'Sri Lanka lost 1 mn taxpayers since 2019'

Colombo: Sri Lanka lost around 1 million taxpayers in the last two years after the Gotabaya Rajapaksa regime announced sweeping tax cuts in 2019 in its bid to spur growth, Finance Minister Ali Sabry has revealed, as the island nation faced an unprecedented economic crisis.

These tax cuts were introduced in November 2019 in keeping with President Rajapaksa's election pledges.

The Cabinet had slashed the value added tax (VAT) to 8 per cent from 15 per cent and also abolished seven other taxes.

These sweeping tax cuts led to a credit rating downgrade in the following year, prompting Sri Lanka to get alienated in international financial markets.

Sabry told Parliament on Thursday that Sri Lanka lost about 500,000 taxpayers each in 2020 and 2021 after the ill-timed tax cuts were delivered.

From around 1,550,000 taxpayers at the beginning of 2020, the number came down to 1,036,000 in 2020 and to 412,000 in 2021. This is a massive problem for us, Sabry told Parliament on Thursday. Sri Lanka's foreign reserves dropped sharply from a healthy level of $8,864 million in June 2019 to $2,361 million in January 2022, according to official estimates.

The COVID-19 pandemic in March 2020 only exacerbated the situation, with tourist inflows and foreign remittances taking a massive hit. The prolonged and intermittent lockdowns caused by the pandemic prevented the economy from achieving what was originally expected from the tax cuts, Sabry was quoted as saying by the Daily Mirror newspaper.

The 2019 end tax cuts were brought for all tax paying citizens in the country to stimulate economic activity and thereby make use of that reinvigoration as a launchpad for the development of the country. As a result of the pandemic, it failed to deliver the desired results, the minister explained.

In 2018, Sri Lanka's tourism industry boomed and generated $4.4 million in revenue, and it dropped to $200 million in 2021, mainly due to COVID-19, he said.

Next Story
Share it