In order to bridge the gap between the government expenditure and spending, further tax reforms are needed since the Government of Sri Lanka is expected to fall short of initial projections by nearly 15% by year end, in part due to economic factors, asserts the International Monetary Fund (IMF).

During the press briefing held at the Central Bank of Sri Lanka (CBSL) – while concluding the IMF staff visit to Sri Lanka – Senior Mission Chief for Sri Lanka of IMF Peter Breuer said: “To fill the gap of missing tax revenues, some reforms are needed to increase the tax.”    

He made these remarks while responding to a question raised by a journalist on whether more tax is needed to improve the government revenue.

Breuer said that the population could be affected as the utility prices are high due to high inflation and it could be “very burdensome”. 

He further added: “Essentially, the country is now experiencing the consequences of the policies that were implemented and the shocks that Sri Lanka had to face over the past years. These policies made the country very vulnerable. In particular, a very strong tax cut in 2019 exacerbated due to disruptions in the country.”

He also noted that in order to increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.

He went on to say: “The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Shehan Semasinghe, Chief of Staff to the President Sagala Ratnayaka, Secretary to the Treasury K.M. Mahinda Siriwardana, and other senior government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organisations, and development partners.”

During a press conference held Tuesday (26) at the Presidential Media Centre (PMC), Sectoral Oversight Committee on National Economic and Physical Plans Chairman Mahindananda Aluthgamage said that the IMF has emphasised three key points in their discussions with them. Accordingly, the Government has committed to reducing inflation to single digits, bolstering foreign reserves, and increasing government tax revenue.