ratios globally, estimated at 7.3% in 2022
However, uncertainty surrounds the ability of new taxes and increased rates to aid Sri Lanka’s economic recovery
People already struggling with declining real income may resist higher tax rates

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