Sri Lanka clearing VAT refunds backlog, govt revenue recovering: Treasury Secy

May 22, 2007 (LBO) – Government revenue is improving and the Inland Revenue Department hopes to clear most of the backlog in value added tax refunds in 3-4 months, Finance Ministry Secretary P.B. Jayasundera said Tuesday. "We've streamlined the VAT refunds process and closed some loopholes," he told a seminar organized by the Sri Lanka Institute of Taxation.

Although some people suffered for a while, the tax system cannot be allowed to be subject to such vulnerabilities, he said.

"By August-September this year we expect the large backlog in refunds to reach a reasonable level."

Jayasundera said VAT revenue had now become "revenue positive" which he described as a healthy development.

Tax Take

The government had also managed to reverse the declining trend in the ratio of revenue to Gross Domestic Product (GDP) in recent years.

Government revenue as a percentage of GDP should exceed 17 percent in 2007 and by 2008-09 get closer to 19 percent, he said.

"For the last 30 years we never had revenue above day-to-day operating expenditure in the budget. The trend was that revenue was lower than recurrent expenditure. So in absolute terms we ran revenue deficits," he said.

Sri Lan