Sri Lanka budget banks on car taxes to boost coffers
COLOMBO: Sri Lanka is banking on vehicle import taxes to boost revenue and revive the island nation's battered economy, as revealed in leftist President Anura Kumara Dissanayake's maiden budget on Monday.
Vehicle imports were banned in 2020 to save foreign exchange, but the move deprived authorities of a lucrative revenue stream, as cars were taxed at around 300%.
Dissanayake stated that the end of the ban would bolster state revenue to meet the tax target of 15% of GDP, which the country must achieve under the terms of an International Monetary Fund bailout agreement.
"For the year 2025, the bulk of revenue gains is expected to be delivered by the liberalisation of motor vehicle imports," the president told parliament.
"This process is being carefully monitored to ensure that the import of vehicles does not result in undue negative impacts on external sector stability."
The budget also doubled the entrance fee for the island's two casinos to $100 and raised the turnover tax on gaming establishments to 18%, up from 15%.
The International Monetary Fund (IMF) wants Sri Lanka to double its income from taxation compared to the 7.3% of GDP it collected in 2022, when the country defaulted on its $46 billion foreign debt.
That year saw the island run out of foreign exchange to finance the import of food, fuel, and other essentials, prompting months of street protests that led to the toppling of then-president Gotabaya Rajapaksa.
Sri Lanka secured a $2.9 billion four-year loan from the IMF the following year.
Dissanayake, who was elected last year promising to end corruption and recover stolen assets stashed abroad, said the economy was on the mend.
"We should be in a comfortable position to service our foreign debts from 2028," he said.
He also announced a substantial 65% increase in the minimum wage to 40,000 rupees ($133) and raised subsidies for low-income earners.
By RSS/AFP
