Moody’s claims new SL Inland Revenue Act will improve government income
According to rating firm Moody’s, the Government of Sri Lanka’s (GoSL) will be able to increase its revenue thanks to the new Inland Revenue Act introduced recently.
Vice President, Sovereign Risk Group of Moody’s Investors Service, William Foster said that the new law was more up-to-date, effective and encompassed a larger area than the previous legislation.
“Through past additions of multiple tax exemptions, Sri Lanka’s income tax efficiency and tax collection are weak relative to other sovereigns,” he said.
“The general government revenue-to-GDP ratio was only 14.3% in 2016, one of the lowest among B-rated sovereigns,” he added.
Sri Lanka generates an extremely low level of government revenue and the new act may remedy this.
According to Foster the new Act will introduce revenue reforms that encourage long-term fiscal consolidation which is crucial to improving the country’s troubled credit profile. Sri Lanka’s credit profile has been negatively impacted by its considerable large debt and weak debt affordability.
According to reports, 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.
Minister of Finance Mangala Samaraweera informed parliament earlier that the main objective of the new Inland Revenue Act is to simplify the tax system in order to create an investor friendly environment that will attract more foreign direct investments.
The Act will reduce the indirect taxes levied from the people from 80% to 60% and increase the direct taxes from 20% to 40% within three years.
An increase in government revenue will help ease the country’s debt burden and also provide funds to implement the government’s various proposed projects. The increase in the government’s ability to fund key large scale projects, it will open up avenues for investors to enter the country and explore investment possibilities in various sectors.
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