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Single digit inflation will not get affected by VAT increase – Siyambalapitiya

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The current value added tax increase will have an impact on inflation but it will not increase more than 5% this year, said State Minister of Finance Ranjith Siyambalapitiya yesterday. The YoY inflation has already increased from 3% to 4% in December.

He said that the current inflation may rise up to around 5% due to the VAT increase but it would not move to the double digit level,” he said.

He recalled that the government did take prudent economic steps soon after the Aragalaya to bring down the inflation from the world fifth highest rate of 70% to around 3% within one year.

The Minister said that a new tax is being implemented to increase government revenue which had fallen drastically. “Our aim is to increase tax revenue from 12% to 15% which will help us to collect around Rs. 645 billion.”

He said that new measures to increase tax are now working as they see more new tax files being opened. He recalled that in 2019 there were around 28,000 tax files and to gain popular political mileage measures were introduced to reduce tax. “This resulted in the tax files coming down to 8,152 in 2020 and due to this government’s efforts to broaden the tax net, tax files have now increased to around 13, 600.”

The Minister also said that some of the importers also benefitted from the VAT increase. “On average Sri Lanka gets around 1,000 containers per day but during the last two weeks of December, this surged to around 1,700. This 60% increase of imports included items such as electronics and other luxury items and traders sell them in January with the new VAT charges and gain a lot of unlawful money.”

Due to this the government lost around Rs. 1 billion revenue. He said that the public should be more vigilant in this regard.

The post Single digit inflation will not get affected by VAT increase – Siyambalapitiya appeared first on DailyNews.

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