By Ruwan Weerakoon
(Lanka-e-News -23.Sep.2026,9.00 P.M.) The International Monetary Fund (IMF) has proposed developing a comprehensive Medium-Term Revenue Strategy as the foundation for any future tax reforms, while acknowledging growing calls for tax relief from Sri Lanka's middle-income earners amid the country's improving fiscal position.
The issue was raised during a media interaction when a journalist asked whether the IMF sees room for tax relief, given the Government's improved fiscal space, while still protecting vulnerable groups through social safety nets.
Responding, Evan Papageorgiou, IMF Mission Chief for Sri Lanka, said there had been a significant improvement in the country's fiscal position. He noted that tax revenue in 2025 reached 15.4 percent of GDP — approximately double the level recorded in 2022 — describing it as a clear indication of stronger revenue generation.
Papageorgiou also pointed to the Government's strong fiscal performance, noting that the primary surplus exceeded 5 percent last year and continues to outperform targets this year. The improved revenue collection, stronger fiscal buffers and healthier reserves, he said, have naturally led to questions from both the public and the media about whether the current tax burden can be eased.
Acknowledging those concerns, Papageorgiou described the question of tax relief as a fair one. He noted that many taxpayers are asking what the purpose of building larger reserves, stronger revenues and improved fiscal buffers is, if there is no discussion about the level of taxation being imposed on citizens.
However, he stressed that decisions on tax relief cannot be taken in isolation. Questions concerning the appropriate level of taxation, the sustainability of revenue collection, the pace of revenue growth and the possibility of tax reductions must all be examined together as part of a broader review of the country's tax framework, he said.
It would be difficult, the IMF Mission Chief said, to justify reducing a specific tax or introducing isolated changes without first considering the overall structure of the tax system. He emphasised the need for an open, informed national debate on what Sri Lanka's tax system should look like in the future — one that encompasses personal income tax, corporate income tax, VAT, capital-related taxes, tax exemptions and incentives.
Papageorgiou revealed that under the Extended Fund Facility (EFF) programme, the IMF is already working with Sri Lankan authorities to formulate a Medium-Term Revenue Strategy. The Government is currently determining its medium-term revenue objectives, he said, which will later be expanded into a detailed framework outlining the future direction of tax policy.
He described the strategy as a critical precondition for future tax reforms, arguing it would help answer key questions on taxation levels, revenue requirements and the potential scope for relief measures.
While declining to discuss specific tax concessions, citing ongoing negotiations between the IMF and Sri Lankan authorities, Papageorgiou made clear that the Fund understands the concerns of taxpayers and recognises the arguments in favour of providing relief.
His remarks indicate that although no immediate tax cuts have been proposed, the IMF believes the discussion on tax relief should form part of a wider, carefully planned reform process. With tax revenues rising, fiscal targets being exceeded and the country's economic position continuing to improve, the debate over tax relief for middle-income earners is expected to become an increasingly important issue in the months ahead.
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by (2026-09-23 17:23:25)
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