COLOMBO: Sri Lanka is looking to hike VAT rates in order to receive further loans from the IMF.
In a recent statement the international credit rating agency Moody’s announced that the recent move by Sri Lanka to implement a VAT hike will aid the country’s efforts to raise its credit rating.
Sri Lanka had previously attempted to implement a higher rate of VAT earlier this year, although the efforts were waylaid by a legal challenge. However, the new effort to see the tax become a reality are likely to see the VAT rate raised from 11 percent to 15 percent.
Moody’s believes that the higher tax rate will result in higher levels of tax revenues, ultimately aiding the country’s fiscal consolidation and raising the national revenue-to-GDP ratio. It was also noted that the VAT hike falls in line with the monetary programme set out before Sri Lanka by the IMF.
It was noted that if the tax hike was delayed any further, it may have jeopardised the loan disbursements due to be mad by the IMF to Sri Lanka.
