Sri Lanka imposed a new 18% value-added tax (VAT) on fuel, mobile phones and computers from Monday in a bid to raise much-needed revenue to restructure its external debt.
Value added tax on other consumer goods was also increased to 18% from 15% previously, as the government sought to shore up public finances while Sri Lanka emerges from the worst of the economic crisis.
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Sri Lanka imposed a new 18% value-added tax (VAT) on fuel, mobile phones and computers from Monday in a bid to raise much-needed revenue to restructure its external debt.
Value added tax on other consumer goods was also increased to 18% from 15% previously, as the government sought to shore up public finances while Sri Lanka emerges from the worst of the economic crisis.
President Ranil Wickremesinghe said in his New Year’s address: “To achieve economic stability, we must continue to move forward on this difficult path. It is not a road adorned with flowers, but one that presents formidable challenges.” said.
Months of social unrest sparked by the economic crisis led to demonstrators storming President Gotabaya Rajapaksa’s residence in July 2022, forcing the then-president to resign.
His successor, Wickremesinghe, responded to the International Monetary Fund’s bailout by raising taxes and cutting government subsidies, and cracked down on anti-government protests.
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The IMF rescue program requires him to finalize by May the restructuring of the island’s $46 billion external debt after the government defaults in 2022.
The tax increases come as the government negotiates with bilateral lenders and sovereign debt holders to change repayment schedules, a key condition of the IMF bailout.
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