Sept 12, Colombo: Sri Lanka's newly revised Inland Revenue Act will augment the country's very low level of government revenues, Moody's said.
"Sri Lanka's newly revised Inland Revenue Act will augment the country's extremely low level of government revenue by replacing the existing law with a more efficient, modern and broad-based tax framework." said Vice President, Sovereign Risk Group of Moody's Investors Service, William Foster.
Foster noted that compared to other sovereign nations, Sri Lanka's income tax efficiency and tax collection were weak.
"Through past additions of multiple tax exemptions, Sri Lanka's income tax efficiency and tax collection are weak relative to other sovereigns," Foster said.
"The general government revenue-to-GDP ratio was only 14.3% in 2016, one of the lowest among B-rated sovereigns."
The reforms of the Inland Revenue Act offer prospects of higher revenues.
The implementation of revenue reforms that foster long-term fiscal consolidation will be critical to shoring up Sri Lanka's credit profile, which is weighed down by the country's large debt burden and relatively weak debt affordability.
The new Inland Revenue Act will reduce the indirect taxes levied from the people from 80% to 60% and increase the direct taxes from 20% to 40% within three years.