State minister Siyambalapitiya fails on success of tax collection

The statement attributed to the state minister (i) cites the tax revenue collected by the IRD (by end September) as 68.4% of the LKR 915 billion target (LKR 625.9 billion) [in the 2022 budget], and (ii) cites it as a good performance in the context of negative 8.2% GDP growth [in 2022, which was not expected when the target was set]. 

To check these claims FactCheck.lk consulted the Fiscal Management report of 2023 and the Revised Budget Estimates of 2022. 

On claim (i): The revised budget estimate report of 2022 shows that the original target is LKR 908 billion. This figure was estimated in 2021. The slightly higher LKR 915 billion cited by the state minister, is the recently revised estimate for IRD collection in 2022. In estimating the amount collected by the IRD, the state minister counted just the VAT and Income/Profit taxes, and not the other miscellaneous taxes. The total tax revenue collected was LKR 633.2 billion, which is slightly more than what the state minister counted (LKR 625.9 billion). However, overall, his claim is materially correct.

On claim (ii): The state minister is materially incorrect in citing the 8.2% unexpected contraction in real GDP growth (nominal GDP minus inflation) as a reason to expect reduced tax collection. The unexpected increase in nominal GDP (due to high inflation) is in fact a reason to expect higher tax collection (since tax collection is based on the nominal values of sales and earnings). 

Therefore, citing the taxes collected by the end of the third quarter (Q3) as a good performance is incorrect. Because it is not only less than 75% of the original estimate, but also only 56.3% of the original estimate when adjusted for the unexpected increase in nominal GDP (see additional note).

Claim 1 is materially correct; but claim 2 is quite incorrect. Therefore, we classify the state minister’s statement as PARTLY TRUE.

Additional Note: The nominal GDP growth forecast for 2022 when the budget was formulated was 10.8% (as per the Fiscal Management Report of 2022). However, the current revised forecast for nominal GDP growth for 2022 is 34.6% (imputed from 2023 budget documents). That means there is a 23.8% unexpected increase in nominal GDP. Adjusting for that would raise the expected tax collection to LKR 1,124 billion from the original LKR 908 billion.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.

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