Sri Lanka tax revenues up by 56-pct amidst deficit up on interest in Nov 23

By: Staff Writer

January 31, Colombo (LNW): Sri Lanka’s tax revenue increased significantly by 56% to 2,512 billion rupees in the 11 months leading up to November. Total revenues also rose to 2,758 billion rupees, finance ministry data shows.

Despite this, the country faced a substantial surge in its deficit, primarily due to increased interest costs.

The monthly tax collection reached 299 billion rupees in November. The country’s current spending skyrocketed to 4,292.8 billion rupees, marking a 46% increase, with interest costs experiencing a significant jump.

Non-interest expenses rose by 14.5%. Notably, there were salary and pension increases in January 2024. Interest costs, which were already high at 1,772 billion rupees up to October, escalated further to 2,351 billion rupees by November 2023.

The Inland Revenue Department (IRD) has achieved its highest ever tax revenue of Rs. 1,550.6 billion in 2023 exceeding the target of Rs. 1,492 billion given to them for the year which is 104 percent of the set revenue target of Rs.1,492 billion given for 2023.

Deputy Commissioner General Inland Revenue Department, Saman Shantha (Media Committee Chairman) said that the target of Tax Revenue to achieve in the year 2024 is set at Rs.2,024 billion.

The total revenue collected by Inland Revenue for the year 2023 is Rs.1,550,589 Million compared to the total of Rs. 861,233 earned in 2022.

The Inland Revenue Department has succeeded in raising the tax revenue by 80 percent up to Rs.1,550.6 Billion for 2023 and by doing so has made a commendable contribution to maintain the financial position of the Government at a very strong base.

The Department has achieved a remarkable revenue collection growth of 25 percent in Corporate and Non-Corporate Income Tax, 59 percent in Value Added Tax (VAT), 473 percent in Advance Personal Income Tax and 684 percent in Advance Income Tax when compared to 2022.

In Sri Lanka, interest costs tend to rise during a stabilization year following a currency crisis triggered by the central bank’s rate cuts and liquidity injections.

The stabilization process began in April 2022 when Sri Lanka allowed interest rates to rise. However, fears of a full default in domestic securities to meet IMF requirements caused further spikes in government securities’ interest rates.

Officials have tried to mitigate the impact of domestic bonds and restructured some bonds, with the EPF-held bonds’ coupon set at 12.5% until 2025.

The deficit in the current account of the budget increased by 35% to 1,534 billion rupees. Capital spending was relatively controlled at 498 billion rupees, a 7% increase. Overall, the budget deficit rose by 26% to 2,020 billion rupees.