Sri Lanka aims for Rs 1,400 billion in VAT revenue by 2024

The Director of the state revenue unit at the President's Office, K K I Eranda, has announced that Sri Lanka anticipates generating 1,400 billion rupees from the Value Added Tax (VAT) in 2024. 

This ambitious target follows the expansion of the tax base and a rise in the VAT rate.

Eranda revealed that despite an initial expectation of 600 billion rupees from VAT in 2023, only approximately 450 billion rupees have been collected thus far. Speaking at a press conference held at the President's media office, 

Eranda attributed this shortfall to previous exemptions that led to tax leakage, prompting the government to broaden the tax base.

Highlighting the historical context, Eranda noted that Sri Lanka's economic bureaucrats had reduced rates and taxes in December 2019 to target potential output, resulting in a severe external crisis surpassing that of 2015 and 2018. One of the key measures taken was raising the VAT threshold from 15 million rupees annually to 300 million, leading to a significant reduction in the number of taxpayers. 

This threshold was subsequently decreased to 80 million as part of tax-raising efforts following a default, with further reduction to 60 million slated for January.

Janaka Edirisinghe, Deputy Director of Economic Research at the central bank, provided insight into global VAT trends, stating that in many countries, VAT revenues typically account for 6 to 8 percent of GDP. While Sri Lanka aims to increase its VAT revenues to 4 percent of GDP in 2024, Edirisinghe acknowledged that this target remains below the optimal level. The current year's VAT revenue is estimated to be only 2.2 percent of GDP.