Even with the proposed tax increases, Sri Lanka still maintains a low tax regime compared to most of the other countries, said State Minister of Finance, Ranjith Siyambalapitiya.
He was speaking at a seminar hosted by the Ministry of Finance on new tax laws and suggestions to improve them on Friday.
 Corporate income tax in some countries
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He said that the current tax structure is lower than countries such as Laos, Myanmar, Pakistan, and India which are in the same economic tier in personal and corporate income tax. “Even with the enhanced tax rates Sri Lanka still remains lower than India.”
The Minister said that tax reforms were introduced to strengthen government revenue which was dropping steadily. “One must understand that the Government has to look after over under-privileged 3.4 million families. While investing in the education of 4.1 million school children through free education, the government also provides handouts for over 200,000 university students.”
The Minister said, “The Government has to look after around 5.8 million patients in hospitals and also a further 6 million outpatients annually under the free health care scheme.”
The Government has also to spend 58% of its revenue on salaries and wages of public servants.
He said that total government revenue was Rs. 1,457 billion but the expenses were Rs. 3,522 billion. “While government revenue was substantially low, government expenditure was around 20% of GDP in 2021, making government revenue grossly inadequate even to meet day-to-day expenses of the Government and this is why we reluctantly had to increase tax.”
The Minister said that they were not robots and knew the hardships the enterprises were going through paying high interest rates to obtain credit, high production costs due to high raw material costs and other overheads. “But if the Government does not increase taxes, the economy will collapse and the country will have to go back to the recent era where there were huge queues for fuel, gas and over five-hour power cuts.
Siyabalapitiya said that today the economy is recovering and this is because prudent economic measures are being taken. “The YoY inflation of CCPI for November which was 61.0% has decreased relative to October. Food prices too have decreased to 73.7%YoY in November 2022 from 85.6% YoY in Oct 2022 while the non-food item prices also decreased to 54.5% YoY from 56.3% YoY in Oct 2022.
Foreign reserves have been strengthened and have increased by USD 90 million to USD 1.8 billion in November 2022 which are all signs of economic recovery.