Sri Lanka waives Rs. 285.7B in taxes in first half of 2025

Sri Lanka waived Rs. 285.7 billion in taxes during the first six months of 2025, amounting to 57% of the country’s total reported tax expenditure since April 2023, a tax expenditure statement released by the Finance Ministry in November shows.

The disclosure indicates that foregone revenue remains high despite efforts to broaden the tax base under the country’s economic recovery program.

When combined with earlier figures, total tax exemptions since April 2023 reached Rs. 787.1 billion, the report said.

The statement covers two separate reporting periods that follow different fiscal cycles.

For the 2023/24 income-tax year, exemptions totaled Rs. 131.5 billion, drawn entirely from corporate and personal income tax concessions.

The 2024 calendar-year figures, which account for consumption and import-related taxes, amounted to Rs. 369.9 billion.

VAT made up the largest share, with Rs. 333.3 billion in exemptions.

In 2025, VAT again dominated the first-half totals.

Exemptions reached Rs. 207.4 billion, largely tied to essential goods, utilities, medical supplies and food-related sectors.

The Social Security Contribution Levy contributed an additional Rs. 61.7 billion in exemptions, while customs duty relief amounted to Rs. 9.3 billion and excise duty exemptions to Rs. 7.3 billion.

The report also noted that temporary concessions granted through gazettes on luxury motor vehicle taxes expired in September 2024, with Sri Lanka Customs now pursuing recovery from beneficiaries who failed to meet registration requirements.

Long-standing tax features remain significant, including Rs. 119.3 billion in corporate tax exemptions for 2023/24 tied to Board of Investment and non-BOI concessionary regimes.

Personal income tax exemptions for the same period were Rs. 12.2 billion.

The Finance Ministry said the continued prevalence of large indirect-tax exemptions limits the revenue gains anticipated under ongoing reforms.

It plans to integrate tax expenditure analysis into the annual budget cycle, introduce clearer benchmarks and more regularly evaluate high-cost concessions as part of fiscal consolidation efforts.