In a bid to increase government revenues, Sri Lanka’s Finance Ministry unveiled a 150% increase on annual taxes for casinos, from Rs 200 million to Rs 500 million, as well as the introduction of an entrance for locals of 200 US dollars.
The finance ministry also laid out a raft of reforms to existing taxes. Bottles of liquor will be taxed at 75%, cigarettes at 85%, and a 40% income tax from those companies. These reforms follow sweeping reforms of Sri Lanka’s income tax, which are aimed at garnering support from the International Monetary Fund for a $2.9 billion loan.
The income tax will see the tax exemption threshold lowered whilst each tier will be forced to pay greater taxes. Critics warn that such dramatic reforms will lead to social unrest. Sri Lanka’s State Finance Minister, Shehan Semasinghe, has noted, however that, unlike previous reforms, those prescribed by the IMF will persist. This comes amidst Sri Lanka’s worst economic crisis in recent history, with close to half of the population (9.6 million people), living under the poverty line and struggling to obtain necessities. In May, the country defaulted on its debts for the first time in its history.
The island’s elite
Sri Lanka’s opposition leader, Sajith Premadasa, has slammed the government for failing to place the burden of taxation on the island’s wealthy elite.
“The Government is attempting to come out of bankruptcy by destroying the lives of the people,” he claimed.
He further slammed the government for failing to recover stolen funds from the likes of those mentioned in the Pandora papers if it lacks revenue. The Pandora Papers revealed how members of the Rajapaksa clan stashed millions of dollars in anonymous offshore trusts and shell companies,
“They will never bring back the stolen funds and neither will legal action be taken against them,” Premadasa said.
Despite the protest of Sri Lanka’s opposition over the reforms, the island’s Central Bank, Governor Nandalal Weerasinghe, has maintained the necessity of IMF support.
“As far as I can see, this (IMF) is the only way out once we come to this level” he told the Sri Lankan President’s Media Division.
“Had we acted earlier, we could have attempted other things. Once our reserves fall to this depth and when no one else is ready to give us any loans, the IMF remains the only window for us as a member country to obtain some kind of a loan,” he added.
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