Sri Lanka’s Withholding Tax Among World’s Lowest: Verité Research 📈

A report by Verité Research highlights that despite increasing the Withholding Tax (WHT) on interest income to 10% in 2025, Sri Lanka remains in the bottom 10% of countries globally for this tax category. • Global & Regional Benchmarks Sri Lanka’s 10% rate is significantly lower than the 16% average for middle-income and South Asian peers. Regional competitors like India and Bangladesh maintain a 20% rate, while some high-income nations exceed 30%. Only 6 out of 98 analyzed countries have a lower rate. • Revenue Projections The government collected Rs. 175 Bn in 2025 at the current 10% rate, with Rs. 185 Bn projected for 2026. Verité suggests that raising the rate to 15% could boost revenue by 50%, generating approximately Rs. 278 Bn—an additional Rs. 93 Bn for the state. • Economic Impact & Compliance WHT serves as an efficient "first line of collection," particularly for the banking and financial services sector. Since WHT can be offset against total tax owed, it does not increase the final tax burden for compliant taxpayers but encourages informal earners to enter the tax net to claim credits. • Policy Recommendation Strengthening WHT is viewed as a "modest but sensible" reform to improve the national tax-to-GDP ratio, which currently lags behind regional standards. Increasing the rate to 15% would align Sri Lanka more closely with global norms while ensuring predictable revenue growth.