Annual Report 2008 - Ministry of Finance and Planning

2. Fiscal Developments - 2008
50
Government Revenue
Government revenue increased by Rs. 90 billion to Rs.655
billion in 2008 compared to the corresponding figures
of Rs. 87 billion and Rs. 565 billion in 2007. The revenue
performance fell short of the targets envisaged in the Budget
2008 mainly owing to the shortfalls in international trade
taxes especially due to the granting of duty concessions
on the importation of essential commodities with a view
to stabilize domestic prices to curb rising food prices. A
significant drop in value and volume of vehicle imports
liable for excise duty, importation of around 8,800 vehicles
on a concessionary duty structure by public servants,
impact of the implementation of free trade agreements and
the slow down in domestic economic activities particularly
in the latter part of 2008 mainly contributed to lower excise
duty, custom duty and VAT. Further a decline in cigarette
sales and the slow down in liquor production moderated the
growth in revenue from excise taxes and VAT.
Chart 2.2
Income Tax
Income tax revenue that consists of Corporate Tax, Personal
Income Tax, Tax on Interest Income and Economic Service
Charge (ESC) amounted to Rs. 126,541 million in 2008. The
personal and corporate income tax recorded a growth of 14
percent as compared to 2007. The ESC and Tax on interest
income increased by 19 percent and 24 percent respectively.
The policy measures taken by the Government to broaden
the tax base, rate revision and other administrative
measures helped to increase the income tax revenue while
this effort was further supported by completing the enabling
legislations to implement revenue proposals in the budget
prior to the commencement of the tax year. In this context,
Government has taken several bold and aggressive measures
in the recent past while embarking on a series of reform
initiatives to strengthen the Inland Revenue Department
and create an environment conducive to the tax payer and
the tax administrators.
Table 2.3
Income Tax Performance
Indicator
Corporate Tax
and Personal Tax
Rs. mn. Growth (%)
2006 2007 2008 2008/2007
50,965 59,659 68,235 14
ESC 8,853 12,203 14,476 19
Tax on Interest 20,665 35,307 43,831 24
Income
Total 80,483 107,169 126,541 18
GDP ratio (%) 2.7 3.0 2.9
Source: Department of Fiscal Policy
The revenue which reflected a growth of 22 percent in the
first three quarters of 2008 recorded a 16 percent growth for
the year with the slow down of economic activities in the
latter part of 2008. The compressed revenue performance in
the last quarter alone contributed to around one third of the
overall shortfall from the envisaged target. As a percentage
of GDP, revenue was 14.9 percent in 2008, a decline from the
15.8 percent in 2007, a worrisome development in the fiscal
performance in 2008.
Ministry of Finance and Planning Sri Lanka
Annual Report 2008