• Electronically filed IIR to be increased by 50% by end-2024

Sri Lanka’s Inland Revenue Department (IRD) seeks to rebuild the Social Security Contribution Levy (SSCL) taxpayer base to 20,000 by the end of 2024 from 12,000 at the end of 2023, the International Monetary Fund (IMF) report states.

According to the Key Performance Indicators (KPIs) laid out by the IRD to 2024 in line with the Extended Fund Facility (EFF) of the IMF, the state tax collection agency looks to increase the Value Added Tax (VAT) also with the SSCL taxpayer base on a quarterly basis to reach 20,000 by end of 2024.

The IMF staff report on Sri Lanka released following the approval of the second tranche states that the IRD is to increase the VAT and SSCL taxpayer base by 2,000 each quarter in 2024 from the current number of 12,000.

The registered VAT population was nearly 29,000 before the 2019 changes and has fallen to 12,000. 

Already, the Government of Sri Lanka  has decided to raise the VAT rate from 15-18% from 1 January 2024, while cabinet approval has been given to bring the VAT threshold to Rs. 60 million from the current Rs. 80 million mark and the SSCL threshold to Rs. 60 million from Rs. 120 million.

This along with the removal of VAT exemptions on 97 classes of goods, is expected to bring in additional VAT revenue close to Rs. 300 billion in 2024.

Moreover, the IRD seeks to keep the collectible debt which is a portion of arrears owed to the department that is not subject to dispute and where there is no legal impediment to collection action, under 12% of the total government revenue by the end of 2024.

At the end of 2021, the ratio of collectible debt to annual collections was 13.75% but deteriorated to 15.4% by end-2022.

Also, it expects to increase the electronically filed Income Tax Returns (IIR) to 50% by the end of 2024. In 2021, electronically filed IIR stood at 23.4% of the total tax returns. 

Electronically filed Income Tax Returns (IIR) to 50% by the end-2024