April 01, Colombo (LNW): A significant portion of Sri Lanka’s anticipated Rs. 922 billion increase in government revenue for 2025 will be fuelled by value-added tax (VAT), according to an analysis by PublicFinance.lk, a local economic research platform.
Government revenue—excluding provincial council income and grants—is projected to reach Rs. 5,012 billion in 2025, marking a 23 per cent rise from Rs. 4,090 billion in 2024.
Treasury estimates place the total revenue at Rs. 5,125.96 billion, with tax revenue alone contributing Rs. 5,012.4 billion. Provincial councils are expected to generate Rs. 83.56 billion, while foreign and domestic grants will add Rs. 30 billion to the national coffers.
VAT remains the most significant driver of revenue growth, projected to generate an additional Rs. 305 billion in 2025, accounting for one-third of the total revenue increase. VAT alone will make up 32 per cent of total government income, reflecting its central role in fiscal planning.
A breakdown of the tax revenue sources highlights that VAT on imports is set to yield Rs. 193 billion, while the excise duty (special provisions), driven largely by motor vehicle duties, is forecasted to bring in Rs. 215 billion, with vehicle-related taxes contributing Rs. 171 billion.
Taxes on international trade and income are expected to rise, generating Rs. 174 billion and Rs. 141 billion, respectively. Other taxes and levies will add Rs. 51 billion, while non-tax revenue is estimated at Rs. 37 billion.
The government is also forecasting an economic growth rate of 5 per cent in 2025, with total tax revenue reaching 13.9 per cent of GDP, while overall revenue is projected to be 15 per cent of GDP.
Export earnings from goods and services are expected to contribute Rs. 19 billion, and capital expenditure is forecasted to account for 4 per cent of GDP. The primary surplus is estimated at 2.3 per cent of GDP, with the budget deficit being expected to stand at 6.7 per cent of GDP.
