Deputy Minister explains lack of aggressive tax measures in Budget 2026

• Deputy Industry Minister Chathuranga Abeysinghe tells investor forum that revenue exceeds targets but base remains low
• Says Govt. aims to lower consumption taxes over time, with VAT cuts tied to improved efficiency
• SOE losses now limited to a handful, with CEB targeted to remain at break-even 
• New Strategic Investment Act to establish rules-based incentives immune to political discretion
• Treasury cash buffer now exceeds Rs. 1 t, used to hold interest rates at 8%
• Renewables positioned to cut electricity costs by one third within five years

The Government kept the 2026 Budget free of aggressive tax mobilisation proposals because households and businesses are already carrying a heavy fiscal load, Deputy Industry and Entrepreneurship Development Minister Chathuranga Abeysinghe told a recent virtual investor forum organised by Tellimer and Softlogic Stockbrokers.

He said revenue is now exceeding International Monetary Fund (IMF) targets but remains constrained by a narrow taxpayer base. “There are about 1 million to 1.3 million people and businesses without tax files. That is the biggest challenge we have,” he said. “We want to widen the tax base so that we do not have to increase taxes anymore.”

Abeysinghe said the Government intends to negotiate lower consumption taxes once efficiency improves. “We want to bring down certain rates like VAT. Our objective is that tax efficiency drives revenue, not higher rates,” he said.

He said there was no justification for adding new taxes at a time when multiple hikes since 2022 have already stretched the public. “The burden on the people and the industry is already very high,” he said. “We would look to broaden the tax base rather than burden the industry or people further.”

Turning to State-owned enterprises (SOEs), he said losses had narrowed sharply. 

“We have probably a handful of SOEs making losses and, collectively, it is very minor,” he said. “Our principle is that SOEs should not burden the Treasury.” 

He said the Ceylon Electricity Board (CEB) has been restructured into four entities and is being tracked closely. “The CEB made a profit of about Rs. 144 billion last year,” he said. “Our discussion is about keeping it at break-even.”

On investment reforms, Abeysinghe said Sri Lanka is shifting towards predictability. “What we really want is a tool-based investment criteria,” he said. “The new Strategic Investment Act will clearly articulate the incentives. No Minister or President can overrule it.”

He said the Government will also streamline approvals through a Trade Single Window and an Investment Single Window. “Today, an investor takes close to two years to set up. We cannot compete with Vietnam or India like that,” he said.

Abeysinghe said infrastructure spending will accelerate. “The infrastructure piece is going to go full flow,” he said. “All the constructions and the highways and the ports that we planned will move forward.”

On energy, he said renewables are central to lowering tariffs. “Sri Lanka has 16 times more renewable energy sources than we really need for the next four years,” he said. “The sources that will help us bring down the cost is what we really look at.”

The Deputy Minister said the Treasury now holds over Rs. 1 trillion in cash for the first time. “This is the first time we have excess cash. We had been running on overdrafts,” he said. The buffer is being used to stabilise interest rates. “Having a cash buffer is going to help us manage interest rates at 8%,” he said.