Cash-ridden Sri Lanka on Tuesday announced tax hikes across the board, steeped in revenue, as the country suffered its worst economic downturn and sought an IMF bailout.
The value added tax (VAT) on almost all goods and services was immediately raised from 8.0 percent to 12 percent, and the corporate tax was increased from 24 to 30 percent.
The personal income tax exemption threshold has been reduced from Rs 3.0 million ($ 8,330) per annum to Rs 1.8 million.
The increase was a rollback of the liberal cut ordered by President Gotabaya Rajapaksa shortly after winning the November 2019 election.
Prime Minister Ranil Wickremesinghe, who is also the finance minister, said the Rajapaksa tax cuts cost the state about 800 billion rupees ($ 2.22 billion) annually and widen the budget deficit sharply.
International rating agencies, as well as independent economists, have pointed to Rajapaksa’s fiscal policy as fueling the current financial crisis.
Opposition MLA Bikram Singh has been made the Prime Minister this month.
His predecessor and the president’s elder brother, Mahinda, resigned after months of anti-government protests turned deadly.
The South Asian country is in talks with the International Monetary Fund (IMF) for a bailout after the dollar ran out, even for much-needed imports such as oil, food and medicine.
Sri Lanka has also defaulted on its 51 billion foreign debt.
Bikram Singh has also said that he is removing several tax breaks given to companies in recent years.
The government did not say how much it would raise from the new tax system.
However, the prime minister said that 1.5 million civilians had run out of money to pay their salaries and had to “print the money”. This will lead to fuel inflation, which is already at a record 33.8 percent.
(This story was not edited by NDTV staff and was automatically generated from a syndicated feed.)