Aug 11, 2017

IRD gears up to implement the new Inland Revenue Act

Sri Lanka is gearing up to implement the new Inland Revenue Act which is expected to make the tax system more efficient and equitable, and generate resources for social and development programs.

The country’s fiscal consolidation, considered key to improving macroeconomic fundamentals, now hinges on this new Act The Inland Revenue Department has started preparing for its implementation, including by establishing a steering committee and project teams, drafting detailed tax manuals, and initiating communication with stakeholders,” the IMF said.

Despite some delay in passing the VAT amendments, the government authorities met the IMF program targets on tax revenues and the primary balance.

However, the end-2016 reserve target was missed reflecting the resumption of portfolio outflows late in the year and intervention to limit currency depreciation. Progress has been made in most fiscal-structural reforms, but energy pricing reforms have stalled due to political resistance.

Sri Lanka’s overall fiscal deficit decreased from 7 percent to 5.4 percent of GDP between 2015 and 2016, with public finances strengthening under an IMF supported program, the fund said releasing its country report.

The budget deficit is projected to fall to 5.2 percent of GDP in 2017, although the figure is up from a previously budgeted 4.8 percent.