President Anura Kumara Dissanayake has said the government plans to reduce certain taxes further in the upcoming Budget while keeping state revenue on target.

Speaking about the country’s economic performance, the President said the government had met its revenue targets without introducing any new taxes since taking office.

“We have not imposed any new taxes since coming to power. In fact, we have significantly reduced some existing taxes. We will reduce certain taxes further in the upcoming Budget,” the President said.

He said the proposed reductions would be carried out without putting the revenue targets at risk. The President did not say in the remarks reported which taxes would be cut or by how much.

The President said earlier governments had repeatedly failed to meet projected revenue, often collecting only around 90 percent of the expected amount. He said the present administration had exceeded its revenue expectations and was maintaining a primary budget surplus, which he said would help reduce the debt burden over time.

He also acknowledged that rising inflation had put extra pressure on households, particularly through higher prices for goods and services. He attributed much of that pressure to the continuing conflict in the Middle East and disruption to international supply routes.

Background

A primary budget surplus means that government revenue is greater than spending, not counting interest payments on debt. Sri Lanka has a primary surplus target as part of its economic reform programme backed by the International Monetary Fund (IMF), which also sets expectations for how much revenue the government collects.

Revenue has been a central question in Sri Lanka’s recovery since the country defaulted on its foreign debt in 2022. Tax policy is set largely through the annual Budget, which the government presents to Parliament in the last months of the year before it is debated and put to a vote.

Taxes on income, goods and services, and imports each affect households and businesses differently. Because the President has not named any tax, it is not yet clear which of these groups would benefit.

What it means

For households, the announcement is a statement of intent rather than a change in any rate. No tax will be reduced until the Budget proposals are presented to Parliament and approved, and the details will determine who gains.

The President’s remarks on inflation indicate that the government is aware of the cost of living pressures families face. Readers who pay tax or buy taxed goods will be able to see the actual measures when the Budget is presented.