Sri Lanka’s tax collection landscape has undergone a dramatic shift in 2026, with Sri Lanka Customs emerging as the country’s largest revenue-generating agency and overtaking the Inland Revenue Department for the first time in years. The development underscores the growing importance of import-based taxation in supporting the Government’s ambitious fiscal consolidation programme.
Official figures from the Finance Ministry show that Customs contributed Rs. 876 billion during the first four months of the year, representing 49% of total tax revenue. By comparison, the Inland Revenue Department collected Rs. 780 billion, accounting for 44%, while the Excise Department generated Rs. 97 billion.
The change has been driven primarily by the resumption of vehicle imports, which has triggered a sharp increase in tax collections at ports of entry. Revenue from excise duties on motor vehicles jumped to Rs. 187.1 billion between January and April, more than three times the amount collected during the same period in 2025. VAT on imports also recorded strong growth, increasing by 35% to Rs. 299.9 billion.
These gains helped total tax revenue rise by 31.7% to Rs. 1.78 trillion, accounting for more than 90% of overall Government income. Taxes on goods and services remained the largest contributor, generating Rs. 1.21 trillion. VAT alone delivered Rs. 677.4 billion, while excise duties contributed Rs. 391.8 billion and the Social Security Contribution Levy generated Rs. 113.3 billion.
However the fiscal story extends beyond import taxes. Domestic tax collection also showed resilience, reflecting broader economic recovery. Revenue from VAT on domestic activities expanded by 26%, while Social Security Contribution Levy collections increased by 15%.
Income tax receipts climbed to Rs. 310.2 billion, supported largely by corporate earnings. Corporate income taxes accounted for half of all income tax revenue, followed by individual income taxes and withholding taxes. The figures suggest that businesses have continued to recover from the economic crisis that severely disrupted activity only a few years ago.
The Ministry attributed the stronger tax performance to sustained economic growth. Sri Lanka’s economy expanded by 5% in both 2024 and 2025, with GDP at constant prices increasing to Rs. 13.13 trillion last year. The improving economic environment has broadened the tax base and strengthened compliance across several sectors.
Meanwhile, Government expenditure remained relatively contained. Recurrent spending increased modestly, while interest payments declined by 4.6%, providing additional relief to public finances. Although capital expenditure rose by nearly 50%, utilisation rates remained below planned levels, indicating that infrastructure and development spending has yet to accelerate significantly.
By the end of April, the Government had already achieved almost 37% of its annual revenue target and more than half of its projected non-tax revenue target. Total expenditure, however, stood at only a quarter of the annual allocation.
The figures point to a fiscal recovery that is gathering momentum. Whether it can be sustained will depend on continued economic growth, stable import activity and the Government’s ability to diversify revenue sources beyond the current dependence on vehicle-related taxes.
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