A confidential report by a cabinet subcommittee states that Sri Lanka’s tax revenue is only 11% of the GDP for last year and that the government revenue as a percentage of the GDP has been on the decline, therefore the estimates for 2015 are unrealistic and unachievable under the existing tax regime.

The report states that there has been a shortfall in revenue even in the first quarter of this year, leaving the Government’s development goals in disarray.

A copy of the ministerial subcommittee report submitted to the Cabinet Secretary is with Daily Mirror and it also states that the reforms introduced in 2011 to the Inland Revenue Department had also not produced results. The confidential report states that under the present tax system, there is a massive tax evasion both extensive and intensive and that neither savings, investments nor revenue have increased other than generating a higher rate of consumption. A cabinet subcommittee appointed to review tax collection so as to prepare the Medium Term Budgetary Framework for 2015 – 2017 contained in the 2015 budget proposals also notes that under the present tax system, achieving the expected economic targets is not feasible.

It recommends the reconsideration of the costly tax exemption programme and to create more fiscal space by broadening the tax base in the face of emerging expenditure, the high fiscal deficit and the growing Government debts.

“It is not prudent to continue our over reliance on indirect taxes and must rely instead on a direct tax effort. We must ease taxing of goods for consumption and services regardless of the people’s income levels and avoid placing burdens on the poorer households,” the report said. The Medium Term Budgetary Framework 2015-2017 will be included in the 2015 Budget proposals, the Daily Mirror learns.

“The revised revenue estimates for 2014 relating to tax revenue is Rs.1168 billion while the estimate for 2015 is Rs.1361 billion, which is an increase of Rs.193 billion,” the report said adding that though it was originally anticipated that the revenue as a percentage of GDP would increase to 21% by 2008, it had ended up in total failure.

Source: Daily Mirror - Sri Lanka