Sri Lanka to bring in 14 previously untaxed sectors into direct tax net: state minister

ECONOMYNEXT — Sri Lanka plans to tax 14 new previously untaxed sectors including large-scale private tuition classes and private medical services in a bid to increase direct taxation, State Minister of Finance Ranjith Siyambalapitiya said.

He told reporters on Monday July 08 that private schools and private engineering and surveyor services will also be taxed.

The Inland Revenue Department (IRD) has studied the income of persons engaged in the 14 sectors, said Siyambalapitiya.

“It was by paying attention to such sectors that we were able to increase state revenue from 8.3 percent of GDP to over 11 percent in a short time and bring revenue and expenditure to some balance.

“A primary surplus was possible because all of those sectors were thoroughly looked into and revenues collected. “We must continue this,” he said.

It was for this reason that the IRD’s Revenue Administration Management Information System (RAMIS) was being deployed, the state minister said.

“Through that we can get data on not just income but the expenditure of such institutes also. Globally that’s how proper calculation of income and expenditure is calculated. “We’re moving forward step by step,” he said.

“We have taken into account 14 sectors that have not been considered,” he added.

The government plans to increase the share of direct taxation to 70 percent from the current 60 percent, he said.

“Why are we trying to increase direct taxes? To reduce the burden of indirect tax on the public. In 2022, 80 percent of tax revenue was indirect, while direct was only 20. This meant that 80 percent of the state revenue burden fell on everyone equally, from the richest person to the beggar on the street. But now this has changed to 70 and 30 percent. In two years, we plan to change this to 60, 40 as in developed countries. “This is to tax people who are able to pay direct taxes, and to reduce indirect tax especially value added tax (VAT),” he said.