Sri Lanka to impose capital gains tax, raise other taxes

ECONOMYNEXT – Sri Lankan Prime Minister Ranil Wickremasinghe said the government will revise the 2016 budget and raise taxes to increase revenue and keep the budget deficit and debt under control.

He announced in parliament that a capital gains tax would be imposed and a uniform value added tax (VAT) would be charged at 15 percent, eliminating the current two-band structure and ending exemptions including to telecoms, private education and health services.

The Nation Building Tax will remains at 2 percent and income tax raised to 17.5 percent from 15 percent.

Wickremasinghe said the government was having talks with the International Monetary Fund on a new tax system to be implemented from 2017.

The capital gains tax would be re-imposed since high income earners had increased their wealth in the past decade with land and stock prices rising.

“We can’t always tax only the poor – we need to tax the rich as well,” he said.

He also announced a proposal to open a budget office in parliament.

Wickremasinghe said the government debt burden was 9.5 trillion rupees and could rise.

The central bank could raise interest rates again after its recent hike maybe before the expected rate hike in the United States.