would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
The proposed tax reforms by the IMF, aimed at improving revenue mobilization and fiscal sustainability in Sri Lanka, come with several potential negative impacts:
1. Increased Tax Burden on Middle and Lower-Income Households
The introduction of an imputed rental income tax on owner-occupied and vacant residential properties could disproportionately affect middle-income households who own property but may not have sufficient liquidity to cover additional tax liabilities. This could lead to financial strain and reduced disposable income for these households.
2. Economic Slowdown Due to Higher Taxes
Higher taxes on essential goods and services, including the introduction of VAT on previously exempt items and increased Corporate Income Tax rates on key industries like betting, gaming, tobacco, and liquor, could reduce consumer spending and business investment. This may slow down economic recovery and growth.
3. Potential for Increased Non-Compliance and Tax Evasion
The complexity of new tax measures, such as the imputed rental income tax and enhanced VAT compliance requirements, could lead to higher levels of non-compliance and tax evasion. Taxpayers may find ways to underreport or hide income, reducing the effectiveness of these measures and leading to administrative challenges.
4. Impact on Real Estate Market
The imputed rental income tax could lead to a downturn in the real estate market as property owners may seek to sell properties to avoid the new tax. This could result in a decrease in property values and reduced investment in real estate, impacting the overall economy.
5. Adverse Effects on Small and Medium Enterprises (SMEs)
Increased tax rates and compliance costs can disproportionately affect SMEs, which may lack the resources to manage higher tax burdens and complex compliance requirements. This could lead to business closures, reduced employment opportunities, and a contraction in the SME sector.
6. Social Unrest and Public Opposition
The implementation of stringent tax reforms and austerity measures can lead to public dissatisfaction and social unrest. The perceived unfairness of new taxes and the burden on lower and middle-income groups could lead to protests and opposition against the government and the IMF program.
7. Short-term Revenue Uncertainty
While the proposed reforms aim to increase revenue in the long term, there may be short-term revenue uncertainty and administrative challenges in implementing new tax systems. This could lead to temporary revenue shortfalls and fiscal instability.
Overall, while the IMF's proposed tax reforms are designed to enhance fiscal sustainability and revenue mobilization in Sri Lanka, they carry significant risks and potential negative impacts that need to be carefully managed to avoid exacerbating economic and social challenges.
No Comment.