Sri Lanka is raising value added tax to 12 percent, corporate tax to 30 percent and the highest personal income tax rate to 34 percent from 18 percent, in a bid to raise 195 billion rupees as money printed to pay state worker salaries trigger forex shortages.
Value added taxes will be raised to 12 percent from 8 percent immediately through gazette notice in an administrative and it is expected to be rubber stamped by the parliament later, according to documents released by the office of Prime Minister Ranil Wickremesinghe.
A telecom levy will be hiked to 15 percent from 11.25 percent through a letter from the regulator to be rubber stamped by the parliament later.
Sri Lanka got into the worst currency crisis in the history of the island’s 72-year central bank as 2.3 trillion rupees was printed to finance the budget and repay bonds from previous deficits from 2020.
In December 2019, in an extraordinary move taxes were also cut in an administrative move while parliament was dissolved. It is not clear whether it was a world’s first in Westminister style parliament.
The government is expecting to raise 125 billion rupees from the taxes for the rest of 2022 and 195 billion rupees in a full year.
Key tax changes planned from October
The highest personal income tax rate raised to 34 percent, starting with the lowest slab of 1.2 million at 4 percent.
The tax exemption threshold brought down to 1.8 million rupees from 3.0 million.
Withholding tax on employment income to be made mandatory
Professional fees over 100,000 rupees to be charged a withholding tax
Withholding tax on interest and dividends.
Exemption for senior citizen interest income of 1.5 million rupees.
Standard corporate income tax to be raised from 24 to 30 percent.
Concessional corporate tax to be raised to 15 percent from 14 percent.
Extra allowance for marketing expenses to be dropped
Betting and gaming annual fee raised to 500 million rupees from 200 million
Betting and gaming gross revenues to be charged 15 percent tax from current 10 percent.
Betting agents to be charged 5 million a year from 4 million a year.
VALUE ADDED TAX
Immediately raise rate to 12 from 8 percent.
VAT threshold to be reduced to 120 million from 300 million rupees.
In 2023 review exemptions list