Sri Lanka sees revenue improving with strong tax effort

July 28, 2009 (LBO) – Sri Lanka’s central bank said it expects government revenue collection to improve later this year, despite the downturn in the first few months, through better collection, a new Nation Building Tax and reduced tax holidays. The government is committed to increasing tax revenue by at least two percent of GDP by 2011 with measures to broaden the revenue base, significantly reduce tax exemptions, and further improve tax enforcement.

These will be coupled with measures to rationalize expenditure in some areas to allow room for spending on reconstruction over the medium term.

Cabraal said the IMF loan approval was an endorsement of the country’s economic policies already announced by the government and that it should help improve investor confidence. Central Bank Governor Ajith Nivard Cabraal said the government was confident of achieving the budget deficit target of seven percent of Gross Domestic Product under the International Monetary Fund 2.6 billion dollar loan programme.

“We do not see too much difficulty in achieving the budget deficit target this year because of anticipated improvements in revenue, spending cuts and rationalisation of spending,” he told a news conference.

“But there will be no reduct