State denied substantial VAT revenue collected from consumers

• COPA chief says amount can be unbelievable   
• Value Added Tax files registered is found to be way below the actual figure denying substantial revenue collected from end consumers of goods and services to state coffers

By Kelum Bandara   

In what appears to be a staggering disclosure, the number of VAT ( Value Added Tax) files registered is found to be way below the actual figure denying substantial revenue collected from end consumers of goods and services to the state coffers, an official said.  

Chairman of the Committee on Public Accounts (COPA) State Minister Lasantha Alagiyawanna told Daily Mirror the difference between the actual number and the registered number could be ‘unbelievable’.   

VAT is a consumption tax levied on goods and services ultimately paid by the end consumer. It is often considered a regressive tax because it tends to have a disproportionate impact on lower-income individuals and households.  

Mr.Alagiyawanna said only 13,000 files had been registered but the real number could be much higher .  

“Even when we dine out,VAT is added to our bills.Yet money collected from us is not transferred to the Treasury in most cases. What a terrible situation!”he said .  

The government has decided to increase the VAT rate from 15 percent to 18 percent to meet the revenue target stipulated by the International Monetary Fund(IMF) to get the next tranche of the Extended Fund Facility .  

According to the World Bank, Sri Lanka has one of the lowest tax-to-GDP ratios in the world. Sri Lanka’s tax-to-GDP ratio in 2022 was estimated at 7.3 percent.