Moody’s Analytics last week said that Sri Lanka’s newly revised Inland Revenue Act will augment the country’s very low level of government revenues.
In a statement to the media, Vice President, Sovereign Risk Group of Moody’s Investors Service, William Foster, stated that the new law replaces the existing law with a more efficient, modern and broad-based tax framework.
“Through past additions of multiple tax exemptions, Sri Lanka’s income tax efficiency and tax collection are weak relative to other sovereigns,” Foster said.“The general government revenue-to-GDP ratio was only 14.3% in 2016, one of the lowest among B-rated sovereigns.”
He said that the reforms of the Inland Revenue Act offer prospects of higher revenues.
Foster in his statement added that the implementation of revenue reforms that foster long-term fiscal consolidation will be critical to shoring up Sri Lanka’s credit profile, which is weighed down by the country’s large debt burden and relatively weak debt affordability.
The new revenue law passed in Parliament on September 7 with amendments. The bill received 90 votes in favour and 25 votes against it.