Govt. mulls increasing personal tax threshold to Rs. 200,000 | Daily FT

The Sri Lankan government is committed to increasing the monthly personal income tax-free threshold to Rs. 200,000, as promised in its election manifesto, with Economic Development Deputy Minister Nishantha Jayaweera stating this move is contingent on strengthening state revenue. This follows a previous increase from Rs. 100,000 to Rs. 150,000, equivalent to an annual threshold of Rs. 1.8 million, and comes as President and Finance Minister Anura Kumara Dissanayake announced tax relief in the 2027 Budget. While the government aims to reduce tax rates and broaden the tax base, the Institute of Policy Studies (IPS) noted that government revenue rose from 8.2% of GDP in 2022 to 16.6% in 2025 but cautioned against immediate tax cuts due to challenges like uneven compliance. The IPS recommends that after the current IMF program ends in 2027, revenue strategies should prioritize increasing the share of direct taxes over the current 40:60 direct-to-indirect ratio by broadening the tax base and improving compliance.