VAT amendment delay threatens IMF’s second tranche

The disbursement of the second tranche of IMF 1.5 billion dollar Extended Fund Facility (EEF) this year might be under threat if there is a delay in passing the VAT amendment Draft bill in parliament.

IMF mission Chief Jaewoo Lee told reporters in Colombo on Friday that the government should expedite the legislative process of implementing the VAT amendments that are needed to support revenue targets for 2016 and 2017.

The 2017 budget should also underpinned by a well–crafted and high quality tax policy strategy to raise Sri Lanka’s low tax revenue – to-GDP ratio, he said adding that the government should focus more on direct taxes rather than depending on indirect taxes.

He commended the legislative process for the new Inland Revenue Act which would be an important step in rebalancing, the tax system toward a more predictable, efficient, and equitable structure and in generating the needed resources in support of the country’ ambitious social and development objectives.

Issuing a statement at the end of the IMF staff team’s visit to hold discussions on the first review of the Sri Lankan government’s economic programme, Mr. Lee noted that “the mission made significant progress toward reach- ing a staff level agreement with the government on completion of the first review”.

Discussions will continue in October in Washington D.C. during the annual meetings of the IMF and World Bank.

He commended the authorities for implementing their IMFsupported economic programme under difficult circumstances, with all quantitative targets through endJune being met.

However, some forward looking aspects of the program review, mainly related to the implementation of the tax reform package, need to be addressed without further delay, he added.