The 2017 Budget proposals presented yesterday included revisions to corporate and withholding taxes to boost revenue and cut the 2017 fiscal deficit to 4.6% of GDP from this year’s 5.4%.
Finance Minister Ravi Karunanayake said corporate income tax would have three slabs of 14%, 28% and 40% instead of the current single rate of 28%. It is expected to bring Rs. 32 billion out of the total Rs. 140 billion of the new revenue the Government is budgeting to raise.
The withholding tax increase from 2.5% to 5% is expected to raise an additional Rs. 26 billion, the Budget document showed.
“Tax efficiency in the country is low relative to its peer countries. Tax administration is negatively impacted by the complex tax structure and the large number of exemptions and tax holidays, leading to a narrow tax base,” Karunanayake said.
He also said a 10% capital gain tax would be introduced from 1 April 2017 without elaborating further. The move is expected to add Rs. 5 billion to State coffers.
The Government aims to boost its 2017 tax revenue by 27% to Rs. 1.82 trillion ($ 12.35 billion) year on year, to meet a commitment given to the International Monetary Fund in return for a $ 1.5 billion loan in May.