• Deshal de Mel says MoF to implement wealth tax as progressive tax 
• Adds tax burden to be shouldered by the wealthy who can do so

The Ministry of Finance is analysing the implementation of the Wealth Tax by 2025 as proposed by the International Monetary Fund (IMF) in a manner that will strike a balance between generating revenue whilst avoiding disincentivising the deployment of capital, Economic Advisor to Finance Ministry Deshal de Mel said.

Speaking in an economic forum organised by the Institute of Chartered Accountants of Sri Lanka yesterday (30), he said in addition to the core taxes such as Corporate and Personal taxes and Excise duties, the Finance Ministry is exploring measures such as the Wealth tax to be implemented as a progressive tax where the tax burden is shouldered by the wealthy who can afford it.

He noted that Sri Lanka is in a situation where it needs to have a steep revenue enhancement in a short period of time, especially in the context of where the country is asking its global counterparties such as the IMF and external creditors to take losses on the loans they have extended to Sri Lanka.

“In that sense, we also need to demonstrate a material fiscal effort from our side to make sure that they are also willing to participate in this process of reducing our debt,” he said.

Moreover, he said that as the implementation of taxes such as the Wealth tax is a new measure, “they require a degree of analysis and work before they are brought out and that process will commence now, in terms of identifying what type of taxes are appropriate in this context and how they strike a balance between generating revenue whilst, avoiding disincentivising the deployment of capital,” he added.

According to the IMF report on the Extended Fund Facility (EFF), Sri Lanka needs to introduce a nationwide real property tax including a review of related fiscal transfers and introduce a gift and inheritance tax with a tax-free allowance and minimal exemptions by January 2025.

Also, speaking at the event Secretary to the Ministry of Finance, Mahinda Siriwardena said that the Finance Ministry had discussions with the Inland Revenue Department and other revenue-collecting agencies on how to use IT-based solutions and systems as a tool to get many people into the tax net and thereby reduce the high tax rates at one point going forward.

He added that in 2022, the Government saw a 37% increase in revenue in nominal terms, which is about Rs 500 billion, even though Sri Lanka’s economy had a 7.8% contraction. 

Siriwardena noted that collecting government revenue in 2023 to achieve the projected revenue target of Rs 3.28 trillion with a 3% economic contraction will be different and have a less inflationary impact when compared to 2022.