Sri Lanka should renegotiate past tax holidays given to corporations in order to get a much higher tax revenue income while Value Added Tax (VAT) exemptions should be removed, member of the Presidential Advisory Group on Debt Restructuring Dr. Sharmini Coorey said.

Speaking to DeranaTV last week, Dr. Coorey, the former Director of the International Monetary Fund (IMF) said that a big problem in Sri Lanka when it comes to taxes, is the very rich not paying sufficient taxes and the number of tax breaks given to the corporations which are very well off. “I don't hear the level of outrage I’d like to hear about how much tax breaks are given,” she added.

She noted that Sri Lanka needs to raise its tax ratio to 18-20% of the GDP from the 8% the country had in 2021 and 2022, while one of the most important things to do is to fix the hole in Sri Lanka’s fiscal accounts. Under the IMF programme, Sri Lanka should raise the tax revenue to 14% of the GDP by 2026.

Moreover, Coorey said that Colombo Port City should not be giving tax breaks to corporations which is something the policymakers in Sri Lanka should focus on. She explained that no tax break in the tax system will contribute to having low uniform taxes for all corporations and added that if there is no tax break then corporations will not be charged 30-50% in taxes rather than at a much lesser range such as 24-25% where everybody has to pay the taxes.

“We should renegotiate some of our past tax holidays. Some people have got tax holidays for 30-40 years, that is not fair. There are people with Rs 100,000 paying a month Rs 6000 and there are people who pay nothing so that has to be fixed,” she added.

Further, she said that Sri Lanka should not exempt VAT and that it needs to be administered in a flat uniform way such as the current 15% which can sustain the country

“We should match it (VAT exemptions) with the cash transfers to the less well-off,” she said, adding that VAT exemptions on food, mainly benefit the well-off as the rich spend more on food.