The upcoming Budget 2022 will not increase the tax rates for the upcoming year, despite revenue inflow being impacted this year and the previous year due to the prevailing Covid-19 pandemic.
A reliable source from the Ministry of Finance told us that there were no plans to increase the tax rate for the year 2022 via the upcoming national budget, which is scheduled to be announced next month.
Speaking to us, Inland Revenue Department (IRD) Commissioner General H.M.W.C. Bandara too stated that the Government will not be increasing the tax rates for the upcoming year. “According to my knowledge, tax rates will not be increased,” Bandara said.
Attempts to further clarify the information from Treasury Secretary S.R. Attygalle proved futile at the time of going to print.
Speaking to us in June, Bandara said that despite close to half of the tax revenue target being met by the IRD, it was still not possible to forecast the possibility of meeting the targeted annual tax revenue of Rs. 575.5 billion amidst the volatile local environment.
“We do not know until when this condition will go on. It will depend on the Covid-19 situation. Sometimes, it could be difficult to achieve the set target if the prevailing situation extends by another two to three months or so,” he explained.
The Committee on Public Finance (COPF), chaired by Anura Priyadarshana Yapa, in June, appreciated the IRD’s achievement in the face of the present global crisis. However, the Committee stressed that the IRD should increase the number of taxpayers in Sri Lanka.
In 2020, the revenue target given by the Government to the IRD was Rs. 613 billion, which was close to the total revenue collection of the year 2016. The target was reduced due to the various tax relief measures provided by the Government in the initial months after coming to power, to stimulate consumer spending and economic growth in the country.
However, Bandara told us that out of this figure, only Rs. 495 billion was supposed to be raised by the IRD in 2020; only 86% of the target was met by the end of the year, he added.
The IRD recorded revenue of Rs. 836 billion in 2017, while in 2018, it managed to collect over Rs. 900 billion. According to several reports, the targets given for the years 2017 and 2018 were Rs. 651 billion and Rs. 792 billion, respectively. In 2019, the revenue target given to the IRD was Rs. 799 billion. The IRD managed to get close to the target by achieving Rs. 785 billion last year, but it fell short by Rs. 14 billion.
In November last year, then IRD Commissioner General Nadun Guruge told that while the target set for the year was Rs. 613 billion, by 30 September, only about Rs. 327 billion was raised, compared to Rs. 597 billion raised in the first three quarters of 2019.
Accordingly, the 2020 target was reduced due to various tax relief measures by the new Government, soon after they were elected to power in November 2019. The most notable amongst these was the reduction of value-added tax (VAT) from 15% to 8% with effect from 1 December 2019. In addition to this, nation-building tax (NBT) of 2.2% was also removed with effect from 1 December 2019, including for financial service businesses.