The next economy – Central Bank Governor Nandal Weerasinghe urged the public to become informants to expand the tax net and thus reduce overall direct and indirect taxes.
The government has raised the value added tax (VAT), an indirect tax, to 18% from 15% effective January 1. The move will also see some VAT-exempt goods such as fuel, gas, health and educational products now subject to the 18% rate. Percent tax.
The new move raised the prices of fuel, cooking gas, food, private transportation fees, and many other goods.
Sri Lankan citizens, who are not accustomed to paying higher taxes, are also forced to register for taxes and file tax applications on an annual basis. The move is expected to boost government revenues to 15 percent of GDP in 2026 from 11 percent last year.
Analysts say most Sri Lankans are unwilling to pay any taxes because they do not see any benefits from paying government taxes amid widely reported corruption allegations.
Central Bank Governor Weerasinghe, who has been instrumental in managing monetary policy and maintaining price stability in the bankrupt Sri Lankan economy, said the public needs to do its part to reduce overall taxes in the future.
“On the public side, they think why they always pay high taxes while others don’t. If people want to reduce taxes in the future, what I see is that while they pay their taxes, they should encourage others to pay taxes or inform the authorities,” Weerasinghe told the TV programme. (For those who do not pay taxes).” late Monday (01) hosted by the President’s Media Center (PMC).
“This is the way to reduce the amount of VAT or personal income tax they pay.”
Weerasinghe’s comments come as Sri Lanka desperately seeks to increase government revenues in line with the commitment it agreed to with the International Monetary Fund for a $3 billion loan.
He also warned that some companies may be involved in VAT fraud. In countries where VAT works well, all businesses are required to issue a VAT invoice to customers whether they are tax-paying businesses or members of the public.
Analysts say that unlike income tax, where the state takes a portion of a person’s earned income, the value-added tax collected from the public is not the income of a company, but a collection made on behalf of the state.
“If we are paying PAYE (pay as you earn) tax, then we have to pay that,” Weerasinghe said, referring to the tax that is deducted at the point of earning.
“But some businessmen with the same income do not pay tax and keep double receipt books and without showing the real income, they show less income and pay less tax.”
“If I pay tax, and if I know someone else doesn’t pay, I can’t reduce my tax burden by adding that person to the tax net.”
“In some places, when you buy goods, they ask you whether you want the invoice with or without VAT. If I agree to pay less (for the invoice without taxes), it will never reduce my tax burden.”