Bankrupt Sri Lanka hikes taxes
Police use tear gas shells to disperse students taking part in an anti-government protest demanding the resignation of Sri Lanka's president Gotabaya Rajapaksa over the country's crippling economic crisis, in Colombo on May 29, 2022.
Cash-strapped Sri Lanka on Tuesday (May 31) announced steep, across-the-board tax hikes to shore up revenue as the country suffers its worst economic downturn and seeks an International Monetary Fund (IMF) bailout.
The value-added tax (VAT) applied on almost all goods and services was raised from 8.0 per cent to 12 per cent with immediate effect, while corporate taxes were also increased from 24 to 30 per cent.
The increases were a rollback of the generous cuts ordered by president Gotabaya Rajapaksa soon after he won the November 2019 elections.
Prime minister Ranil Wickremesinghe, who is also the finance minister, said Mr Rajapaksa's tax cuts cost the state some 800 billion rupees annually and widened the budget deficit sharply.
International rating agencies, as well as independent economists, have pointed to Mr Rajapaksa's fiscal policy as having fuelled the current financial crisis.
