President Anura Kumara Dissanayake has committed to reducing the Pay-As-You-Earn (PAYE) tax rates for Sri Lanka’s workforce by March 2025.
Speaking in a televised programme on Wednesday evening, he outlined a series of tax reforms and economic initiatives that his government plans to include in the upcoming national budget, which will be presented in February 2025.
He revealed that the new budget would focus on providing targeted relief for lower-income earners by reducing PAYE tax rates. He emphasized that while tax cuts would benefit lower-salaried individuals the most, high-income earners would see more modest reductions.
He also noted that his administration had held discussions with the International Monetary Fund (IMF) representatives in Washington to review these proposed fiscal reforms. An IMF delegation is scheduled to visit Sri Lanka on 14 November for further consultations.
In preparation for these changes, the President announced that following the election on 14 November, a smaller Cabinet of fewer than 25 members would be appointed.
Due to time constraints, the government will initially present a supplementary budget to fund state operations until March 2025, with the full budget to follow in February.
Additionally, Dissanayake confirmed plans to remove the Value Added Tax (VAT) on certain essential goods and services.
While acknowledging the importance of tax collection, he emphasized that the priority would be to provide economic relief to vulnerable groups, with the broader aim of fostering an environment where all citizens can live comfortably.
The President also addressed Sri Lanka’s ongoing participation in the IMF program, which requires the government to increase revenue to 15% of GDP by 2025, up from the current target of 13.8%.
The IMF also mandates that Sri Lanka’s primary account balance should be positive by 2.3% by 2025. Dissanayake acknowledged the difficult decisions ahead, stressing that leaving the IMF program was not a viable option at this stage due to the risks of economic instability.
He assured that despite potential reductions in taxes, the government would strive to meet its economic targets without compromising citizens’ livelihoods.
In another major announcement, Dissanayake outlined steps to revive Sri Lanka’s paddy cultivation and restore the country’s collapsed state-owned rice marketing and supply chain.
The government plans to streamline operations at the Paddy Marketing Board, making full use of its storage capacity of 201,000 metric tons and renovating an additional 100,000 metric tons of storage facilities.
The government will also register all paddy collectors, with a mandatory weekly stock report to be submitted to authorities.
Despite these efforts, Dissanayake acknowledged the financial challenges faced by the Paddy Marketing Board, which has incurred a debt of Rs 28 billion due to inefficiencies.
This debt, which was provided by two state banks and the treasury to purchase paddy from farmers, remains a significant hurdle for the Board’s operations.
