By: Staff Writer
December 23, Colombo (LNW): The International Monetary Fund (IMF) will review the new tax measures announced by Sri Lanka recently, Julie Kozack, Director of the Communications Department of the IMF said.
She noted that the IMF staff and the Sri Lankan authorities reached a Staff-Level Agreement on the Third Review under the EFF arrangement last month.
The International Monetary Fund (IMF) has proposed a series of tax reforms for Sri Lanka, effective from January 1, 2025, aimed at achieving fiscal sustainability and a tax-to-GDP ratio of at least 14% by 2026. These reforms include the introduction of new taxes, adjustments to existing ones, and the removal of certain exemptions
Kozack said that once the review is completed or approved by the IMF Executive Board, Sri Lanka will have access to $333 million.
“With respect to what comes next, the Executive Board meeting is expected to take place in the coming months following the implementation by the authorities of the prior actions,” she said.
Kozack revealed that the IMF staff will include a full assessment of the new tax measures in the staff report that will be published following approval by the Executive Board of the program.
President Anura Kumara Dissanayake recently announced proposed reforms to Sri Lanka’s Personal Income Tax (PIT) system.
These changes include raising the tax-free monthly income threshold from LKR 100,000 to LKR 150,000, as well as adjusting the tax brackets to offer substantial savings for taxpayers.
At the same time, these proposals reinforce Sri Lanka’s position as one of the region’s least taxed countries for lower-income earners.
Although the President did not outline the precise tax rates for each bracket, PublicFinance.lk has estimated the new rates and brackets based on the proposed reductions upto Rs 300,000 per month.
Sri Lanka already provides the highest tax-free threshold and a comparatively lower tax burden for low-income earners than most other South Asian countries, with the exception of the Maldives.
In a previous blog, PublicFinance.lk noted that Sri Lanka’s current tax-free income threshold of Rs 100,000 per month is higher than those in Bangladesh (Rs 75,682), Pakistan (Rs 54,710), and India and Bhutan (approximately Rs 91,000).
However, while income earners below Rs 250,000 per month enjoy relatively low tax obligations, the burden beyond this amount rises sharply to the highest in the region.
