SL Budget 2025 aims for equitable economic distribution
The Government will present its maiden budget 2025 in Parliament on February 17 ensuring equitable economic distribution, extending urban benefits to grassroots levels, strengthening public transportation, optimise decentralised funds, and improve welfare distribution mechanisms to support deserving communities effectively, state officials said.
It will extend urban benefits to rural areas, strengthen public transport, optimise funds at the decentralised level, and develop welfare systems that will reach these communities where it is duly deserved, Finance Ministry sources said.
The tax reforms also feature high in the budget. It envisages raising the tax-to-GDP ratio of 15 per cent by the end of 2025 from the 8.3 per cent posted in 2022.
To reach this target, there would be an increase of direct taxes to account for 40 per cent of total taxes by 2025.
Although previous governments allocated large sums of money to the decentralised budget, those funds were not directed toward productive projects.
Therefore, attention was drawn to the allocation of decentralised budget provisions in a manner that can be used for national projects, a high official of the finance ministry said.
A sum of Rs.97.5 billion has been allocated in the budget for public salary increments of up to Rs. 7,500 per month due to current financial constraints.
However, any increase beyond this stipulated amount will depend on a decision by President Anura Kumara Dissanayake, who also serves as the Minister of Finance.
Revenue is projected at about 15.1 per cent of GDP or Rs. 3.9 trillion, while expenditures are targeted at close to 20 per cent of GDP or Rs. 5.2 trillion.
The government plans to consolidate taxes by increasing the (Port and Airport Development Levy) PAL rate, removing the NBT rate, and simplifying the tax system by reducing the number of taxes such as Pay As You Earn (PAYE) and With Holding Tax (WHT).
The Personnel Income Tax changes of increasing the tax threshold to Rs. 200,000 from Rs. 100,000 and reducing tax rates may result in a revenue loss of Rs. 70-80 billion.
Additionally, exemptions on Value Added Tax (VAT) for essentials like school supplies and baby food could lead to a further revenue decrease of Rs. 70-80 billion.
Revenue of Rs.300 billion from the reopening of vehicle imports will be highlighted.
Some of the key tax reforms this fiscal year are set to be implemented from April 1, 2025. These include Rs.44.4 billion in 2025 by imposing Imputed Rental Income Tax on owner-occupied and vacant residential properties, Rs.23.7 billion through PAYE tax and VAT changes, and Rs 35.5 billion through Corporate Income Tax reforms.
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