By Uditha Jayasinghe

COLOMBO (Reuters), Sri Lanka’s government has announced a tax reform to maximize revenue in the face of the country’s severe economic crisis. It will increase value added taxes as well as corporate income tax. Individual tax payers will also be given less relief.

Ranil Wickremesinghe was elected Prime Minister and will present an interim budget in the next few weeks. He stated that these measures are necessary because of unsustainable state of government finances.

“… “The implementation of strong fiscal consolidation plans through revenue enhancement and expenditure rationalization steps in 2022 is essential,” Wickremesinghe’s office stated in a statement.

One of the most important tax increases was an increase in Value Added Tax. (VAT) with immediate effect. It is estimated that this will boost government revenues to 65 billion Sri Lankan rupees ($180.56 Million).

The exchequer will also benefit from other measures like raising corporate income taxes from 24% down to 30% in October.

According to the statement, withholding tax has been mandatory on income earned from employment and exemptions for individuals tax payers have been reduced.

($1 = 360.0000 Sri Lankan rupees)