AFP, Colombo :
Cash-strapped Sri Lanka on Tuesday announced steep, across-the-board tax hikes to shore up revenue as the country suffers its worst economic downturn and seeks an IMF bailout.
The value-added tax (VAT) applied on almost all goods and services were raised from 8.0 per cent to 12 per cent with immediate effect, while corporate taxes were also increased from 24 to 30 per cent.
The personal income tax exemption threshold was lowered from 3.0 million rupees ($8,330) a year to 1.8 million rupees.
The increases were a rollback of the generous cuts ordered by President Gotabaya Rajapaksa soon after he won the November 2019 elections.
Prime Minister Ranil Wickremesinghe, who is also the finance minister, said Rajapaksa’s tax cuts cost the state some 800 billion rupees ($2.22 billion) annually and widened the budget deficit sharply.
International rating agencies, as well as independent economists, have pointed to Rajapaksa’s fiscal policy as having fuelled the current financial crisis. ALSO READ: Sri Lanka asks farmers to plant more rice as food shortage looms
Wickremesinghe, an opposition legislator, was made prime minister this month. His predecessor and the president’s elder brother Mahinda stepped down after months of anti-government protests turned deadly. The South Asian nation is in talks with the International Monetary Fund for a bailout after running out of dollars to pay even for the most essential imports such as oil, food and medicines.
