The low tax regime introduced in late 2019 had caused an annual loss of around LKR 600 billion - 800 billion in tax revenue to state coffers, a statement added.
"At present, the situation has aggravated to a very critical level where the General Treasury has to increasingly obtain Central Bank financing to make the government expenditures, including a substantial part of interest, salaries and wages, pensions and Samurdhi payments etc. This is clearly unsustainable and hence the implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalization measures in 2022 and beyond to ensure macroeconomic stability to support the medium to long-term economic growth objectives of the country," the statement adds.
Accordingly, it has been proposed to increase the Value-Added Tax from 8% to 12% as well as to increase the Telecommunications Levy from 11.25% to 15%. It has been proposed to implement these reforms immediately.
In addition, several taxes are proposed to be amended with effect from Oct. 01, this year.
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