• VAT and excise duties, especially on motor vehicles, drive increase in government coffers
• Fin. Min. reports revenue up 24.8% to Rs. 2,322 b, with IRD hitting nearly half its annual target

Sri Lanka’s tax revenue collection has jumped by about 26% in the first half of 2025 compared to the corresponding period last year, driven by revenue from value added tax (VAT) and excise duties, the Finance Ministry said.

In their Fiscal Review Report for the first half of the year, the Finance Ministry said that the total revenue increased by 24.8% to Rs. 2,322 billion in the period, where tax revenue amounted to Rs. 2,152 billion, a 25.9% increase year-on-year (y-o-y).

Revenue from VAT increased by 27.6% to Rs. 876 billion in the first half of 2025, while revenue from excise duty on motor vehicles significantly increased by 335.6% to Rs. 129.1 billion during the period.

Income tax revenue increased by 9.2% to Rs. 489 billion in the same period.

The Inland Revenue Department (IRD) has achieved 47.3% of its annual estimate, contributing to around half of the total tax revenue collected in the first half of 2025.

Meanwhile, excise duty on cigarettes decreased by 17.9% to Rs. 44.0 billion in the first half of 2025 compared to the same period of 2024, with the high prices of cigarettes.

However, revenue from excise duty on petroleum increased by 15.5% to Rs. 112 billion during the period.

Furthermore, the Finance Ministry said that capital and net lending decreased by 8.6% to Rs. 224 billion in the first half of 2025, while total Interest payments increased by 10.7% to Rs. 1,264.6 billion.