Budget 2026 projections cloud para-tariff phase-out, Arutha warns

Wednesday, 19 November 2025 00:00 - - {{hitsCtrl.values.hits}}

Think tank says export growth, diversification difficult with para-tariffs in place
Govt. policy on para-tariff phase-out at odds with revenue estimates up to 2028
Revenue forecasts show increasing collections from PAL, CESS and SCL despite announced phase-out

The Government’s plan to unwind para-tariffs has been thrown into doubt by its own revenue projections, according to analysis by economic think tank Arutha Research, which says the 2026 Budget sends mixed signals on one of the most critical reforms for export growth.

The Budget reiterates the President’s commitment to phasing out para-tariffs in line with the national tariff policy, but points out that the Government’s medium-term revenue forecasts tell a different story, with projected collections from the Ports and Airports Development Levy (PAL), Special Commodity Levy (SCL) and import CESS expected to rise through 2028.

Arutha notes that para-tariffs will continue to account for nearly two thirds of taxes collected from international trade.

“If revenue from PAL, CESS and SCL is expected to grow every year until 2028, it signals a clear mismatch between the policy announcement and the numbers underpinning the Budget,” the think tank said.

According to Arutha, this inconsistency raises doubts about the credibility of the phase-out and undermines confidence among exporters who argue that para-tariffs choke competitiveness and stall diversification. “Sri Lanka cannot achieve export growth with para-tariffs in place,” Arutha said.

Arutha also links the tariff debate to the decision to reduce the VAT registration threshold to Rs 36 million, noting that an authentic para-tariff phase-out could help SMEs manage rising costs.