Sri Lanka on path to raise more taxes and fix state finances: IMF Video
ECONOMYNEXT – Sri Lanka’s current administration began a drive to increase government revenues getting more taxes from the people, instead of cutting spending (state austerity) and making the government smaller.
Cutting spending is generally opposed by socialists and Keynesians, who want the state to tax people more and spend more.
The government is also on a drive to raise more direct taxes (taxing investible capital and savings) rather than indirect taxes (taxing spending)
If spending is kept in check, the higher taxes can reduce or eliminate the budget deficit. Persistent budget deficit has pushed debt to dangerous levels, where a large part of revenues are now used to service debt. The government is trying to reduce the budget deficit to around 3.0 percent of gross domestic product from around 5.0 percent, which will help reduce the accumulation of new debt.
The International Monetary Fund has released a video outlining what the government is attempting to do.