Shift Tax Net to Capacity, Not Consumption: World Bank & Fiscal Data 📈

• Overall Figures & Revenue Trends • Revenue reached 15.4% of GDP (Rs. 5,049.2 Bn) in 2025, up from 12.3% in 2024 (and 7–8% in 2022). • Imbalance persists: Indirect taxes rose to 77.4% of total tax revenue in 2025, while direct taxes dropped to 22.6% (down from 33.5% in 2023). • Goods & services tax generated Rs. 3,198.1 Bn (9.8% of GDP), with VAT raising Rs. 1,746.9 Bn—far exceeding total income tax of Rs. 1,139.4 Bn (3.5% of GDP). • Key Sector & Business Impacts • In the World Bank Sri Lanka Enterprise Survey 2025, 19.3% of surveyed firms cited tax rates as their main obstacle, while 12.3% named tax administration (nearly 3x the South Asian average of 4.6%). • 27.5% of business owners/managers reported competing against unregistered or informal operators. • World Bank Recommendations & Road Ahead • Shift from regressive indirect taxation to progressive direct taxation ahead of Budget 2027. • Broaden tax base by linking TINs to major transactions and cross-matching existing land, vehicle, and bank records. • Ease compliance for SMEs and individuals through pre-filled forms, faster refunds, data protection, and establishing an independent Tax Ombudsman.