COLOMBO: Sri Lanka’s cabinet approved a hike in Value Added Tax (VAT) up to 18% from the current 15% with effect from Jan. 1, 2024, said Transport Minister Bandula Gunawardana.

State tax revenue of the first nine months of 2023 rose 51% as compared to the same period last year but tax collection targets agreed with the International Monetary Fund have not yet been accomplished, the cabinet said in a statement.

The new tax proposals will go into effect from 2024, including the imposition of taxes on all goods and services to which VAT is not yet applicable.

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“Public revenue increased to 1.7 trillion rupees ($5.19 billion) in the first nine months when compared to last year but this amount is barely sufficient to pay public sector salaries, meet welfare payments and other recurrent expenditure,” Gunawardana, who is the cabinet spokesman, told reporters.

“We know the public is struggling, so even though we are very reluctant to we have no choice but to increase taxes,” he said.

Additional taxes are likely to be introduced in the budget, which will be presented to parliament in mid-November, said Gunawardana.