The Ministry of Finance in Sri Lanka has revealed that the government sacrificed more than Rs. 240 billion in potential tax income during the first half of this year.
This substantial loss is due to exemptions from Value Added Tax (VAT) and the Social Security Contribution Levy (SSCL) granted to certain businesses.
The official tax expenditure statement for 2024/2025 specified that the total amount foregone from January to June for companies not covered by the Board of Investment, Port City, or Strategic Development Projects was Rs. 243.8 billion.
A significant portion of the lost VAT revenue—over Rs. 99.4 billion—occurred in the wholesale and retail sector.
The electricity and gas sector also saw a VAT exemption of Rs. 34.8 billion.
The total estimated expenditure for the Social Security Contribution Levy (SSCL) alone for the six months was Rs. 61.7 billion.
The largest SSCL exemption, amounting to Rs. 20.2 billion, was also within the wholesale and retail sector.
The manufacturing sector was exempted from Rs. 9.9 billion in SSCL.
The Ministry of Finance report explained that the SSCL, which is a turnover tax, can have a cumulative impact across the economy.
Exempting it is viewed as a measure to reduce this cascading effect, which could otherwise push up the prices of goods and services.
The government stated that most of these tax expenditures were approved to prevent this impact on consumer prices, aiming to improve the living standards of the public.
Source: Hiru News