📈 IPS Urges Wealth Tax Shift, Cautions Against Premature VAT Cuts

• Fiscal Policy Outlook: The Institute of Policy Studies (IPS) report, _Sri Lanka State of the Economy 2026_, warns that cutting VAT is premature and could risk debt sustainability. Further statutory tax rate hikes remain "highly unlikely" as post-2022 revenue gains were driven mainly by elevated rates. • Targeted Wealth Taxation: Instead of a comprehensive net wealth tax, IPS recommends shifting fiscal focus toward accumulated wealth via targeted measures: • Modernised property taxation with digital cadastres and updated valuations. • Streamlined taxation on capital gains and rental income, particularly in real estate & land markets. • Progressive levies on luxury assets. • Compliance Crosshairs: Non-compliance is prevalent in informal income streams, particularly high-income professionals in medicine, law, consultancy, construction, and private education. • Structural Reforms: IPS recommends e-invoicing, taxpayer identification, data analytics, and integrated banking/tax data to widen Sri Lanka's tax base and improve debt management.