A team from the International Monetary Fund (IMF) is scheduled to arrive in Sri Lanka on Wednesday (7) to undertake a study in order to determine the modalities for introducing a State property tax. 

Speaking to The Sunday Morning Business, Ministry of Finance Department of Fiscal Policy Director General M.K.C. Senanayake stated that an IMF team would be visiting Sri Lanka for a two-week stay on Wednesday (7) to conduct a study and engage with stakeholders in order to determine the suitability and the specific modalities for introducing property taxes in Sri Lanka.

“During their visit, they will be engaging with stakeholders such as the Survey Department, Municipal Councils, Local Governments, Provincial Councils, and the Finance Commission. They will be meeting with all of them,” he stated. 

He revealed that presently certain Municipal Councils were already levying property taxes under the Municipal Councils Ordinance. Through the study, among other things, they hope to identify whether a State property tax should be introduced to replace such municipal property taxes or whether it will be introduced concurrently.

Senanayake stated that the introduction of this State property tax was still at its inception, with the precise modalities yet to be decided and that the study would examine and analyse the data to determine how the property tax would be levied. 

The introduction of a property tax by 2025 was part of the revenue generation plan the Government and the IMF had agreed to in 2023. 

The programme documents provide the following assurances given by Sri Lanka: “To reach a primary fiscal surplus of 2.3% of GDP by 2025, we will revamp the property tax system and introduce a wealth transfer tax. In particular, we will introduce a nationwide real property tax and adjust the system of transfers between the Central and Provincial Governments. 

“We will also introduce a gift and inheritance tax with a tax-free allowance and minimal exemptions. Preparatory work for these tax reforms will commence by mid-2023, supported by IMF technical assistance.”