No Choice But To Hike Sales Tax: SL Finance Minister
Colombo, April 29: Sri Lankan Finance Minister Ali Sabry has said that he had no choice but to increase the sales tax amid the country’s economic crisis.
In an interview with BBC on Friday, Sabry slammed the government for reducing the rate of value added tax (VAT) to 8 per cent in 2019.
He said that the nation needs $4 billion in the next eight months to be able to pay for imports of daily essentials.
“We have to increase the taxes. We need to find a way to bridge the revenue gap and expenditure which we have”, he said.
BBC quoted the minister as saying that the current level of VAT is “definitely not sustainable” for a country like Sri Lanka that is dependent on the imports of essentials and said the rate should be raised to 13 per cent or 14 per cent.
He pointed out that reducing taxes soon after Gotabaya Rajapaksa became president was wrong and the government waited too long to ask for IMF’s help.
Sabry was also cautiously optimistic that the country will be able to start paying its international creditors again by next year, but said it was “very, very difficult for me to give a timeline, I hope and pray that it is as soon as possible, probably six months one year down the line. But I don’t know,” BBC reported.
Earlier, PM Mahinda Rajapaksa-led government had announced that it would temporarily default on $35.5 billion in foreign debt as the Covi-19 pandemic and Ukraine conflict had made it “impossible” to make payments to overseas creditors.
